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Social Housing Speed Read – New funding system for supported housing

After the Government's announcement last week that the Local Housing Allowance (LHA) cap would not be applied to supported or social housing, a new funding system for supported housing is proposed.

What’s new? 

Different funding models for sheltered, transitional and long-term supported housing have been proposed from April 2020, a year later than originally planned, in a policy paper published on Wednesday by the Department for Communities and Local Government (DCLG).

The three pronged proposal is:

  • Short-term supported housing, such as homelessness hostels and women’s refuges, will be funded by a ring-fenced grant given to local authorities to cover the costs that were once met by housing benefit. The Government plan to define short-term supported housing as two years or until the tenant has moved into long-term stable accommodation – whichever comes first.
  • Sheltered and extra care housing will be funded by a ‘sheltered rent’. This rent is proposed to be a “type of social rent that recognises…and acknowledges the higher costs of these types of housing compared to general needs housing”. The amount that providers can charge and the annual increases will be capped by the Government. The rent level will be determined using formula rent, plus or minus 10% flexibility to take into account the extra costs of supported housing. The Homes and Communities Agency (HCA) will regulate this rent along with annual limits.
  • Funding for long-term supported housing will continue to be through the welfare system. This covers housing for people with mental health conditions, disabilities and highly specialised supported housing. The Government said that it will work with the sector to “manage costs and ensure the best outcomes for tenants”.

In addition to the above, councils will be required to work alongside tenants and local representatives to assess the need for supported housing and to create an effective plan for supported housing in the area. A National Statement of Expectation will also be published by the Government in an attempt to encourage local authorities to work in a way Government would like to see for sheltered housing and extra care housing for the elderly.

What do these proposals mean?  

The sector has welcomed the new funding proposals from the Government. David Orr, Chief Executive at the National Housing Federation (NHF) has said the proposal “represents a very welcome and significant shift from the Government and…addresses concerns about the long-term stability of funding for most schemes”.

Terrie Alafat, Chief Executive of the Chartered Institute of Housing (CIH) said the proposals give “much-needed reassurance following a long and damaging period of uncertainty”.

However, the sector is still concerned that there are crucial details that need addressing.

Rachael Byrne, Executive Director of care and support at Home Group, has expressed that the plus or minus 10% would “not be enough” for sheltered rent. In addition to this, Charlie Norman, Chief Executive of Mosscare St Vincent’s and board member of Placeshapers said that if the ‘sheltered rent’ is not set at the right levels, it could be a “step backwards”.

The sector also has concerns about what funding will be available from 2020 onwards. Tony Stacey, Chief Executive of South Yorkshire Housing Association welcomes the proposed funding but said unless the Government “reinstates the £540m it has pinched from social housing rents in 2020/2021, supported housing could be facing a 13% cut”.

Government consultations

In addition to the policy paper, the DCLG has launched two further consultations; one on costs for extra care and sheltered housing and one on short-term supported accommodation, seeking views on what extent councils already have supported housing plans and needs assessments, views on the commissioning process and comments on what is needed to assure providers that costs will be met.

The consultations are running until 23 January 2018 and there will be a further consultation in the new year on the sheltered and extra care accommodation funding system.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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