Supreme Court guidance on affordable rent and intentional homelessness (Samuels v Birmingham City Council)

21/06/2019

Local Government analysis: Shu Shin Luh and Connor Johnston, barristers at Garden Court Chambers, examine the Supreme Court’s decision in Samuels v Birmingham City Council to quash the respondent local authority’s finding that the appellant’s rented accommodation had been affordable and therefore when she had fallen into rent arrears and been given notice to leave, she had become intentionally homeless and could not require it to find accommodation for her.

Samuels v Birmingham City Council [2019] UKSC 28, [2019] All ER (D) 44 (Jun)

What are the practical implications of the judgment?

The decision in Samuels v Birmingham City Council is far-reaching and has provided some much-needed clear guidance on how local authorities should assess affordability of accommodation. Lord Carnwarth stated that such an assessment required an applicant’s income from all sources to be compared with the applicant’s reasonable living expenses (other than rent), having regard to the needs of that person and the household. This requires an objective approach. The court has acknowledged that benefits such as income support, child tax credit and child benefit are not designed to provide a surplus to cover costs, such as housing, over and above the subsistence needs of a family. Therefore, in the absence of any other objective guidance, the level at which these benefits are set can be used—at least as a starting point—as a proxy for an applicant’s ‘reasonable’ expenditure. This means, in practical terms, that applicants with expenditure at or below this level should not generally be regarded as having become homeless intentionally if they are unable to pay their rent and end up losing their accommodation as a result.

It is possible that this decision will result in fewer findings of intentionality—the evidence of the interveners in this case (Shelter and The Child Poverty Action Group) showed there was a significant degree of variation in the assessment of affordability across the country, with many local authorities adopting more stringent measures than this. By the same token, the decision should result in greater consistency in decision-making. The judgment may also result in an increase in the number of households which are regarded as ‘homeless at home’ as a consequence of being unable to afford their rent.

The backdrop to this case is a series of measures imposed by central government which have made it more difficult for occupiers who are reliant on welfare benefits, and particularly those in the private rented sector, to pay their rent. These include the freeze on the local housing allowance, the bedroom tax and the benefit cap. It is arguable that, in the context of these measures, one of the practical consequences of the judgment is to transfer costs from central to local government. In simple terms, it is local government which will need to take responsibility under the homelessness legislation for those who cannot afford their accommodation as a result of central government reforms. If this is to be viable, consideration may need to be given to increasing the funding made available by central government to local authorities, in order to meet their homelessness obligations.

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What was the background?

The appellant was an assured shorthold tenant. She lived with four children and was in receipt of housing benefit, child tax credit, child benefit and income support. This was her only income. Housing benefit did not cover all of her rent, leaving a shortfall of £151.49 per month. She had to rely on her other benefits but could not maintain her payments of rent. She fell into arrears and was evicted from her accommodation. Subsequently she applied to the respondent as homeless and was found to be homeless intentionally. The decision was upheld by the respondent on review and by the County Court on appeal. The respondent considered that she had sufficient ‘flexibility’ in the amount of benefits she received to cope with the rent shortfall.

On a second appeal to the Court of Appeal, the appellant argued that the accommodation had not been affordable and that the review decision was flawed as there had been no consideration of the fact that her welfare benefits were set at subsistence level, being intended to meet her and her family’s living needs and not intended to cover her housing costs. Paying the rent shortfall out of this money was likely to affect the welfare of her children. In advancing this argument, she relied on paragraph 17.40 of the homelessness code of guidance for local authorities (guidance), published in 2006 by the Department for Communities and Local Government, which provides that: ‘In considering an applicant’s residual income after meeting the costs of the accommodation, the Secretary of State recommends that housing authorities regard accommodation as not being affordable if the applicant would be left with a residual income which would be less than the level of income support or income-based jobseekers allowance that is applicable in respect of the applicant, or would be applicable if he or she was entitled to claim such benefit.’

The appellant argued that this passage needed to be understood with reference to the rules on welfare benefits as they had been at the time the guidance was first published—income support used to include an amount for children, which has since been replaced by child tax credit. This passage from the guidance would, historically, have provided a much more generous measure of affordability than it might seem to now. The guidance had not been updated to reflect benefits changes that moved payments for children from income support to child tax credit, but it was argued that it should be interpreted to mean the same. In addition, it was argued that the respondent’s review decision contained inadequate reasons.

The Court of Appeal dismissed the appeal. There was no rule of law requiring a local housing authority to take as its starting point a presumption that reasonable living costs were matched by benefits income and that there was no flexibility within such income for the payment of housing costs. Further, the reasons given in the respondent’s review decision had been adequate.

The appellant appealed to the Supreme Court. The appeal focused on three issues:

  1. whether, as a general principle, a property can be regarded as affordable if an applicant has to use subsistence benefits (income support, child tax credit, child benefit and the like) in order to meet housing costs
  2. the correct interpretation of paragraph 17.40 of the guidance
  3. the level and quality of reasons needed in a homelessness decision

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What did the Supreme Court decide?

In a unanimous judgment, the Supreme Court allowed the appeal.

The court started by considering how the guidance should be interpreted. Lord Carnwath (giving a judgment with which the other justices agreed) remarked at para [33] that: ‘There is an attraction in the argument that references to “income support” in paragraph 17.40 should be understood in the sense in which that expression was apparently used at the time of the earlier versions of the guidance. It seems surprising, even nonsensical, that the level of income support should be maintained as a guide to affordability, but without regard to the changes which excluded from income support any allowance for the children of the family.’

However, the court did not consider it necessary to decide this issue one way or the other. Rather, regulation 2 of the Homelessness (Suitability of Accommodation) Order 1996, SI 1996/3204 should be taken as the starting point. This required sources of income which an applicant had, including social security benefits, to be taken into account. That income should then be compared with the applicant’s reasonable living expenses. This required an objective assessment. And the assessment was to be carried out on the basis that the accommodation would be available indefinitely (para [34] of the judgment).

Whether or not the reference to income support in the guidance should be interpreted as extending benefits to children, there was nothing in the guidance which would preclude the taking into account of child-related benefits in the assessment of affordability. Benefit levels were not ‘generally designed to provide a surplus above subsistence needs for the family’. As such, benefit levels were ‘at least a good starting point for assessing reasonable living expenses’ (para [35]).

The Supreme Court held that the reviewing officer asked the wrong question. He had asked whether there was ‘sufficient flexibility’ in the appellant’s budget to cover the shortfall of around £150 per month. Lord Carnwarth held that: ‘The question was not whether, faced with that shortfall, she could somehow manage her finances to bridge the gap, but what were her reasonable living expenses (other than rent), that being determined having regard to both her needs and those of the children, including the promotion of their welfare.’

Had the correct question been asked and ‘in the absence of any other source of objective guidance on this issue’, Lord Carnwath concluded, ‘it is difficult to see by what standard that level of expenses could be regarded as other than reasonable’ (para [36]).

The matter was remitted for reconsideration by the respondent but with a strong indication that, in light of the information available and law as the court had explained it, it was ‘hard to see on what basis the finding of intentional homelessness could be properly upheld’ (para [37]).

The court finished by urging the government to consider the issues raised by the case, and the significant degree of variation in the assessment of affordability across the country which had been demonstrated in the evidence of the interveners, with a view to giving ‘clear guidance to authorities undertaking this very difficult task’ (para [41]).

Shu Shin Luh and Connor Johnston appeared with Martin Westgate QC, barrister at Doughty Street Chambers, for the interveners (Shelter and The Child Poverty Action Group) in this case.

Interviewed by Robert Matthews.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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