This is a repository copy of Temporary Accommodation in London : Local authorities under pressure. White Rose Research Online URL for this paper: https://eprints.whiterose.ac.uk/95010/ Version: Published Version Monograph: Rugg, Julie Joyce orcid.org/0000-0002-0067-6209 (2016) Temporary Accommodation in London : Local authorities under pressure. Research Report. London Councils Reuse Items deposited in White Rose Research Online are protected by copyright, with all rights reserved unless indicated otherwise. They may be downloaded and/or printed for private study, or other acts as permitted by national copyright laws. The publisher or other rights holders may allow further reproduction and re-use of the full text version. This is indicated by the licence information on the White Rose Research Online record for the item. 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[email protected] https://eprints.whiterose.ac.uk/ Temporary Accommodation in London: Local Authorities under Pressure Julie Rugg February 2016 A report prepared for London Councils Disclaimer Viewsexpressed inthisreport are not necessarily those ofthe University ofYork,the Responsibility for any errorslieswiththe authors Copyright Copyright forthisresearchisheldby the University ofYork. ii Contents Disclaimer _____________________________________________________________________________ ii Copyright______________________________________________________________________________ ii Contents_______________________________________________________________________________iii Acknowledgements _____________________________________________________________________vi Executivesummary_____________________________________________________________________ vii Principalfinding.................................................................................................................................................vii Introduction.......................................................................................................................................................vii Temporaryaccommodationpolicydevelopment.............................................................................................viii Thecurrent TAmarket:demandandsupply.......................................................................................................x Costingtheuseoftemporaryaccommodation..................................................................................................xi DeliveringTA:boroughofficers’views..............................................................................................................xii Conclusionandrecommendations....................................................................................................................xiii 1. Introduction________________________________________________________________________1 Introduction.........................................................................................................................................................1 Background..........................................................................................................................................................1 TheLondonhousingmarket.............................................................................................................................1 Changesinwelfareprovision...........................................................................................................................5 Increaseinhomelessnessacceptances............................................................................................................8 TemporaryaccommodationinLondon............................................................................................................9 Researchquestions............................................................................................................................................10 Researchmethod...............................................................................................................................................11 Outlineofthereport..........................................................................................................................................12 Conclusion.........................................................................................................................................................13 2. TemporaryAccommodationpolicydevelopment_______________________________________14 Introduction.......................................................................................................................................................14 Usingtheprivaterentedsectortomeet low-incomehousingneed..................................................................14 Temporaryaccommodationpolicyframework.................................................................................................16 FinancingTA......................................................................................................................................................16 Housingbenefit subsidy.................................................................................................................................17 HomelessnessPreventionGrant....................................................................................................................19 Theshift tonightlyrates....................................................................................................................................19 Managingthenightlyratesmarket...................................................................................................................20 Out ofboroughplacements...............................................................................................................................21 Inter-boroughprocurement...............................................................................................................................22 iii NzolamesovCityofWestminster......................................................................................................................22 Conclusion.........................................................................................................................................................23 3. ThecurrentTAmarket:demandandsupply___________________________________________25 Introduction.......................................................................................................................................................25 Overalldemand.................................................................................................................................................25 Changingnatureofdemand..............................................................................................................................26 Managingprocurement.....................................................................................................................................27 Changeinpropertysupply.................................................................................................................................27 Conclusion.........................................................................................................................................................30 4. Costingtheuseoftemporaryaccommodation _________________________________________31 Introduction.......................................................................................................................................................31 ResearchonTAcosts.........................................................................................................................................31 Costingmethod.................................................................................................................................................32 Datacollection...................................................................................................................................................33 Caveats..............................................................................................................................................................34 Elementsincludedinthecalculation.................................................................................................................34 Expenditure....................................................................................................................................................35 Income............................................................................................................................................................38 GrosscostsandLAcontribution........................................................................................................................39 Conclusions........................................................................................................................................................39 5. DeliveringTA:boroughofficers’views_______________________________________________41 Introduction.......................................................................................................................................................41 Borough-specificfactorsinfluencingTA............................................................................................................41 Localtenuremix.............................................................................................................................................41 Strategy..........................................................................................................................................................41 Economicupturn............................................................................................................................................42 ThedemographicsofTAdemand......................................................................................................................42 ChangeintheTAportfolio.................................................................................................................................43 TheLondonhousingmarket..............................................................................................................................43 TheLocalism Act................................................................................................................................................43 Changesinwelfareprovision.............................................................................................................................43 DeliveringTA.....................................................................................................................................................44 Managingthemarket........................................................................................................................................44 Conclusion.........................................................................................................................................................45 6. Conclusions _______________________________________________________________________46 Introduction.......................................................................................................................................................46 ThehiddencostsofTA.......................................................................................................................................46 iv Obscuringtheimplicationsofwelfarereform...................................................................................................47 PRSOsandTA....................................................................................................................................................47 Ahigh-functioningnichePRSmarket................................................................................................................48 TheSpendingReview.........................................................................................................................................49 Recommendations.............................................................................................................................................49 Conclusions........................................................................................................................................................51 AppendixOne:Guidancenote____________________________________________________________53 AppendixTwo:Spreadsheet______________________________________________________________56 AppendixThree:Someindicativecosts____________________________________________________60 AppendixFour: InnovationinmeetingTAneed:casestudiesprovidedbyLondonCouncils____61 v Acknowledgements This report has been produced with the assistance of David Rhodes and Alison Wallace at the Centre for Housing Policy. In addition, gratitude is expressed to all the housing officers dealing with temporary accommodation in London boroughs who afforded the time to shape and contribute to the research task, and to staff at LondonCouncilswho assistedmaterially withthe completionofthe project. London Councils has commissioned the University of York to undertake an independent piece of research looking at the temporary accommodation market in London, specifically highlighting the costs involved in providing temporary accommodation to homeless households. The structure and final conclusions of the report –andany errorsor omissions–are the author’s. vi Executive summary Principal findings This research describes the policy and market context for the provision of temporary accommodation in London, and boroughs’ difficulties in securing accommodation to house homelesshouseholds. The likely cost of temporary accommodation across London in 2014/15 was close to £663m. The level of expenditure met by London boroughs specifically from their ownGeneralFundscanbe estimatedat just over one quarter ofthatcost,or £170m. Introduction Local authorities have a statutory duty to provide accommodation for homeless households that have been defined as being in priority need and unintentionally homeless, and are obliged to secure temporary accommodation (TA) for that household as an interim measure whilst a longer-term alternative becomes available. This obligation places the local authority in an increasingly difficult position where the supply of property suitable for use as TA has become restricted and exceeds the levelofdemand. Demand for TA in London constitutes a major proportion of TA overall in England. Traditionally, TA subsidy has operated through the housing benefit system but London boroughs are now reporting substantial shortfalls between the subsidy providedandthe actualcost ofmeeting TA need. The London housing market constitutes a challenging environment in which to deliver TA services. Growth in the number of households has not been matched by a similar growth in property supply. The supply of affordable housing remains an issue despite increases in the provision of social housing across the capital. Demand for PRS property has intensified, and at the 2011 Census, the sector comprised the second largest tenure after home ownership. Rents have increased in London faster than in any other English region. Between Q2, 2011 and Q 1, 2015, rents in the lowest quartile rose by around39per cent inInner, and32per cent inOuter London. A raft of changes to welfare provision, implemented from 2013, has reduced the degree of support available to households reliant on housing benefit to pay some or vii all of the rent. Changes that have had a substantive impact on TA included the benefit cap, which restricts the overall rent a household can receive; and a restriction in benefit uprating which has materially affected the value of the Local Housing Allowance (LHA) compared with local market rents. Funding for Discretionary Housing Payments(DHPs) has increased. In London, there was a 77 per cent increase in homelessness acceptances between 2010 and 2014, reversing a decline that had been in evidence since 2005. The ending of an assured shorthold tenancy has become the principal reason for homelessness presentations. Anecdotally, TA officers report that landlords are ending tenancies in ordertore-let at higher rents. The Coalition Government commitment to reduce the use of TA by 2010 was successful: the number of households in TA dropped by 50 per cent between 2005 and 2010. However, since 2011 the use of TA has re-commenced an upward trajectory. InQ1,2015,the TA figure was60 per cent higher thanin Q4,2010. This research aims to evidence the cost of TA across London boroughs, with the specific objective of isolating the degree of expenditure that is not met through central government subsidy. The research has included focus group work with London borough TA and finance officers in order to devise a robust costing spreadsheet,whichwascirculatedto boroughsfor completion. Telephone interviews also took place with TA officers in order to gain a qualitative understanding of the nature ofTA demandandservice delivery ataboroughlevel. Temporary accommodation policy development A number of policy developments have increased the reliance of local authorities on the PRS to meet demand for housing from low-income households. Temporary accommodation constitutes a specific niche market within the PRS, and is driven by a set of practices outside the frameworks that are standard in other parts of the sector. The increased reliance on the PRS to meet TA need has followed limitations in the ability to access social housing stock and a withdrawal of registered providers fromthe sector. At the same time, the Localism Act has introduced the option for local authorities to discharge their duty to homeless households through the offer of a 12-month viii tenancy in the PRS. Both these measures have escalated demand from London boroughsfor propertyinthe PRS. There is a complex policy framework underpinning the delivery of TA, reflecting a gradual layering of initiatives and regulations. Local authorities have an obligation to accommodate households that are in priority need, in the first instance in temporary accommodation until more suitable settled housing can be secured. Following steep increases in the proportion and number of families in bed and breakfast (B&B)hotels,in 2003the Government introducedregulationrestricting any B&Bplacement to amaximumofsix weeks. TA is financed through subsidy from central government via the housing benefit system. Housing benefit support for TA households contains two elements: an LHA element directed towards payment of the rent; and a ‘housing management’ element which is intended to support local authorities’ management of that TA tenancy. The LHA element has been capped at 90 per cent of the LHA at the 2011rate. The current housing management element is £40 per week in London comparedwith £60 outside London although the November 2015 Spending Review announced changes to this element ofTA subsidy. The nature of procurement of property to meet TA need underwent substantive change in 2013. In August of that year, the Government introduced new funding to support a reduction in the number of households in B&Bs. Local authority demand for emergency TA escalated, and in response the TA market increased the supply of ‘nightly rates’ accommodation. This accommodation was made available on a nightly-use basis,rather thanleasedby boroughsover longer time periods.A nightly rates arrangement was more lucrative to the supplier and, since that time, there has beensubstantialgrowthinthiscomponent of the TA market. Development of the nightly rates market enhanced competition for property and the incidence of widely divergent rents for similar properties. Attempts to contain costs in the nightly rates market led London boroughs to establish an agreement around the nightly rates payable. This measure has reported some degree of success in slowing the upward trajectory of costs. However, not contravening the agreement remains challenging for local authorities and, anecdotally, there has been an increase in the short-term emergency use of B&Bs as a consequence of an inability to find accommodationat the agreednightly rate. ix