England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
SULLIVAN J
SIR CHRISTOPHER BELLAMY

		Royal Courts of Justice Strand London WC2A 2LL
		23rd July, 2002

MR JUSTICE COLLINS:

1. The London Borough of Lambeth, like all local authorities, has an obligation to allocate housing accommodation to those who qualify. At present, the authority is required to maintain a register of such qualifying persons: see ss.161 and 162 in Part VI of the Housing Act 1996 ('The 1996 Act'). That is to be changed by the Homelessness Act 2002 s.14 to a requirement to allocate to eligible persons and the need to maintain a register is to be abolished. Whether they are described as qualifying or eligible, all British citizens and most of those who are given indefinite leave to remain in the United Kingdom are entitled to apply for local authority housing, unless they are the subject of a statutory provision which excludes them. At present, there are no material exclusions.
2. Section 167 of the 1996 Act is central to these appeals. It provides:-

“167. Allocation in accordance with allocation scheme

(1) Every local housing authority shall have a scheme (“their allocation scheme”) for determining priorities, and as to the procedure to be followed, in allocating housing accommodation.

For this purpose “procedure” includes all aspects of the allocation process, including the persons or descriptions of persons by whom decisions are to be taken.

(2) As regards priorities, the scheme shall be framed so as to secure that reasonable preference is given to -

(a) people occupying insanitary or overcrowded housing or otherwise living in unsatisfactory housing conditions.

(b) people occupying housing accommodation which is temporary or occupied on insecure terms.

(c) families with dependent children.

(d) households consisting of or including someone who is expecting a child.

(e) households consisting of or including someone with a particular need for settled accommodation on medical or welfare grounds, and.

(f) households whose social or economic circumstances are such that they have difficulty in securing settled accommodation.

The scheme shall also be framed so as to secure that additional preference is given to households within Paragraph (e) who cannot reasonably be expected to find settled accommodation for themselves in the foreseeable future.

(3) The Secretary of State may by regulations -

(a) specify further descriptions of people to whom preference is to be given as mentioned in subsection (2), or,

(b) amend or repeal any part of subsection (2).

(4) The Secretary of State may by regulations specify factors which a local housing authority shall not take into account in allocating housing accommodation.

(5) As regards the procedure to be followed, the scheme shall be framed in accordance with such principles as the Secretary of State may prescribe by regulations.

(6) Subject to the above provisions, and to any regulations made under them, the authority may decide on what principles the scheme is to be framed.

(7) Before adopting an allocation scheme, or making an alteration to their scheme reflecting a major change of policy, a local housing authority shall -

(a) send a copy of the draft scheme, or proposed alteration, to every registered social landlord with which they have nomination arrangements (see section 159(4)), and

(b) afford those persons a reasonable opportunity to comment on the proposals.

(8) A local housing authority shall not allocate housing accommodation except in accordance with their allocation scheme.”

The only relevant Regulations are the Allocation of Housing (Reasonable and Additional Preference) Regulations 1997 (1997 No. 1902), which added to the list of those who fall within s.167(2) those who are homeless to whom an authority owes the full housing duty under Part VII of the 1996 Act. Paragraph 2 reads:

“The following are specified as further descriptions of people to whom reasonable preference is to be given in the allocation scheme of a local housing authority -

(a) people owed a duty by that authority under section 193 or 195(2) of the Housing Act 1996 or section 65(2) or 68(2) of the Housing Act 1985 (main housing duties owed to homeless persons),

(b) people in respect of whom that authority are exercising their power under section 194 of the 1996 Act (power to secure accommodation after minimum period of duty under section 193 of that Act) and

(c) people -

(i) who have within the previous two years been provided with advice and assistance by that authority under section 197(2) of the 1996 act (duty where other suitable accommodation available) or

(ii) who are occupying accommodation secured with such advice and assistance.”

3. Lambeth's allocation scheme was after some two years in the formulation brought into effect in July 2000. It has been declared to be unlawful in both the cases before us. Sir Christopher Bellamy's judgment in the “A” case concludes that the scheme is unlawful on a somewhat wider basis than that of Sullivan J in the Lindsay case. That was because of a change made by Lambeth in September 2000, the effect of which was to give greater preference to the homeless to whom the full Part VII duty was owed. That change meant that A's chances of obtaining accommodation were adversely affected. Such considerations were not directly relevant in the Lindsay case.
4. Lambeth's scheme, called its Allocation Policy, contains its own exclusions. It is unnecessary to go into detail, but for obvious reasons Lambeth will only take on those who have some connection with Lambeth and will not provide for those who already have a secure house or who have, by their own misdeeds (for example, failure to pay rent) found themselves in housing difficulties. The following are the material extracts:-

“How need is assessed.

Assessment of housing need is in two stages:

The Council's assessment of applicants' housing need reflected by:

- placing them in one of six allocation groups - see page 16.

- in some cases, determining the areas, sides and type of property required - see page 24 onwards.

Applicants' judgment of their own need by making choices that will affect how quickly they are housed.

The Council's policy is to limit its own assessment as far as possible, and to give the freest rein possible to the applicant's choice.

The Council sets broad limits, which vary between the categories of applicant. Within these limits the emphasis is not on what the Council thinks applicants should get, but on what applicants think they need.

Applicants balance their housing need against their preference: those who feel their need is pressing will widen their choices; those prepared to wait can be more selective.

Date - order priority of applicants within groups means that the Council can indicate, through estimated waiting times, the effects an applicant's choices will have on the time it will take to receive an offer of housing.

While the Council does not have the properties to meet many applicants' ideals, emphasising choice should mean offers are closer to expectations.

As choices in the private housing markets are affected by what people can afford, so the time applicants feel they can afford to wait will affect their choices.

Reasonable preference

Section 167(2), Housing Act 1996 stipulates that, among housing register applicants, reasonable preference must go to certain categories. The allocations scheme fulfils this both directly and indirectly.

The reasonable preference categories are:

(a) people occupying insanitary or overcrowded housing or otherwise living in unsatisfactory housing conditions.

This is partly addressed by groups B (emergencies) and C (supply transfers).

(b) people occupying housing accommodation which is temporary or occupied on insecure terms.

This is particularly addressed by group E (homeless households).

(c) families with dependent children.

This is particularly addressed by assessing the property size needs of applicants, and setting a maximum size, so that family-sized dwellings are allocated almost exclusively to those with children.

(d) household consisting of or including someone expecting a child.

This is particularly addressed by assessing the size need of a household expecting a child as if the child were already born.

(e) households consisting of or including someone with a particular need for settled accommodation on medical or welfare grounds.

This is partly addressed by group B (emergencies), which includes urgent medical cases.

The requirement that additional preference is given to households who cannot reasonably be expected to find settled accommodation for themselves in the foreseeable future is met by group F (referrals).

(f) households whose social or economic circumstances are such that they have difficulty in securing settled accommodation.

This is particularly addressed by groups E (homeless households), F (referrals) and G (incoming HOMES).

(g) homeless households -

To whom the council owes a duty under section 193, Housing Act 1996 or s.65(2), Housing Act 1985 (priority, not intentional, homeless).

To whom the council owes a duty under s.195(2), Housing Act 1996, or s.68(2), Housing Act 1985 (priority, not intentional, threatened with homelessness).

For whom the council is exercising its power under section 194, Housing Act 1996 (the power to secure accommodation after the minimum period under s.193).

To whom the Council has given advice and assistance within the past two years under section 197(2), Housing Act 1996, (duty where other suitable accommodation is available).

Who are occupying accommodation secured with advice and assistance under section 197(2), Housing Act 1996.

This is particularly addressed by group D (homeless households).

The statutory reasonable preference categories are not to be considered in isolation from one another, and they may work cumulatively in certain cases.

It is not just the allocation groups, but all of the elements of the scheme, including self-assessment, that together form Lambeth's response to s.167(2).

The choices applicants make are founded on a combination of their need, their preferences and how acutely they feel the need to move.

Applicants are asked about their present circumstances. Where they indicate their accommodation is unsatisfactory, they are given clear advice to make their choices accordingly, to allow the most acceptable estimated waiting time for satisfactory housing.

The council may also give certain applicants in groups E (homeless), F (referrals) and G (HOMES) more priority within those groups if necessary to assist in discharging the Council's statutory duties or to take account of relative levels of housing need.

Allocation groups

Allocations are made through seven groups. These are in priority order:

(a) right to return

(b) emergencies

(c) supply transfers.

The remaining four are not listed in priority order:

(d) mainstream allocations

(e) homeless households

(f) referrals

(g) incoming HOMES nominations.”

5. The policy goes on to give a more detailed explanation of who will fall within the various groups. It will be apparent that the Groups cover those who do not fall within Part VI of the 1996 Act at all. Indeed, one of Mr Arden Q.C's complaints about the policy is that it covers not only those who fall within Part VI and to whom a duty may be owed under s.167 but also those to whom Lambeth has other obligations. Group A is an obvious example. It comprises those who have had to be moved out of local authority accommodation because, for example, of the need to carry out repairs and who have a right to return.
6. So far as material, the details of the other groups are as follows:

“Group B - emergencies

A case will be considered for this group if the move is required for one of the following reasons:

For medical reasons defined below.

To avoid a serious threat of violence/harassment to a Lambeth Council tenant, and where management action against the perpetrator is not sufficient to resolve the situation.

To alleviate statutory overcrowding (as defined by Part X Housing Act 1985) of a Lambeth Council tenant.

To avoid serious loss to the Council.

To comply with a court order or ombudsman instruction of major importance.”

Group C is headed 'Supply transfers'. This group comprises those who have to be transferred to other accommodation while, for example, their existing accommodation is to be repaired or redeveloped. It includes various other categories but only a few will normally fall within Part VI of the 1996 Act.

Group D is headed 'Mainstream Allocations'. It reads:-

“The only assessment criterion for joining this group is that the applicant must qualify to join the transfer list or housing register. All those not assessed as being in any other group are placed in this group.”

Group E is headed 'Homeless Households'. Broadly speaking it covers those who fall within the 1997 regulations. Group F is headed 'Referrals'. It covers those referred by a number of different agencies including the Council's environmental health officers and social services. The former may occur where existing accommodation is unfit for human habitation, the latter may be based on the need to preserve family life or to protect children or to deal with a mental or physical disability is identified. It covers too those referred by woman's aid organisation. In addition, there is an access scheme with voluntary organisations managing supported housing. Those in this category are normally outside Part VI. Finally, Group G covers what are described as 'HOMES nominations'. These comprise a very small number of nominations from social landlords via the Housing Organisation's mobility and exchange service. The number is negotiated annually.

7. Guidance as to allocations is set out in the policy.

“Deciding which group to offer to

For each vacant property, the computer generates 'matchlists' of applicants in each allocation group who may need that bed-size and have included that allocation area in their application.

The allocating officer decides which matchlist to offer to in the following order:

(a) Group A, right to return

(b) Group B, emergencies

(c) Group C, supply transfers

(d) Groups D to G - whichever is furthest proportionately behind its target.

Properties becoming available for letting from development programmes should be allocated across the allocation group in similar proportions to their targets.

Major decanting exercises may mean that all vacant properties in certain areas must be offered to local decants. For other special policies on lettings, see 40. Targets

Guidelines are set annually for each year's allocations by the Executive Director of Housing. They are set in percentage form, and are the same for all neighbourhood offices and tenant management organisations, and for the central nominating section.

They are given as percentage targets for groups D, E, F and G. Separate targets are set for allocations to large dwellings (with four or more bedrooms).

Groups A, B and C are not targeted groups. Targets for the other groups are percentages of all allocations and nominations after setting aside lettings to these three groups.

The targets for group E (homeless) are based on the level of supply expected and the number of allocations that would be required to achieve the change in temporary accommodation use planned for the period.

The targets for Group F (referrals) are set in consultation with each of the accredited referral agencies, and relate to the allocations they require to meet their housing needs, while taking into account the pressure of need from other sources.

The targets for Group G (HOMES) are set in response to number requested by HOMES which is based on a formula applied nationally.

The target for Group D (mainstream) is derived from the projected supply, allowing for expected demand from Groups A (right to return), B (emergencies) and C (supply transfers) and the targets for the other groups.

Performance against these targets - borough-wide and in each allocating office - is kept under continuous review to ensure that they are met. The effect of performance in each applicant group is also reviewed, and targets changed if necessary.

Order of applicants on the lists

When applicants are registered for housing, they are placed at the bottom of the list for their group, for the size of property they need, in the allocation areas they are registered for.

Applicants in each such list are placed in order of the date and time that they joined the list.

Every new applicant joins the bottom of their list. Applicants are listed in priority date and time order. It is not possible for applicants to go down their lists, unless they refuse a reasonable offer.

Applicants who change their group, the size of the property they need or their allocation areas will join the foot of the lists they join, while keeping their position on the lists they were already on.

The council reserves the discretion to give applicants in Groups E (homeless), F (referrals) and G (HOMES) more priority within those groups if necessary to assist in discharging the Council's statutory duties or to take account of relative levels of housing need.”

A discretion is reserved to Groups E, F and G only. If reasonable offers are refused, the penalty is to go to the bottom of Group D. That is subject to a right of review.

8. Lambeth, as required by s.169 of the 1996 Act, also had to have regard to guidance from the Secretary of State. That is contained in a Code of Guidance of March 1997. The material extracts are as follows:-

“5.5. The concept of reasonable preference has been used to articulate how authorities should prioritise different indicators of need ever since the term appeared in s.51 of the Housing Act 1935. Its use in the 1996 Act represents a continuation of the existing principles of housing allocation. It means that authorities should give due weight to the factors listed in s.167(2), but does not restrict authorities to taking only such factors into account. Authorities could add other factors of their own, such as housing key workers coming into the area, whose presence is essential for economic growth. However authorities should not allow their own secondary criteria to dominate their allocation scheme at the expense of factors in the statutory list.

5.6. Other considerations also apply to allocations. Authorities have a general duty to manage the resources at their disposal prudently. They may wish to take into account the characteristics of the people they select as tenants, both individually (as potentially good tenants) and collectively. This could extend to selecting tenants for property on a new estate in such a way as to ensure a visible social mix on the estate. There may also be cases where the only way an authority can ensure full use of all vacant stock is by giving some preference to categories of persons whose characteristics are not reflected in s.167(2). For example, some authorities have to adopt special strategies on hard-to-let property, granting tenancies to whoever is willing to take the property, regardless of housing need: this would not conflict with the principles in s.167(2), provided that there is no other way of letting the property reasonably, and that those accorded a reasonable preference are given the opportunity to consider the property. When nominating to bodies such as RSLs, local authorities should recognise that those bodies will also wish to ensure that they are able to manage their own stock effectively.

5.7. It is for each authority to consider how to reflect the categories set out in s.167(2) in the allocation scheme which they devise. A number of possible indicators are given in Annex A to this Guidance. There is no requirement for authorities to give equal weight to each of the factors listed in s.167(2). Generally, authorities will wish to ensure that their allocation schemes give greater preference to the more severe cases of need, whether manifested singly or through a spread of indicators. For example, an authority may wish to give greater priority to a household which includes a woman who is both pregnant (attracting reasonable preference under s.167(2)(d) and living in insanitary conditions (s.167(2)(a)) than a household which includes a woman who is only pregnant. However, the fact that a household includes a woman who is both pregnant and has a dependent child (attracting reasonable preference under both s.167(2)(c) and (d)) should not of itself give that household greater preference over a family which has two dependent children (and therefore only attracts preference under s.167(2)(c)). Each authority should have arrangements for determining priority in allocation between two households with similar levels of need. It would be quite legitimate to employ some indicator that reflects the time spent waiting at a particular level of need. Whatever indicators are used, they should be set out clearly in the allocation scheme.

5.8. The flexibility inherent in the provisions of s.167 means that an authority should not operate purely formulaic basis. Authorities must behave rationally, taking into account all considerations relevant to housing and social needs, and ignoring irrelevant factors. It would be open to an authority to establish, as part of their allocation scheme, a procedure for dealing with special cases on an exceptional basis. For example, if a household on the register has a reasonable expectation of being offered accommodation within three months but suddenly lose their existing home as a result of a disaster, it would be open to the authority to make an immediate offer of accommodation through the register. Similarly, where an authority consider that there is a good case for granting a tenancy to the former partner or carer of a deceased tenant, as set out in Paragraph 6 of Annex C, they have the discretion to do this, provided that they assess the case in the context of other demands on their housing stock.

What does “additional preference” mean?

5.9. In order to secure that “additional preference” is given, an allocation scheme would have to ensure that proper priority is accorded to a person with a particular need for settled accommodation on medical or welfare grounds who cannot reasonably be expected to find accommodation for him/herself in the future.

5.10. The provision is aimed at individuals who are particularly vulnerable, for example as a result of old age, physical and/or mental illness, and/or because of a learning or physical disability. These are people who could live independently with the necessary support, but who could not be expected to secure accommodation on their own initiative. The provision does not require authorities to allocate the first available property of any sort in such cases, but it does assume that people meeting this description will have first call on suitable vacancies.

5.11. An authority should take into account: the availability of suitable accommodation, whether a package of care and support services is required in order to enable the applicant to take up an offer of accommodation, as well as decisions by social services or health agencies about how the applicant's support, care or health needs should be met. Close and effective working between housing, social services and health authorities will be critical in order to delivery the most appropriate solution to the housing, support and care needs of people who come into this category.

What discretion do local authorities have in delivering their allocations schemes?

5.21. By virtue of s.167(6) a local housing authority is free to decide the structure of their allocations scheme (for example, whether it is points-based, date order or quota based, or any combination of theses), what indicators to use, and what weighting to give to the categories listed in s.167(2), provided, of course, that reasonable preference is still given to those categories when allocating housing. Discretion rests with the authority, as it did previously, although the scheme may be devised and operated by the director of housing, or the appropriate chief officer, under delegated powers. The Secretaries of State would encourage local authorities to exercise this discretion to ensure that first priority should be the provision of housing for married couples with children, and for vulnerable individuals, who are living in unsuitable accommodation.

5.22. Many authorities have in the past made arrangements that effectively set aside a quota of anticipated allocations for groups with particular characteristics, and in some cases allocate the accommodation on the basis of referrals from social services departments, welfare bodies or specialised agencies dealing with rough sleepers. Establishing such quotas can form part of an authority's strategy to integrate the provision of housing with other social policies, for example as part of a care in the community package, or to enable individuals to move on from a hostel providing temporary accommodation. It is inherent in the provisions of s.167 that authorities retain this discretion, provided that the persons who are subject to such arrangements fall within one (or more) of the categories of “reasonable preference” set out in subsection (2) of is s.167.

5.23. The Secretaries of State would encourage authorities to ensure that the wider objectives of delivering social housing in support of a range of social policies can continue to be met, for example by maintaining or establishing quota arrangements. Authorities should ensure that: any such arrangements form part of their allocation schemes adopted under s.167 of the 1996 Act; the qualifications for falling within a quota are clearly set out; and allocations made on the basis of a quota go to persons whose names appear on the housing register. Where a group of authorities have common arrangements for receiving referrals from an outside agency, they will need to ensure that their individual allocation schemes are mutually compatible.”

9. Lambeth was also looking to the future and took into account the Green Paper of 4th December 2000 which led eventually to the Homelessness Act 2002. This laid some emphasis on choice. It refers to the desirability of promoting a more customer-centred approach. Social housing, as it is now called, should generally be given to those in the greatest housing need, but the matter of assessing such need is not limited to points systems; a more broad brush 'banding' system may be appropriate.
10. Before coming to the specific issues raised in these appeals, I should refer to the facts of the individual cases. That can be done very briefly since in the A case, Lambeth accepted that it had not carried out the assessment in accordance with its policy so that she may not have been accorded the priority to which she was entitled. Thus in her case it is only necessary to record that A and her daughter had been living in a single room in a hostel and that she suffers from physical and mental disabilities, the latter partly resulting from her housing problems. She has been placed in Group F, having been referred by the Social Services Department. She falls within all the categories of persons within s.167(2) save for (d), since she is not pregnant. She also qualifies for the additional preference to be given to some within s.167(2)(e). Mr Lindsay is a single man. He is homeless but not in priority need so that the Council do not owe him the full Part VI duty. He has to rely on friends or family to accommodate him and, when that fails, he sleeps rough. He cannot afford private accommodation, being unable to find a deposit. He was allocated to Group D. Although there was some confusion in the Council's dealings with him, by the time of the hearing before Sullivan J it was accepted that he fell within s.167(2)(b) and (f).
11. Insofar as it is not spelt out in the Allocation Policy, in witness statements produced in each case the Council's Housing Needs Manager, Mr David Fowler, has explained the Council's thinking which led to the policy and how it works in practice. The starting point is the appalling pressure on Council accommodation in Lambeth. There has been a reduction of over 50 per cent during the past 5 years in the amount of stock available at the same time as an increase in those seeking accommodation. Much of the pressure has resulted from an increase in homelessness. Thus the reality is that in Lambeth, as in most of the inner London boroughs, the vast majority of those who are on the housing register and who seek Council accommodation fall within at least one of the categories in s.167(2). Many are in more than one. The figures provided show that only some 4 per cent are not entitled to preference. The Council had, like many, operated a points system to identify priorities. This was, in its view, unsatisfactory in a number of respects. It was somewhat inflexible and did not always identify real need. It took no account of applicants' own perceptions of need. More particularly, it meant that those on the list could be pushed back when those with more points joined. This was especially frustrating for those nearing the top who found themselves suddenly dropping a substantial number of places.
12. The policy says that the individual applicants have the opportunity to make choices by judging their own need which will affect how quickly they are housed. When an application is made, the relevant official will identify the Group into which the applicant is to be placed. He will also, depending on how many dependants are involved, identify the size of accommodation needed. If there are young children, normally accommodation in the upper floors of tall buildings will be regarded as unsuitable. The borough is divided up into a number of different areas, some of which have longer waiting lists than others because some are considered more desirable than others, and the applicant will be appropriated to such as his application indicates. Applicants can discover, because the information can easily be made available, what the situation is in each area and roughly how long they can expect to have to wait. It is thoroughly depressing to have to record that the wait in Lambeth for cases which are not in the highest category of need is measured in years rather than months. The choice referred to is exercised by a willingness to accept accommodation which is smaller or otherwise less suitable or in a greater number of areas. One major benefit of the policy is said to be that it is date order based. An applicant cannot generally slip back. Her or she will be placed within the appropriate Group and against the relevant size of accommodation and area.
13. Great emphasis is placed on the opportunity to make a choice to achieve preference. It is said that under the old policy, the refusal rate for accommodation offered was two to one. It is now one to three which, it is said, shows the advantage of choice. I am not persuaded that these figures by themselves necessarily justify the conclusion reached. It is important to know how many refusals were on review regarded as justified. If unsuitable accommodation was being offered, it is hardly surprising that there were more refusals. What has helped is not necessarily choice but a greater knowledge of what an applicant was prepared to accept. Furthermore, in many ways the policy provides the antithesis of choice. A realisation that what would otherwise be regarded as substandard accommodation in an unwanted area can be the only way of avoiding an unacceptably long wait, is hardly what most would regard as a real choice. It is not the sort of choice which the Green Paper seems to me to be advocating. However, whatever is the correct label to attach to it, Mr Fowler says that it reflects the situation in the private market and those in greater need not only can but in practice are prepared to accept less suitable accommodation and so this policy does work. The Council advises all applicants of the advantages of maximising their options.
14. Targets are set for the various allocation Groups. This aspect of the policy and in particular the changes in the targets which resulted in Group D and Group F being reduced to zero are attacked separately. I shall return to that in due course. It is convenient to deal first with the two main arguments against the lawfulness of the policy. These are, putting them very broadly, first that the policy does not provide for the reasonable preference required by s.167(2) since it covers not only those who are entitled to such preferences but also those who are not. All within, for example, Group D can achieve a better chance of a speedier provision of accommodation by widening their options. Thus those who are not entitled to preference have an equal opportunity of achieving preference to those who are entitled to it. This cannot meet the words of the statute whereby the scheme must be “framed so as to secure that reasonable preference is given to” the various persons. Secondly, it is submitted that the scheme does not enable those who fall within more than one of the categories in s.167(2) to achieve a greater priority. Although the policy purports to cater for such composite assessments and Mr Fowler asserts that the Council was aware of the need to ensure that they could be properly considered, in reality they are not, save through the relief assessment and a limited discretionary power contained only in Groups E, F and G.
15. S.167 does not require more than that a reasonable preference be given. Each authority's scheme will inevitably be linked to its particular situation and will reflect its particular problems. The Code of Guidance recognises that other factors than those in s.167(2) can be taken into account and given weight provided that they do not dominate the scheme at the expense of those in s.167(2). Equally, the authority will decide what weight to attach to each of the factors. In R v Wolverhampton MBC ex p Watters (1997) 29 HLR 931, this court considered the correct approach to reasonable preference in the context of s.22 of the Housing Act 1985, the predecessor of s.167. That case concerned a scheme in which the existence of rent arrears could wipe out the preference which would otherwise be accorded. The court rejected the argument that the requirement to accord reasonable preference would not be complied with if no preference was given at all. Leggatt LJ said (at p.936):-

“No preference is to be given except reasonable preference. That involves balancing against the statutory factors such factors as may be relevant. So the Council is entitled to take account of substantial arrears of rent due to the Council... [W]hen in the Council's judgment an applicant's rent arrears are such as to outweigh the reasonable preference that would otherwise avail him, that applicant will not be selected.”

In his short concurring judgment, Judge LJ said at p.937:- “Although the effect of section 22 of the Housing Act 1985 is to produce an advantage for prospective tenants who bring themselves within the relevant criteria, they do not enjoy an automatic entitlement to be allocated local authority housing appropriate to their needs. The section is concerned with the process of 'selection' of tenants by the housing authority and there is nothing to suggest that the suitability of the prospective tenants, or indeed any other relevant considerations, are to be ignored. Even in the case of applications by those within the criteria which entitle them to preferential treatment, the express requirement that the preference should be reasonable rather than absolute entitles the housing authority, in addition, to consider any other relevant fact including the extent to and circumstances in which the applicants the applicants have failed to pay due rent or have otherwise been in breach of the obligations of their existing or earlier tenancies. Such circumstances are not excluded from their selection process.

The statutory obligations imposed by section 22 therefore requires that positive favour should be shown to applications which satisfy any of the relevant criteria. To use colloquial language they should be given a reasonable head start. Thereafter all the remaining factors fall to be considered in the balancing exercise inevitably required when each individual application is under consideration. If despite the head start the housing authority eventually decides on reasonable grounds that the application for a tenancy must be rejected this will not constitute a breach of the obligations imposed by section 22.”

16. The scheme must be framed so as to secure that reasonable preference is given. The Council's scheme is based on date order and includes (potentially in each group but in reality largely in Group D) those who are not entitled to any preference. Mr Lowe Q.C. attempted to suggest that 4 per cent was de minimis. In terms of numbers, that suggestion is insupportable, but the exact percentage is irrelevant. Unless it is clear that no applicants who are not entitled to preference are able to compete on equal terms with those who are, the scheme cannot secure that the necessary head start is given. The self assessment of need cannot in my judgment provide the preference since all within the Group have an equal entitlement to widen their options and the individual's personal assessment of his or her need cannot secure that only those who are within s.167(2) are accorded the preference.
17. The scheme is not directly linked to the various categories in s.167(2). That is not in itself a reason to regard it as unlawful provided that it does in fact secure the necessary preference for those categories. Mr Lowe was asked in the course of argument to explain the distinction between the assertion that a particular s.167(2) category was partly addressed by a Group and the assertion that it was particularly addressed by a Group. In the end, it seems it is a question of degree, particularly meaning mainly. It is to be noted that the additional preference to be accorded to those in Category(e) who have the added problem of being unable to find settled accommodation within the foreseeable future is said to be catered for by Group F. This is because such persons would be likely to be referred by the Social Services department. But the fact remains that the scheme cannot secure that the necessary preferences are accorded because of the presence of those who are not within s.167(2) in the Group and who have the same opportunity to achieve preference.
18. I now turn to consider the argument that, even if the Group (particularly group D) comprised only those entitled to preference, the scheme would still be unlawful because it fails to provide a means of giving priority to those who fall within more than one category (the so-called composite need) or those in Category(e) who are entitled to the additional preference. Parliament has left it to the Authority to decide how to assess the various categories and what weight should be attached to each. In fact, what the Authority must do is to assess the needs of each applicant and endeavour to give preference to those in greater need. This is what Lambeth says its scheme is designed to do and it asserts that it succeeds in so doing. In reality, a judgment has to be formed by someone when faced with competing needs and a woefully inadequate availability of suitable accommodation. Reliance is placed on a decision of Richards J in R v Islington LBC ex parte Reilly and Mannix (1998) 31 HLR 651. Islington operated a points scheme. It was unlawful because it was unduly rigid and did not cater properly for composite need. Thus it did not achieve a true assessment of need. This was applied by Latham J in R v Westminister ex parte Al-Khorsan (1999) 33 HLR 77. The claimant was homeless and Westminster's scheme did not enable consideration to be given to any other categories in s.167(2) which applied to him and which cumulatively would should that he had a greater need and so should achieve a higher degree of preference. At page 81 Latham J said:-

“10. In my judgment, the respondent is seeking to avoid doing precisely what the Act requires it to do. Paragraph 2.3 of the Code of Guidance to which I have already referred states:

'A local authority secure tenancy or an assured periodic tenancy with a registered social landlord is, in many cases, a guarantee of social housing for life. It is therefore important that authorities should take a long term view of applicants' circumstances, to ensure that such housing, and nominations to registered social landlords, go to those households with the greater underlying needs.'

“11. That seems to me to be the philosophy which underlies the provisions of section 167. The various categories of need identified in section 167, and in the 1997 Regulations, are not to be treated, it seems to me, as separate watertight compartments. They identify needs which are cable of being cumulative. And it is only in that way that a proper judgment can be made of the respective needs of persons on the list. This was recognised by Richards J in R v Islington LBC ex p. Reilly and Mannix at page 666. In so far, therefore, as the respondent's scheme precludes consideration of any of the other categories to which reasonable preference and additional preference ought to be given, under section 167(2) it is unlawful, in that it excludes from consideration matters which Parliament has required the respondent to take into consideration. The extent to which priority should be given within the homeless category to those who may fall within the other categories is a matter for the respondent. But those who have needs which are capable of falling into any of the other categories are entitled to have those needs taken into consideration.”

This can be encapsulated in the requirement that the scheme in question has a mechanism for identifying those with the greatest need and ensuring that so far as possible and subject to reasonable countervailing factors (for example, past failure to pay rent et cetera) they are given priority. No doubt normally those in greater need will be those who qualify under more than one category, but it will not necessarily be the case that X who is within more categories than Y automatically must be regarded as being in greater need than Y. All will depend on the circumstances, one of which may include the length of time Y has spent waiting.

19. In the Islington case, Richards J decided that the scheme could not achieve what it should in this respect and so failed because it was irrational. That in my view is the correct approach. So we have to decide whether the method which Lambeth has devised in its Allocations Policy to identify and so give priority to those in greatest need can reasonably be said to achieve its object. Any scheme which is aimed at an assessment of comparative need will be imperfect. Whether done by means of quotas or points with an injection of discretion or howsoever, it will inevitably involve elements of subjective judgment and individuals will feel that their needs are greater than those of others who have been given priority over them.
20. As it seems to me, the question is whether self-assessment can be said to be a rational means of solving the problem. Lambeth asserts that it works and that an individual's assessment of his or her own needs is as reliable as that made by a third person. The difficulty with that submission is that the individual is inevitably concerned only with his or her own situation and may not on any reasonably objective view have greater need. While I have recognised the inevitable perfections of any scheme, this seems to me to be altogether too haphazard. Furthermore, it is all very well to say that individuals can widen their choices, but it may be impossible to do so. For example, if there are young children, a high rise flat may be regarded as not being a possible option. And, although the Council's medical adviser may help, some medical conditions may severely limit choice, even though they are not regarded as serious enough to promote the individual from Group D. To suggest that those in Group D are all roughly similar in their needs and that all that is being done is fine tuning is unimpressive. The paucity of available accommodation and the large number of those who seek it mean that the threshold of a Group with greater preference is a high one. That is inevitable because of the situation faced by Lambeth, but it will mean that the large numbers in Group D will exhibit real differences in their needs.
21. Accordingly in my view the system which Lambeth has devised and the manner in which preferences are to be accorded by means of self-assessment or, as Lambeth calls it, choice do not meet the statutory requirements. I would therefore regard it as unlawful even if those who do not qualify were removed from the Group.
22. Those who need the additional preference under Category(e) are catered for by Group F. It is true that a placement in that Group depends upon a referral, but if an applicant has the cumulative difficulties, it is hard to imagine that a referral would not take place. If it did not, it would only be because sufficient need was not disclosed. Group F includes others whose need is equivalent albeit they are not entitled to additional preference. This means, it is submitted, that such additional preference cannot be secured to those entitled to it by statute. There is, however, the ability to exercise discretion. Furthermore, when assessing need against available accommodation, if others' need is greater, it is not reasonable to afford preference at their expense. It is also said that the availability of accommodation for Group F will be affected by the priority given to Group C but as Mr Lowe has pointed out, the supply transfers are few in number and are principally for those who are in need of urgent removal from their existing accommodation because of proposed redevelopment or its insanitary nature. They will fall into a high category of need and it is reasonable for the scheme to give them priority. The criteria for inclusion in Group F are set out in considerable detail. It would not be sensible to go into the detail since the policy is unlawful. But it seems to me that a provision which identifies those entitled to the additional preference by means of a referral in circumstances envisaged in Group F is capable of properly according them that additional preference.
23. Mr Arden has made a general attack on the scheme on the ground that it lacks transparency. He submits that the 1996 Act was intended to change the law so that those who applied for housing accommodation should be able to look at a scheme and understand from its terms exactly how reasonable preference is accorded. This scheme does not show who will qualify for what Group and who in each Group will achieve preference. It is not lawful to leave it to officers to make the decisions unless the criteria are clearly spelt out and understood. This, submits Mr Arden, is to be derived from the use of the expression “framed so as to secure.”
24. S.168 requires that a summary of its scheme is provided free of charge, that the whole is available for inspection and that copies are provided on payment of a reasonable fee. Furthermore, any alteration to the scheme reflecting a “major change of policy” must be notified and explained. S.166 requires that everyone on the housing register is able to see his entry and to be given such general information as will enable him to assess how long it is before he gets suitable accommodation. Anyone can at any time get a computer print out giving him the necessary information.
25. I do not accept that a scheme has to contain the degree of precision Mr Arden submits to be necessary. The wording of the Act does not require it. The scheme must set out all aspects of the allocation process, but it is not necessary to do more than Lambeth has done, that is to say to explain what criteria apply to each Group and to indicate that an officer will allocate in accordance with those criteria which may be general. Equally, although it is unlawful for other reasons, self-assessment is sufficiently explained.
26. Finally, Mr Arden has attacked the manner in which quotas and targets are dealt with. The scheme explains that they are set annually for all Groups other than A, B and C. How they are assessed is adequately explained and the policy goes on to make clear that preference is kept under review and that:-

“the effect of preference on each applicant Group is also reviewed, and targets changed if necessary.”

That seems to me to be all that is required. The actual targets and any adjustments need not form part of the published scheme. There must be flexibility to cater for changes of availability during a year or to meet a particular crisis. Provided that there is no major change of policy (and a need to vary targets in the light of preference or to meet a change of circumstances is not such a major change) there is not need to republish.

27. Two specific variations have been relied on in these appeals. In A, there was produced a letter of 7th September 2000, which reads --

“Dear Colleague.

The homelessness crisis.

There are now over 100 homeless households in bed and breakfast. We must reverse this rise and, because housing supply continues to run at the lowest levels ever, we must take very strong remedial action.

I am therefore setting temporary new targets for lettings, which require that a larger share of properties go to the homeless group, so that we reverse the effects of non-compliance with my previous instructions.

Please ensure that a copy of this letter is given to every member of staff in your office who allocates vacant dwellings.

Who should I allocate a void to?

		Allocation Group	Share of offers
1.	If the property is set aside for right-to-return	A (right to return)
2.	If the property is not set aside for right-to-return	B (Emergencies)
3.	If there are no suitable emergency applicants for the property	E (Homeless)	Allocate 80% of voids
		C (supply: decants, major repairs, transfer incentive scheme, short-life recall, service occupiers etc.)	Offer only to bring allocations up to 20%

In group E (Homeless) you should give preference to applicants with the sub-categories TAC (temporary accommodation) and NON (asylum seekers). This may mean you have to go a long way down the matchlists to find a case. If there are no such cases anywhere on your matchlists, offer to HAH (prevention) if necessary.

If you cannot find suitable homeless applicants to offer to, please contact Fidelis Linehan (64202) or David Fowler (64347)for advice.

On HICS, the menu option “New view target performance” (on the allocations targets menu on the allocations menu) shows how acceptances in your NMO/TMO are performing against these targets.

You may also find the attached flow chart helpful.

Do not offer to:

Allocation Group	Share of Offers
D (Mainstream)	Zero
E (referral quotas)	Zero
G (incominng HOMES Nominations)	Zero

In order to be certain that these instructions reach all those responsible for offers, please cascade this letter to each person in your office who deals with allocations. Please instruct them to e-mail SHS HouseNeeds with their name and office, confirming they have received this letter.

Yours Faithfully,

John Broomfield

Executive Director of Housing.”

28. The effect of this was to give priority to Group E (homelessness) so as not only to change the targets, bringing D F and G to zero, but also to change the order in which allocations were to be made. C was now to come below E. Sir Christopher Bellamy regarded this as a major deviation from the policy as published and unlawful because it contravened s.167(8). A change to targeting and quotas resulting from a reasonable response to the crisis created by the need to find accommodation for the homeless is not within the precise language used in the scheme since it does not result from the effect of performance on each Group. Nevertheless, I would be reluctant to hold that targets were inflexible and could not be varied to meet such crises. In any event, as Mr Fowler pointed out, the reduction to zero did not in fact mean there were no allocations to those groups since some accommodation was not suitable for A, B, E and C. But the change of order of allocations was a variation not contemplated by the scheme as published. If such variations are to occur, the scheme must provide for them. It could have done and if it had I would have regarded such variations, if reasonable, to have been lawful. As it is, I agree with Sir Christopher Bellamy.
29. Finally, in Mr Lindsay's case, a letter of 6th February 2002 was produced. This stated that the share of offers for Group D should be reduced to zero per cent. It was said that this was because Group D has so out performed the planned allocations in the first three quarters of the year (which runs from April to March) that it had already achieved the level set in the plan. If further allocations were allowed, other Groups would suffer. This was precisely what the policy referred to and indicated would occur. It is therefore clearly lawful.
30. I have enormous sympathy for Lambeth and indeed for all Councils faced with similar problems. The reality is that s.167(2) is difficult to apply sensibly when almost all applicants are entitled to reasonable preference and there is a chronic shortage of suitable accommodation. Nevertheless, the statutory provisions have to be complied with and with considerable regret I have been compelled to conclude that both the judges were correct to declare that Lambeth's policy is unlawful. Accordingly, I would dismiss both these appeals.

Lord Justice Judge:

31. I have read the judgments of Pill LJ and Collins J in draft. I agree with them. I add a few words of my own by way of emphasis.
32. Like Pill LJ I do not believe it appropriate for the court to be invited to express broad approval to a scheme or schemes, or for the court to be asked to express a view, favourable or otherwise, about the validity of an individual scheme. We can only deal with specific complaints about the lawfulness of an individual scheme. In reaching our conclusions we will not have reflected on more than the specific complaints in the context of the scheme as a whole. If we were to go further and indicate approval for the scheme as a whole, we should have done so without having heard argument from any individual adversely affected by a different aspect of the scheme not immediately before us. That would not be right.

Lord Justice Pill:

33. Section 167(1) of the Housing Act 1996 (“the 1996 Act”), which in part VI of the Act, requires every local housing authority to have a allocation scheme for determining priorities in allocating housing accommodation. Section 167(2) requires the scheme so to be framed “as to secure that reasonable preference is given” to certain categories of people, families and households. The scheme must also secure an additional preference for households within one of the categories, category(e) defined in the sub-section.
34. I should first wish to acknowledge the extreme difficulty involved in operating such a scheme in a Borough like the London Borough of Lambeth. First, there is enormous pressure upon the limited housing stock available to the Borough Council (“the Council”). The evidence of Mr Fowler, the Council's Housing Needs Manager, was that, in the period 1st April 2000 to 31st March 2001, there were 14,107 Part VI applicants for lettings and a total of 1,607 lettings was made. Secondly, the proportion of those on the list entitled to the statutory preference was 96 per cent. A requirement to give a quarter of applications preference over the other three-quarters may readily be applied or even a requirement to give a preference to one half over the other half, but the “head start” contemplated in the sub-section may have little significance if all but 4 per cent of applicants are entitled to it.
35. The Council laboured for two years to devise an allocation scheme which they believed to be both workable in the Lambeth context and compliant with the statutory requirement. As explained by Mr Lowe for the Council, the scheme provided for the allocation of applicants to one of six groups and an allocation of quotas or targets to groups. These are described as the broad parameters of preference. Applicants then have a choice on a property to property basis. Self-assessment was described as the key element and characteristic of the scheme. It is said to rely very largely on the applicant's expression of choice.
36. Applicants have access to matching lists which, by reference to type and size of accommodation and to location within the Borough, indicate past turnover rates and thereby the length of time an applicant is likely to have to wait to be offered a particular class of accommodation. The choice relied on by the Council to establish a preference then arises. The applicant assesses the extent of his own needs. He can decide whether he assesses his need in such a way that he would prefer to wait longer to obtain better accommodation or accommodation in a part of the Borough he perceives to be a better area. (It is accepted that regulations, dealing for example with overcrowding, may limit choice to some extent.) It is demeaning to applicants, it is submitted, to suggest that choices are better made by a scheme operated by the Council's housing department.
37. I agree with Collins J (and Sullivan J) that the Council's allocation scheme is unlawful by reason of its failure to give preference to the 96 per cent of applicants who are entitled to the statutory preference over the 4 per cent who are not. The 4 per cent cannot for present purposes be dismissed as too small to matter.
38. I also agree that the provision of choice does not render the allocation scheme lawful. Conferring a choice on applicants is of course admirable and accords with government policy, as expressed in a response to public consultation following the Housing Green Paper of December 2000 “to promote choice based lettings approaches more generally.” However, the sustained submissions of Mr Lowe have not persuaded me that giving the choice of accepting something less than the applicant maybe allowed, if available, discharges the specific duty in section 167(2) to give a preference. I fail to see how permitting an applicant to assess his need so highly that he accepts inferior accommodation amounts to conferring a preference on him. The two concepts are different and the right to choose does not amount to a preference within the meaning of the section. This conclusion is not dependent on the fact that the choice is available to all applicants, and not only those entitled to the statutory preference, but is consistent with it.
39. The Code of Guidance issued by the Department of the Environment and Department of Health in March 1997 appears to me to provide in paragraphs 5.5 to 5.8 and 5.21 to 5.23, under the headings “what does 'reasonable preference' mean?” And “what discretion do local authorities have in devising their allocation schemes?”, valuable guidance to local authorities. Authorities are in any event required to have regard to the Code, the relevant paragraphs of which are set out in the judgment of Collins J. Provided the statutory preference is given, an authority is free to decide the structure of its allocation scheme and date order and quota based schemes are contemplated as well as points based schemes. Mr Arden for the respondents, does not challenge the lawfulness of a scheme which provides for categorisation and quotas but submits, and I agree with the submission, that it necessarily follows from the statutory duty that the presence of the reasonable preference must be reflected in the categorisation adopted. That is not of course to say that each or any of the subsections must have its own category. It is not enough, however, to provide a preferential category or categories only for exceptional cases in what are recognised to be small groups while leaving the bulk of those entitled to the preference in a single undifferential category.
40. I also agree with Collins J, and the judgments cited, that the allocation scheme must provide fuller guidance in identifying needs, including a recognition that the factors in section 167(2) may operate cumulatively. Mr Arden goes too far when submits that the effect of section 167(2) is to transform an art into a science; the possible combination of circumstances arising from the criteria in section 167(2) is so large that the need for value judgments remains. I do however accept the statutory intention to provide a scheme which is as clear and predictable in operation as circumstances permit. I would add that overelaboration may become the enemy of clarity and fairness but that, I acknowledge, is a proposition easier to state than to apply.
41. While again acknowledging the difficulty of the Council's task, the allocation scheme is, in my judgment, unlawful for the reasons given. Beyond that, it does not appear to me helpful to attempt a detailed critique of the scheme, group by group and quota by quota. It is for the Council and not the Court to devise an allocation scheme and section 167 does not impose a straightjacket or require an absolute preference. I see dangers in the statistical exercise performed in 'A' by Sir Christopher Bellamy and the conclusions drawn in that, from the limited submission made about them to us, it appears to me that the figures may not properly reflect whether the statutory requirement was met. The parties to the appeal did not seek to place much reliance on them and the scheme has been found to be unlawful on more general grounds.
42. The further requirement in section 167(2) to provide additional preference for households within paragraph (e) of the subsection, who cannot reasonably be expected to find settled accommodation for themselves in the immediate future, presents a further complication in devising a scheme. The additional preference must be reflected in the scheme but does not necessarily require an allotment to persons entitled to it ahead of everyone else on the housing list regardless of the extent of their need, time on the list or entitlement to preferences and composite preferences under section 167(2). The Council have attempted to provide the additional preference in their group F. Because of the conclusion I have reached on the scheme as a whole, I am not able to approve group F but, in agreement with Collins J, I find that something along the lines of group F is capable of providing the additional preference. I also agree with the comments of Collins J as to the amount of detail to be expected in a scheme through frequent changes in priority are inimical to the attainment of predictability and are not to be made without good reason.
43. For those reasons, and the reasons given by Collins J, I too would dismiss this appeal.