Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/1988/2012

ADMINISTRATIVE APPEALS CHAMBER CH/3332/2012

Before Judge Mark

Final Decision:

Having previously allowed the appeals and set aside the decisions of the tribunal, I substitute my own decisions for those of the tribunal.  That decision is to set aside the decisions of the council dated 24 August 2010 and to substitute my own decision that the claimants’ net eligible rents were in each case £242.17 per week (£257.87 per week less £15.70 ineligible charges).

REASONS FOR DECISION

1.    Following oral hearings of these appeals I gave interim decisions setting aside the decisions of the tribunal and giving directions for further evidence before substituting my own decisions for those of the tribunal.  One of those decisions, in which the facts were recorded and my reasons were set out in full, is SS v Birmingham City Council and the Secretary of State [2013] UKUT 418 (AAC).  I left over for further submissions and evidence the question whether, on the basis of those decisions the rents charged for its rooms by the claimants’ landlord were unreasonably high by comparison with the rent payable in respect of suitable alternative accommodation elsewhere within the meaning of regulation 13 of the Housing Benefit Regulations 2006 as incorporated into those Regulations by schedule 3 to the Housing Benefit and  Council Tax Benefit (Consequential Provisions) Regulations 2006.

2.    This decision should be read in conjunction with my earlier findings and decisions in these cases.

3.    As I explained in SS v Birmingham City Council, the claimants’ landlord, Roshni, was a charity operating a women’s refuge for women from the South Asian continent who were experiencing domestic violence or parental conflict.  Prior to the financial year 2010/11, it received unrestricted public funding from Supporting People which it used to subsidise rentals for its rooms.  In the year ending 31 March 2010 it received £118330 funding in this way (a reduction of more than £30000 in funding compared with the previous year).  By contrast it received on £64,054 in respect of accommodation.  It lost that funding, through no fault of its own at the end of that financial year.

4.    As a result it commissioned a review by a local consultancy in housing and support.  The report advised that a contractual rent should be charged on £257.87 per week per room, consisting of a core rent of £132.80,service charges of £109.37 and ineligible charges (for housing benefit purposes) of £15.70, producing an eligible rent of £242.17.  This was significantly in excess of the rent charged in the previous financial year by Roshni, which the council had accepted as reasonable.  It was also, in total, significantly in excess of the total eligible rents charged by 5 comparators relied on by the council, which ranged between £140.75 and £210.16.  All those comparators, however, received public funding which they could use to subsidise rents.  There were no comparators which were unsubsidised.

5.    In those circumstances, I concluded at paragraph 33 of SS v Birmingham City Council

“Where such a comparison [i.e. with unsubsidised comparators] is not possible because of the absence of such comparators, it is permissible and necessary to look at the rent charged by subsidised landlords.  However, for an unsubsidised rent to be unreasonably high in comparison with that charged by the subsidised landlords, it would normally have to be shown that the size of the rent exceeded what the other rent could be expected to have been but for any element of discount.  I do not totally rule out any other possibility, for example where a subsidy has been lost because of some wrongdoing by the landlord, particularly where there is no shortage of suitable subsidised accommodation.  However, the present case concerns refuges for women against whom violence has been perpetrated.  The number of places needed in hostels for such women and their children may well exceed the number of places for which public funding is available, particularly at a time such as the present when public funding is being substantially reduced across the board.  Many if not most of those availing themselves of such accommodation would need to obtain housing benefit to pay the rent.  Without housing benefit, and without being subsidised by public or private funding, a charity could not operate a hostel that was needed to cater for those who could not get into a funded hostel because it could not recoup its reasonable operating costs.  This would leave victims of violence either homeless or at risk at the homes they wished to leave.”

6.    The Secretary of State has sought in further submissions to question whether this test is the correct one.  He says that it is a highly subjective test as it would require a local authority to assess the extent to which the landlord has set the rent to compensate for a lack of subsidy, and that it would be difficult for a local authority to do this on the ground, as it may require it to make potentially complex theoretical judgments about what level of rent might have been charged by a comparator landlord had it not been in receipt of subsidy.  It is also said that it would probably also require a wider consideration of the relevant organisation’s business model and projections to establish the level of rental income which a particular landlord required in order to remain operational, and thus, the level which they would, theoretically have been obliged to push rents up to had they not been in receipt of subsidy.

7.    If the Secretary of State wished to challenge the correctness of paragraph 33 of that decision, he should have sought permission to appeal.  It is not open for him to do so on this further hearing in the same case. 

8.    However, the test contemplated by me in that paragraph is very unlikely to involve the sort of complexity that is envisaged by the Secretary of State or the detailed analysis of the landlord’s accounts to which the council has subjected Roshni’s accounts in these cases.   In the normal case, there will be a simple question as to the size of the subsidies in the comparables and their effect on the rental level.  If without the subsidies the comparable rental levels would equal or exceed, or be very close to, the rents charged by the landlord, then it would normally follow that the rent charged by the landlord would not be unreasonably high by comparison with the comparators.  The excess would simply compensate for the absence of subsidy and that excess would not be unreasonable.  It would only be where the excess was more than minimally greater than the subsidised element of the comparable rents that the landlord might be expected to justify the difference and the local authority would have to consider the explanation.  While there may be possible justifications for the extra rent that would mean that it was not unreasonably high by comparison, they are unlikely to depend on a detailed analysis of the landlord’s accounts, any more than the reasonableness of any other rent is determined, for example, by a rent officer by reference to such accounts.  What may be relevant could include the reasonable provision of additional services or the omission of reasonable provisions by a comparator, leading to an unduly low rental.  For example, the comparator may be letting rooms in a building due for demolition within a short period, so that there is no need to allow for the cost of major repairs in calculating the rent.

9.     It is no doubt reasons of this kind which have led to the range of subsidised rents regarded as reasonable, as set out in paragraph 15 of SS v Birmingham City Council.  The fact that the rent of £210 set by comparator 5 is 50 per cent higher than that of £140 set by comparator 1 and 22 per cent higher than that set by comparator 2, although all are subsidised, has not led to the rent of £210 being regarded as unreasonably high in comparison.

10. In the present case, the closest comparator in terms of size and other factors is comparator 3, on which the council has relied in its latest submissions.  Its accounts, at p.292, show that it received £173,501 from Supporting People and £79,772 from accommodation charges.  In other words only 31.5 per cent of its accommodation costs came from rental charges and the remaining 68.5 per cent came from relevant subsidies.  It is plain that if the subsidy had been lost and it had been necessary for it to recoup all its accommodation costs from rent, the rent would have needed to be in the order of £568 instead of £179.  Even the smaller percentage subsidy of 58 per cent to which I came by a different calculation in my previous decision would mean a rental increase from £179 to £426.  I find it impossible to see how Roshni’s unsubsidised rent of £242.17 can be regarded as unreasonably high in those circumstances.  I note that it is suggested that other subsidies obtained in the course of the year by Roshni from other sources should be taken into account.  However, they can only be taken into account if they can be used by Roshni to subsidise rents.  Roshni’s evidence, which has not been seriously challenged and which I accept, is that most of those funds, which in any event fall far short of the lost grant from Supporting People, could only be used for other charitable purposes relating to children projects.

11. I would add that in considering the reasonableness of the rents charged, if there had been some element of subsidy obtained during the year in question, it would have been necessary to determine whether it was available when the rent was agreed for the individual claimants.  If it was only obtained at a later date, it cannot sensibly be taken into account in deciding whether the rent level was unreasonably high before it was obtained.  Roshni cannot be expected to have set rents in the hope of future subsidy that had not been promised and may never have materialised.

12. As I have already indicated, it does not appear to me to be necessary or appropriate to engage on a detailed examination of Roshni’s and the comparators’ accounts.  The council in this case has sought to do so, pointing out, for example, that Roshni’s support costs in their accounts are £21,815 more expensive than those of comparator 3. That is correct but it fails to differentiate between costs related to accommodation and those related to children projects.  I note that comparator 3’s accounts show that it had a grant from the council of £16,972 for such projects, while Roshni’s accounts show not only a similar grant from the council but also two further grants totalling nearly £50,000, suggesting that Roshni will have spent far more on such projects than the comparator.  The excess in relation to children projects could easily account for the £20,815 difference in support costs.  Other criticisms could also be levelled at the council’s analysis of the accounts but for the reasons I have given they are not relevant to the outcome of this appeal.

13. Given the demand for Roshni’s accommodation (it was 98 per cent full in the year in question), that it filled an important need beyond that provided by the funded charities, and that its loss of funding was the result of cutbacks and not of any failings on its part, I am satisfied that there is nothing remotely unreasonably high in the rents charged by it by comparison with the rent payable in respect of suitable alternative accommodation.

14. I therefore find that the claimants’ eligible rents are the full amounts claimed by them.

(signed) Michael Mark

Judge of the Upper Tribunal

 11 March 2014