Part VII of the Housing Act 1996 provides that local authorities are under a full duty to secure accommodation to a person found homeless, if certain conditions are satisfied, one of which is that they are not satisfied that she “became homeless intentionally” (section 193(1)). That in turn depends on whether she deliberately did or failed to do anything in consequence of which she ceased to occupy accommodation which was available for her occupation and “which it would have been reasonable for [her] to continue to occupy” (section 191(1)).
Pursuant to The Homelessness (Suitability of Accommodation) Order 1996:
- In determining whether it would be, or would have been, reasonable for a person to continue to occupy accommodation … there shall be taken into account whether or not the accommodation is affordable for that person and, in particular, the following matters –
(a) the financial resources available to that person, including, but not limited to, –
(i) salary, fees and other remuneration;
(ii) social security benefits; …
(b) the costs in respect of the accommodation, including, but not limited to, –
(i) payments of, or by way of, rent; …
(d) that person’s other reasonable living expenses.”
Local authorities are also required to have regard to the relevant code guidance, which at the time was the Homelessness Code of Guidance for Local Authorities (“the Code”). Paragraph 17.40 of that code provided:
“In considering an applicant’s residual income after meeting the costs of the accommodation, the Secretary of State recommends that housing authorities regard accommodation as not being affordable if the applicant would be left with a residual income which would be less than the level of income support or income-based jobseekers allowance that is applicable in respect of the applicant, or would be applicable if he or she was entitled to claim such benefit. This amount will vary from case to case, according to the circumstances and composition of the applicant’s household. A current tariff of applicable amounts in respect of such benefits should be available within the authority’s housing benefit section. Housing authorities will need to consider whether the applicant can afford the housing costs without being deprived of basic essentials such as food, clothing, heating, transport and other essentials …”
Ms Samuels, along with her four children, occupied a property under an an Assured Shorthold Tenancy. In July of 2011, she was given notice to leave on the basis that she had fallen into rent arrears. An application to the respondent local authority under Part VII of the Housing Act 1996 was made but the authority found her to be intentionally homeless. This finding was made on the basis that her failure to pay rent constituted a deliberate act, which resulted in the loss of accommodation which was both affordable and reasonable to expect her to continue to occupy.
There is some confusion (irrelevant to the substance of the appeal) about the exact figures involved in Ms Samuels’ income and expenditure. It was common ground that Ms Samuels was at the relevant time entirely dependent upon social security benefits. The figures provided to the court gave a monthly income of £1897.84, comprised of:
£548.51 – Housing Benefit
£290.33 – Income Support
£819 – Child Tax Credit
£240 – Child Benefit
Which provided a sum of £1349.33 available for the living expenses of the family, excluding housing benefit. Her rent was £700, giving a rental shortfall of £151.49. At the time of the review decision, her expenses (as provided by her solicitors), stood in the sum of £1,234.99 per month. Once housing benefit and rent were included in the calculation, an overall shortfall of £37 per month was alleged.
This appeal arose from the finding of the respondent local authority’s reviewing officer that there was “sufficient flexibility” in Ms Samuels overall household income to meet the rental shortfall, and accordingly the accommodation was affordable to her.
Crucially, the question of whether the reference to use of income support as a guide is to be treated as extending also to benefits in respect of children, in particular child tax credit, was in issue in this case.
Appeal to the County Court
The County Court did not accept that there had been a failure to consider paragraph 17.40 of the code of guidance. In line with the decision in Balog v Birmingham City Council  EWCA Civ 1582, the Code had been referred to in the letter, and so the court could assume its contents had been properly considered.
Court of appeal
The Court of Appeal dismissed Ms Samuels’ appeal, rejecting an argument that income derived from benefits must be treated as income at a subsistence level and incapable of providing for flexibility.
Looking at the respondent Local Authority’s approach to the guidance, the Court held [paragraph 35] that
“benefit levels are not generally designed to provide a surplus above subsistence needs for the family. If comparison with the relevant benefit levels is material to the assessment of the applicant, it is difficult to see why it should be any less material in assessing what is reasonable by way of living expenses in relation to other members of the household.”
Noting that Ms Samuels’ monthly expenses were “well within the amount regarded as appropriate by way of welfare benefits” (£1234.99 in circumstances where her total income from non-housing benefits was £1349.33), the Court held that the reviewing officer misdirected himself in asking whether there was sufficient “flexibility” in her household expenses to allow her to meet the £151.49 shortfall between her rent and housing benefit. The question review officers are required to address in these situations is
“not whether, faced with that shortfall, she could somehow manage her finances to bridge the gap; but what were her reasonable living expenses (other than rent), that being determined having regard to both her needs and those of the children, including the promotion of their welfare.”
In circumstances such as these (i.e. where levels of expenditure are below the level of benefits at subsistence level, including those required to meet the needs of children), the Court held that “it is difficult to see by what standard that level of expenses could be regarded as other than reasonable.”
It follows from the reasoning of the Supreme Court that where an individual’s budgeted expenses are within their non-housing benefit entitlement (including, in particular, Child Benefit and Child Tax Credit), such expenditure should be viewed as reasonable simply by virtue of falling below the threshold characterised as subsistence level. Applying the same line of reasoning, one might also surmise that in circumstances where someone’s expenditure exceeded their total non-housing benefit allowance it would only be reasonable to expect them to reduce it to the subsistence level (i.e. to spend only that which has been assessed as a subsistence amount for that individual or household, and no more).
If this approach is taken, then individuals or households who derive their entire income from benefits, and who have a shortfall between their housing benefit (or the housing element of universal credit) and their rental liability, then only those who can comfortably meet any shortfall in rent AND their ordinary expenses (without having to find “flexibility” or savings) from their benefits entitlement should properly be regarded as meeting the “affordability” criteria. One might imagine that in these lean times such a group is very small indeed.
This could, in theory, have a variety of knock-on implications for authorities, not least the very real possibility that it leads to an increase in people to whom the main duty in Part VII is accepted. Should that happen, then authorities who are already dependent upon the use of temporary accommodation to supplement their inadequate housing stock, could become more and more reliant upon this as a short and medium term solution. Should that happen; and given the comparatively high weekly rents common in temporary accommodation, it seems plausible that authorities in London and other high rent areas may need to consider more out of borough placements, controversial though that can be.
The Court concluded its judgment with a postscript, commenting on more recent developments, in particular the advent of Universal Credit, and the Homelessness Reduction Act 2017 (and the new Homelessness Code of Guidance provisions on affordability). In short, the Supreme Court does not appear to be of the view that the position has been assisted or clarified by either development. The Court concludes by pointing to evidence of large discrepancies between the approaches taken by different local authorities to the question of affordability and inviting government to “give clearer guidance to authorities undertaking this very difficult task.”