Welfare Reform Act 2007

Section 30: Local housing allowance

137.The provisions in section 30 provide for powers that will facilitate the national roll out of a new way of calculating maximum housing benefit, known as the local housing allowance, across the private rented sector. A version of the local housing allowance scheme is currently operating for private sector tenants in 18 local authority areas.

138.The main secondary legislation dealing with housing benefit (referred to here as the housing benefit rules) is contained in the Housing Benefit Regulations 2006 (S.I. No. 213), the Housing Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006 (S.I. No. 214) the Rent Officers (Housing Benefit Functions) Order 1997 (S.I. No.1984) and the parallel Rent Officers (Housing Benefit Functions) (Scotland) Order 1997 (S.I. No.1995).

139.Under the current housing benefit rules for claimants in the private rented sector, the maximum amount of benefit that can be paid is the "Appropriate Maximum Housing Benefit", subject to reductions to take account of income. The Appropriate Maximum Housing Benefit is the weekly amount of rent eligible to be met by housing benefit, less deductions made in relation to non-dependants. The eligible rent is determined by establishing whether the rent charged is considered appropriate for the particular area, property and the claimant’s particular needs. Local authorities are required to refer each individual case (with some exceptions) to the rent officer service(7). Rent officers decide whether rents are appropriate for the particular area or property and the claimant’s particular needs using a system of ‘rent restrictions’ set out in The Rent Officers Orders. Rent officers must also deduct any charges included within the rent that are ineligible for housing benefit purposes, such as for the costs of fuel bills or meals.

140.The local housing allowance replaces the existing rent restrictions by providing a new way to determine the maximum amount of housing benefit payable. Non-dependant deductions and reductions to take account of higher incomes will still apply. Any given claimant will be eligible, as a maximum, to the local housing allowance rate that applies according to the number and mix of occupiers, and the area in which the claimant lives. The detailed rules on how the local housing allowance is set are in secondary legislation, as is the case under the current housing benefit rules. There will still be a need for rent officers to collect market evidence and consider geographical areas. However, rather than determining referrals on individual cases, they will make ‘generic’ determinations establishing the local housing allowance rates for different sized properties within the geographic areas they have identified.

141.Section 30 provides for powers that are more specifically appropriate for the local housing allowance approach to the determination of a claimant's maximum housing benefit. This will facilitate the roll out of the local housing allowance nationally across the private rented sector.

142.Subsection (1) of section 30 removes section 130(4) of the Social Security Contributions and Benefits Act 1992, which requires regulations to be made setting out how a claimant’s Appropriate Maximum Housing Benefit should be determined in any case. This provision is replaced by the new 130A (2). Subsection (2) of section 30 introduces a new section, 130A, into the Social Security Contributions and Benefits Act 1992.

143.The new section 130A (1) provides that a claimant’s Appropriate Maximum Housing Benefit must be determined in accordance with this section.

144.Subsections (2) and (3) enable regulations to provide that claimants may have their Appropriate Maximum Housing Benefit calculated by reference to rent officer determinations. These could be property specific determinations, or the generic determinations required under the local housing allowance, which apply to properties of a certain size in a particular area.

145.Subsection (4) enables regulations to be made requiring local authorities to refer certain cases to rent officers for property specific determinations. This will be necessary for cases that are exempt from the local housing allowance.

146.Subsection (5) introduces an additional “treat as liable” power solely for the purpose of calculating the Appropriate Maximum Housing Benefit. This provides a more specifically appropriate power centred on the local housing allowance approach, providing for a claimant’s housing benefit to exceed their rent liability if the appropriate local housing allowance is higher than their actual rent liability. Equivalent provision is made by subsection (6) for claimants who are ‘treated’ as having a rent liability under regulations made under section 137(2) (j) (e.g. because it is their partner who has the actual liability). This provides for their housing benefit to exceed their deemed liability, if the appropriate local housing allowance is higher than their deemed liability.

147.Subsection (3) of section 30 provides for a power to prescribe when local authorities must review a Housing Benefit award. Under the local housing allowance, this allows for the local authority to apply a new local housing allowance rate each year to ensure that a claimant’s award is updated.