The UK government has announced that its policy to cap Local Housing Allowance (LHA) for supported accommodation will be put on ice until 2019 when the funding for Scotland will then be transferred to Holyrood.

A new funding model to be introduced by the Department of Work and Pensions (DWP) means that although LHA will be applied to supported accommodation from 2019, the overall funding for the sector will be maintained at current levels and transferred to Scottish Government control.

Work and pensions secretary Damian Green said the new funding formula, which affects women’s refuges, homeless shelters and housing for those leaving care, is intended to protect the sector from the cap with a top up of additional ring-fenced funding.

The amount of top-up funding will be set on the basis of current projections of future need.

In a statement to parliament yesterday, Mr Green said: “We know the valuable role that these organisations play in communities across Britain. Women’s refuges or housing for young people with learning disabilities are important parts of the support system for vulnerable people.

“Our new funding model will help those people who need it the most.”

The new model will mean Housing Benefit and the housing element of Universal Credit will focus on paying for core housing costs, while still ensuring the sector is protected from the Local Housing Allowance cap.

The Scottish Federation of Housing Associations (SFHA) said that while it welcomes the LHA cap implementation, the move to pass the funds to the devolved administrations could amount to a re-run of the ‘bedroom tax’ implementation north of the border.

Releasing a new report which sets out just how costly further UK government welfare reform could be, the SFHA urged the Scottish Government to quickly set out how it intends to deal with the cap’s “devastating consequences” for vulnerable people.

SFHA chief executive, Dr Mary Taylor, said: “The DWP announcement merits a cautious welcome as it gives us all more time to work out exactly how we are going to prevent costs of between £4.3 million and £5.6m a year hitting vulnerable supported accommodation tenants in Scotland – and by default their social landlords. Unfortunately, it does not address our concerns about how single people under 35 who are not in supported accommodation but who are still ‘at-risk’ will cope with imminent reductions in their social security payments.

“The DWP’s intention to hand over supported accommodation funds to Holyrood means it is more important than ever that the Scottish Government sets out its initial position in relation to this critical issue especially given the its ambitious target to build 50,000 more affordable homes, some of which will have to be for supported accommodation.

“If housing associations don’t know whether the social security system in Scotland will protect vulnerable people properly – that is, by paying their rent – and won’t really know one way or the other for another three years, they are unlikely to take on the significant financial risks of building and developing more supported accommodation. Delaying the introduction of the policy until 2019 does not address this issue. Building houses is quite obviously a long term process with extensive lead in times that cannot simply be frozen and unfrozen at will.

“Until there is complete clarity on these points from both the UK and Scottish governments the long term future of supported accommodation in Scotland will remain in suspended animation.”

The Scottish Government said it will work with the sector to ensure the devolved funding is used wisely and supports those who need it most.

Angela Constance, cabinet secretary for communities, social security and equalities, said: “I am delighted that the UK government has finally listened to the concerns of Scottish Women’s Aid and many others, who have campaigned tirelessly to highlight this issue.

“Continuing with this policy would have reduced the funding available to crucial services including hospices, sheltered accommodation and women’s refuges, putting them at risk. It will be a huge relief to those organisations that the funding will continue at current levels.

“However, it has been absolutely ridiculous that there has been so much worry and distress caused to people across Scotland, and the rest of the UK, while the UK Government has dithered over making a decision - since the policy was first announced there has been a virtual freeze on investment in this vitally important area.

“We will now work with our partners in the sector to ensure the funding devolved to Scotland is used wisely and provides maximum support for those who need it most.

“From 2019 the resources for supported accommodation will transfer to the Scottish Government. When we have further detail, we will work with our partners to ensure that supported accommodation in Scotland is put on a secure and sustainable footing for the long term.”

Case studies

Below are two case studies from the SFHA that are illustrative of the policy’s affect.

N.B. The LHA cap policy as it applies to single tenants under 35 applies to tenancies taken up from April 2016 and payments will be capped from April 2018.

The LHA cap policy as it applies to tenants in supported accommodation has not yet been introduced, and when it does, it will only apply to tenancies taken up immediately after its introduction as opposed to tenancies that exist prior to that.

Obviously this means that, so far, few single tenants under 35 and no tenants in supported accommodation are affected. These cases studies then are anonymised examples based on real life current tenants (one under 35 (Linda) and one in supported accommodation (Andrew)) and are given to illustrate the types of people and circumstances that will be affected by the policy when it kicks in.

Linda and Andrew (not their real names) are both tenants with Horizon Housing Association which is part of Link Group.

Linda is 23 years old and was nominated for housing as a homeless person. She had recently fled domestic violence and was living with family and sleeping on the sofa.

She was already in receipt of Employment Support Allowance and was supported to make a claim to the Scottish Welfare Fund to access essential items to set up home, including white goods and a bed.

She now lives in a one-bedroom housing association flat. The current monthly rent is £315.92. The LHA shared room rate for her council area is £60.00 per week/£260 per month. If Linda was to start her tenancy today, under the LHA maxima, from April 2018 she would face a shortfall of £12.95 per week/£56.14 a month.

The possibility of losing her tenancy could put Linda’s physical and mental health and wellbeing at risk, and there is a risk that she could end up returning to the domestic abuse situation if she lost her tenancy, putting her in potentially serious danger.

Andrew lives in shared supported housing, sharing his home with one other person and a sleepover staff member. He pays a share of a rent on a four-bedroom property which was purpose designed and adapted for people leaving hospital.

When he moved from hospital, Andrew had barely left his ward in over 15 years, never saw his family and was highly dependent on medication.

Andrew currently pays £452.52 per month, which includes furniture, decoration, enhanced maintenance and adaptations. He gets full Housing Benefit. Under the LHA maxima, he would only be entitled to £68.28 per week/£295.88 per month. The shortfall of £156.64 per month/£36.14 per week would be unsustainable for any new occupant who would likely end up in hospital or a care home instead.