15/12/2013

Shortfalls, guidance and intentionality

Birmingham City Council v Balog [2013] EWCA Civ 1582

A s.202 review decision on affordability was at the centre of this second appeal, brought by Birmingham after a s.204 appeal decision went against them. The issue was to what extent the review decision should manifest attention to the statutory guidance (the July 2006 Guidance) on affordability.

Mr B had been the tenant of a flat in Thanet, occupied by him, his wife and two children. The household had moved out in April 2012 and moved into his mother’s property in Birmingham. Soon after, the mother asked them to leave and Mr B applied as homeless to Birmingham.

Mr B said that the tenancy of the flat had come to an end and that he had been told he had to leave. He also said that the property was in a very poor state of repair, so it was not reasonable for him to remain. Birmingham asked the letting agents, and the Environmental Health department of Thanet District Council, who said, variously, that the property had had a lot of remedial work over the year before Mr B left, the remaining deficiencies were minor, and that Mr B had not been asked to leave. Birmingham’s s.184 decision found Mr B intentionally homeless for these reasons, adding that there were £715.94 in rent arrears.

Mr B sought a review. Submissions were made for Mr B by Shelter, which did not, yet, address affordability, focussing on the condition of the property, anti social neighbours, Mr B being told the tenancy would not be renewed. On the arrears, it was simply stated that Mr B did not know of arrears and thought HB covered the rent.

Following a council interview with Mr B, the review officer issued a minded to notice, noting deficiencies in the original decision as it had failed to consider affordability, but stating the officer was minded to find against Mr B. Mr B did not make any further submissions and Shelter were no longer instructed.

At the interview Mr B had said that his income

comprised child benefit, tax credit and jobseekers’ allowance and amounted to £920 per month. His expenditure included sums spent on water rates, gas, electricity, housekeeping, TV licence, telephone and school meals and amounted to £946.18 per month, leaving a monthly deficit of £26.18.

The s.202 review decision stated, on the affordability issue:

You have provided an income and expenditure form for the period you were resident at the property. The form suggests that your income was £920 per month, and that your outgoings were £946.18 per month. You have not included housing benefit as income on the form and similarly not included your rent on the form as an outgoing. The figures provided suggest you have a deficit of £26.18 per month. I note that you have been employed during periods of the tenancy, and you have provided wage slips confirming your income. The wage slips you have provided correlate with periods when your housing benefit was reduced and you would have been required to pay a top up amount. I am satisfied that benefit services would have calculated your income and entitlement correct for this period, and that you would have been awarded the correct entitlement for housing benefit when considering your income. I am of the opinion that you could have afforded the rent during periods of employment, as your income increased by approximately £300 per month, and you were required to pay £180 towards your rent. I am satisfied during this period the rent was affordable. When your employment stopped, housing benefit covered your rent and I am therefore satisfied the rent was affordable for this period of your tenancy.

 

I note that there may have been a period you were required to pay £41.72 towards your rent whilst you were unemployed. I have considered your income and expenditure form for this period and considered if you could have reduced possible outgoings to ensure the top up amount could have been paid. I note that you have attributed £693 per month to housekeeping. Whilst I acknowledge you would have had essential housekeeping outgoings such as food shopping, I am satisfied £693 is a large amount for your family size and could have been reasonably reduced by more cost affecting [sic] shopping. I am satisfied that you could have reduced your outgoings by the stated £26.18 deficit and by a further £41.72 to ensure your rent was paid. I do not consider you would have had to sacrifice essential amenities to do so, and I am satisfied that you could have reasonably performed this task in your household. Accordingly, having considered your monthly outgoings, I am satisfied that the rent was affordable and it was reasonable for you to remain for this reason.

In short, the rent was affordable.

Mr B appealed. The Circuit Judge did not uphold the appeal grounds of inadequate reasoning and irrationality, but did find that the review decision was defective in the consideration of affordability. Specifically, there was no specific reference to the Guidance, para 17.40 specifically. Further, the decision did not show that Mr B’s residual income had been considered.

25. […] I reached this conclusion (a) because the relevant provisions of the July 2006 Guidance were not mentioned in the section of the review decision letter in which affordability was addressed and (b) because nowhere in its reasons did the respondent give any indication that it had considered whether the payment for accommodation would have left the appellant with less than the level of income based job seekers’ allowance. Nowhere in its decision did the respondent state that it had decided that it was inappropriate to take into account the July 2006 Guidance nor did it give any explanation for not taking into account the provisions of the July 2006 Guidance. It appeared that the relevant provisions of the July 2006 Guidance on affordability, in particular paragraph 17.40, had simply been overlooked. The respondent did not of course have to follow the July 2006 Guidance but it did have to have regard to it.

 

26. Having considered the detailed analysis on affordability in the decision letter, I was not satisfied that the respondent had regard to the July 2006 Guidance at all in relation to the issue of affordability. Nor did I conclude that this was a case in which it was inevitable that the respondent would have reached the same result if the provisions of the July 2006 Guidance had been taken into account. There was simply no basis for making that finding. An analysis of the income and expenditure figures in the light of the relevant provisions of the July 2006 Guidance may have led to a different conclusion.

Birmingham appealed to the Court of Appeal.

!7.40 of the Code of Guidance address residual income after meeting accommodation costs. It states:

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 job seekers’ 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. The Secretary of State recommends that housing authorities avoid placing applicants who are in low paid employment in accommodation where they would need to resort to claiming benefit to meet the costs of that accommodation, and to consider opportunities to secure accommodation at affordable rent levels where this likely to reduce perceived or actual disincentives to work.

The Court of Appeal had regard to the all too familiar passages from Holmes-Moorhouse v Richmond upon Thames LBC [2009] UKHL 7 on the ‘benevolent approach’ to be taken to the interpretation of review decision letters by the Court.

Birmingham argued that

the council asked itself the right question, namely whether the property was affordable, and assembled the necessary material to answer it. Particular consideration was given to the income and expenditure analysis in assessing whether, having paid the rental shortfall, Mr Balog would have been able to afford the basic amenities of life. Although it is true to say that the review decision does not in terms refer to paragraph 17.40 of the 2006 Guidance, consideration was plainly given to it, and that is enough. The Recorder fell into error in finding to the contrary.

Mr B argued that the Recorder had reached the right decision. Not only was there no mention of the specific para of the Guidance, unlike other parts of the review letter, but no consideration of whether Mr B’s residual income was less than Income Support or (IB) JSA.

the benefits paid to Mr Balog represented a minimum level of income for him and his family. Payment of the rental shortfall would have left Mr Balog with a level of income nearly £70 per month less than this minimum. Moreover, the benefits paid to Mr Balog left him below the UK poverty line even before this shortfall was taken into account. In all these circumstances no housing authority acting rationally and properly directed in law could have decided that the property was affordable.

The Court of Appeal looked at the context of the affordability issue being raised, noting that it had not been raised by either Mr B (or his representatives) or the Council until the review officer’s minded to letter, and that Mr B had not made any response or further submissions in response to that letter.

Further, the issue of affordability only arose during the periods when Mr B was unemployed, but there was an unexplained deduction in HB meaning he had to pay £41.78 per month to the rent. Thus the issue was whether Mr B could afford that shortfall for the periods in which it occurred.

In answering this question it can be seen the Review Officer gave careful consideration to whether Mr Balog could have reduced his outgoings. He noted that Mr Balog had attributed £693 to housekeeping and observed that this seemed a large amount for such a family and that he believed it could have been reduced by more effective housekeeping. This, he thought, would have allowed Mr Balog to cover both the rental shortfall and the deficit of £26.18 to which I have referred at [11] above. Further, it was a reduction that Mr Balog could have made without sacrificing essential amenities.

On the issue of attention to the Guidance, the review officer should be found to have given it attention.

Firstly, the review officer had taken on the issue of affordability for himself and had identified the deficiency in the first decision. So it was reasonable to assume that the issue was in his mind throughout.

Secondly, the review officer had clearly had regard to the overall Guidance in general terms, as it was referred to in several places.

Third, while no express reference was made to para 17.40, this should not be surprising where it was not an issue that had been raised by Mr B

In my judgment Review Officers are not obliged to identify each and every paragraph of the guidance which bears upon the decision they have to make. That would be to impose upon them a wholly unreasonable and unnecessary burden. I do not therefore accept that the absence of any express reference to this paragraph indicates that the Review Officer failed to have regard to the guidance it contains.

Fourth, the review officer had analysed with care “the circumstances in which Mr Balog would be required to make a contribution to the cost of housing and the impact this would have on his household”. In particular he had addressed the effect of having to contribute from time to time about £42 per month towards the rent while Mr B was unemployed. The review officer was also aware of the shortfall in Mr B’s income and

recognising the potential hardship this would cause, the Review Officer then went on to consider whether this would deprive Mr Balog and his family of the basic essentials. In all the circumstances of this particular case, he found that it would not. As he put it, they would not have to sacrifice essential amenities. In my judgment this exercise involved precisely the kind of analysis which is envisaged by paragraph 17.40 of the statutory guidance.

Lastly, there was admittedly no direct reference to the Guidance recommendation “that housing authorities should regard accommodation as not being affordable if the applicant would be left with a residual income which would be less than the applicable level of income support or income-based jobseekers’ allowance”. However the review officer had approached the issue of affordability with a concern that Mr B should not be “required to pay any larger sum than he could manage”. To criticise this for failing to include specific reference to the Guidance was “the kind of nit-picking analysis” deprecated by Lord Neuberger in Holmes-Moorhouse.

Birmingham’s appeal allowed.

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

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