As the number of people becoming homeless from private sector accommodation continues to rise, and as private sector accommodation is used for discharge of duty and temporary accommodation by Councils, the issue of affordability becomes more and more important. Both intentional homeless decisions and suitability decisions can rest on affordability.
The Court of Appeal considered affordability and the proper approach to it in Farah v London Borough of Hillingdon  EWCA Civ 359.
This was the second appeal of Hillingdon’s s.202 review decision upholding the first decision that Ms Farah was intentionally homeless from her private sector tenancy because she had failed to pay the full rent.
Ms F applied as homeless, stating that she could not afford the rent:
To substantiate this, she completed an income and expenditure form showing income from benefits of £311.42 per week and expenditure of £349.69. Further inquiries of the Department of Work and Pensions disclosed that, prior to the commencement of the lease in April 2011, her disability living allowance was raised to £51.40 per week from £18.95 thereby increasing her income from benefits to £344.52 per week. The expenditure included £10 for the cost of haircuts for her children and £10 for a weekly swimming session for them. A further £50 was included in the form for taxi fares with a note that, because of her disabilities, the appellant cannot walk for more than 3-5 minutes at a time and has to use taxis in order to do her shopping. She also gave the Council her January 2012 bank statement.
The points about her disability were included in the notes of her interview in which she also said that her rent had fallen into arrears by about £300 per month and that she had been unable to reduce the arrears. The housing officer’s notes recorded shortfalls in the amount of available housing benefit over rent which fluctuated in amount depending on whether the appellant was in receipt of discretionary housing benefit in any particular period. Importantly, the notes also refer to a period between May and August 2011 when the appellant was required to repay a social fund loan by weekly deductions of £34.27 from her income support payments thereby increasing the shortfall in her income.
The Council found her intentionally homeless. The s.184 decision did not address the social fund loan deductions, or indeed, Ms F’s disability.
Your income and expenditure shows that you had expendable income of -£38.27. However this reflects items we would not consider to be necessities such as payment to credit card and swimming which amounts to £35.00 according to your estimate. This still leaves you in a minus figure of £3.27 which would show that the property may have been unaffordable for you.
However, according to the DWP your weekly income was £344.52 and not £311.42. This shows your weekly expendable income as -£5.17. However, when we remove the items that are not considered essential, your weekly expendable income amounts to £29.83.”
Even on this assessment, the property would have been unaffordable by £2 for about 5 months, by £7.86 for about 2 months, by £17.86 for about 3 months and by £27.77 for 3 months. There was no detailed address to this, instead the decision maker said:
I have also noted that some items in your weekly expenditure are exaggerated for a family of 4 with 3 children being under the age of 11. Therefore taking all above into consideration I am satisfied that the property was affordable for you.
On review, Ms F put in detailed submissions on her disability and thus need for taxis for transport, and other aspects of affordability. The Council legal department, in responding on interim accommodation pending review on 15 October 2012, stated:
The weekly expenditure figure that she gave us amounted to £349.69 creating a minus amount of -£38.27 but her expenditure breakdown included £50.00 per week on clothing, £25.00 per week on credit card payments (a secondary financial liability as unsecured debt), £50.00 per week on taxis and £10.00 per week on haircuts.
These details make it clear that Ms Farah was not properly prioritising the payment of her primary financial liabilities over her secondary liabilities and non-essentials. From the above, it is quite clear where your client could have made weekly savings.”
This letter introduces clothing and taxis as items to be eliminated (as overspend), for the first time.
The final s.202 review response stated simply:
An affordability assessment carried out for the period during which Ms Farah was resident at the property shows that the rent shortfall would have been affordable to her had she prioritised those payments over non-essential and secondary financial liabilities.
Ms F brought a s.204 appeal, which upheld the Council’s decisions. Ms F then brought a second appeal to the Court of Appeal, arguing “the reviewer does not appear to have considered the appellant’s financial circumstances in making the assessment of affordability or the other matters referred to in the Guide and that the review decision is unreasoned.”
The Court of Appeal noted the Homelessness Code of Guidance 2006, at 17.40
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.”
This broadly mirrored the case law, notably, R v Brent LBC, ex p. Baruwa (1997) 29 HLR 915 in which Schieman LJ said:
“On a strict reading of the statute, a person who deliberately refrained from paying his rent in circumstances where he used the only assets at his disposal for buying necessary food for himself and his family would be regarded as homeless. There is ample authority for the proposition that this is not so. Kennedy, J put it thus in a different context from the present in an oft cited dictum in R v London Borough of Hillingdon, ex p Tinn (1988) 20 HLR 305 at p 308:
“As a matter of common sense, it seems to me that it cannot be reasonable for a person to continue to occupy accommodation when they can no longer discharge their fiscal obligations in relation to that accommodation, that is to say, pay the rent and make the mortgage repayments, without so straining their resources as to deprive themselves of the ordinary necessities of life, such as food, clothing, heat, transport and so forth.”
In this case, Ms F argued, Hillingdon had simply not addressed “which further items of expenditure ought to have been reduced or eliminated and no consideration was given as part of that exercise as to how any such savings could have effectively eliminated not only the weekly deficit in the payment of the current rent but also any arrears which had accrued in the past through, for example, the repayment of the £500 to the social fund”.
The Court of Appeal concurred:
the correct starting point is the review decision itself. This appeal can only succeed if we are satisfied that the review decision discloses an error of law in one of the senses referred to earlier. The reviewing officer correctly set out her task as being to ascertain whether the s.184 decision was a correct legal decision, that the conclusions were fair and reasonable and that the facts could have led to no other outcome. But the decision as recorded in the letter of 3 December does not in my view carry out this exercise. The passage quoted earlier at  is a verbatim repetition of what Ms Brickwood said in her earlier letter of 10 October when refusing the appellant’s request for accommodation pending review. It makes no reference to the Guide; to the appellant’s own explanation for her expenditure and the consequent arrears of rent; to the housing officer’s judgment as to what items of expenditure were non-essential; or to the issue of whether other items of expenditure were excessive. Nor does it review any of the conclusions in the s.184 decision. Instead, it merely states that the affordability assessment that was carried out shows that the rent would have been affordable had the appellant prioritised her expenditure. No reasons are given for accepting the correctness of that assessment.
Even if it were wrong to begin with the s.202 decision, the s.184 decision was equally flawed:
 … I accept, of course, that it is neither realistic nor necessary to expect already burdened local authorities to identify each and every paragraph of the guidance they have taken into account or provide an over-detailed set of reasons for reaching their financial conclusions. Cases like Birmingham City Council v Balog  EWCA Civ 1582 show that this is not necessary. But, as in all cases, the level of detail necessary will usually depend upon the issue to be decided and the facts of the particular case. In some cases it will be enough to say that the housing authority concluded that the amount spent on a particular form of expenditure was excessive or unnecessary without going into further detail or qualification. In other cases, where the tenant has produced and relied on a justification for the expenditure under review, a more detailed explanation of the reasons for rejecting those arguments may be required.
 The present case falls, in my view, into the latter category. The housing officer had already in his s.184 decision letter made specific deductions in expenditure by removing the credit card and swimming payments. But he had not explained which of the remaining items was in his view excessive or why. Given that one of these items was the £50 spent on taxis (which was arguably essential) and the other items were money spent on food and clothing, it was, I think, incumbent on the reviewing officer to re-visit this part of the assessment and to explain why she had reached the same conclusion. It is not enough to say that the appellant’s solicitors failed to raise those specific points when requesting the s.202 review. The reviewing officer was under a statutory duty to review the decision which had been taken and the reasons for it. This involved considering any obviously relevant matters: see Cramp v Hastings Borough Council  EWCA Civ 1005 at .
While this case might have been a marginal decision, that made the clarity of reasons all the more important – it called for a reasonable explanation of the points on which Ms F failed. While Hillingdon argued it was obvious to Ms F why she failed, the Court of Appeal disagreed:
She was never told what other expenditure she should have postponed and the sums she spent on food, clothing and taxis were not so large or obviously excessive as to require no explanation for being treated as excessive. Nor is there any indication of how the social fund payments were factored into the decision. The letter from the Council’s legal department of 15 October also raises an obvious concern that the assessment which has been made may simply be wrong.
The review decision was quashed and remitted for fresh decision.
The significance of this case is that it is a reminder, both to Councils and to applicant’s advisors, that affordability is to be taken serious and dealt with in detail. While some elements of Ms F’s spending, such as credit card payments, were clearly not priority in comparison to the rent, there was, on any proper analysis, still a shortfall become income and outgoings, particularly during the period of the social fund repayment deductions. Hillingdon did not so much analyse this as carry out a hand waving exercise, one which was not refined even after, for example, a detailed explanation of the taxi costs had been provided.
Except in the clearest and most obvious of cases, a Council should not find intentional homelessness on the basis of an affordability assessment stating merely “some items in your weekly expenditure are exaggerated”. Which items? By how much? And why exaggerated? The review decision should also deal with those points – whether or not raised in such detail by the applicant – see para 32.
Where affordability has become a key issue after benefit cuts, and homelessness from the private sector now the single largest single kind of homelessness (and rising), this is a welcome reminder from the Court of Appeal of how it should be approached.
“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” Mr Micawber in David Copperfield.