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“Perverse Incentives”


Osman, R (on the application of) v London Borough of Harrow [2017] EWHC 274 (Admin)

A challenge to Harrow’s allocation policy, specifically on the ‘downgrading’ of allocation priority for overcrowded households in PRS accommodation, while existing Harrow tenants kept the higher priority for overcrowding on a transfer application. Ms O had been in Band A originally. Following the changed policy, she was downgraded to Band C. The household was undoubtedly severely overcrowded, with Ms O, her husband and 4 children under 6 in a one bedroom flat.

The grounds of judicial review were:

The amended allocation policy unlawfully discriminated against those in the private rented sector including the Claimant and her family by denying equivalent priority to those in the public sector contrary to articles 8 and 14 of the European Convention on Human Rights (ECHR).

The Amended Scheme did not secure that a reasonable preference was given to persons occupying overcrowded housing or otherwise living in unsatisfactory housing conditions including the Claimant and her family contrary to section 166A(3) of the 1996 Act.

Harrow’s justifications for amending the allocation scheme were, as per a November 2015 council report

‘Stop offering high priority to overcrowded families who are home seekers. This has resulted in families remaining in overcrowded accommodation for many years believing this will facilitate an offer of social housing. Families in this situation can resolve their housing need far more rapidly by obtaining suitable alternative accommodation in the private rented sector.’

[…] ‘All households who are overcrowded by 2 bedrooms or more are currently given band A on Locata. The proposal is to keep the existing policy unchanged for those living in permanent social housing but reduce banding to band C for those living in private sector accommodation, the same as homeless households. This is because those in private sector accommodation can meet their housing need by moving to alternative accommodation in the private sector, whereas those living in permanent social housing realistically do not have that option. The current scheme unfortunately leads to some families choosing to remain in overcrowded conditions when they could find alternative suitable private rented accommodation (or some adult family members could move out and establish their own household to alleviate the overcrowding).’

Harrow then put the rationale in evidence in the JR as:

‘to give greater priority to applicants from the private sector who were living in overcrowded conditions. They were to be included in Band A of the scheme along with existing council tenants who were in overcrowded premises. This increased priority was to run alongside the existing efforts made by Harrow to assist through the homelessness procedure as it was not considered that such applicants had somewhere that it would be reasonable for them to reside in and were therefore homeless.

Sometimes there can be unintended consequences when attempts are made to improve a situation for applicants and it became apparent that applicants were not coming forward to be assisted with suitable accommodation though the homelessness route. This meant that children were remaining in overcrowded accommodation far longer than they needed to be and that many applicants were declining properties offered under the homelessness procedure in the hope of obtaining a secure tenancy under the allocations policy. It seemed that applicants were prepared to wait in conditions that were unsatisfactory especially for their children. It had become a perverse incentive likely to cause harm to the families of applicants.

The Policy is regularly reviewed and early in 2015 various amendments were being considered including the downgrading of applicants from the private sector in overcrowded conditions from Band A to band C. It was thought that this would encourage families with dependent children to move into suitable accommodation far more quickly through the homelessness procedure than had been the case when they were waiting for an offer through the allocations policy. It was thought that this would place such applicants in the same position as other homeless applicants.’

The issue was

a) In situations of overcrowding were public sector tenants (transfers) as a group analogous to private sector tenants (homeseekers) including the Claimant for the purposes of article 14; and, if so,

b) Was the difference in treatment justified and proportionate?

The claimant argued, on legitimate aims and proportionate means:

First, he submits that the motive behind the distinction as explained in the decision letter was that the Defendant had a ‘legal responsibility’ to their tenants and should not allow them to be overcrowded. In fact under the tenancy terms, as Mr McDermott who appears for the Defendant accepts, the obligation was on the tenant not to allow the premises to become overcrowded. Thus there should be no distinction between the Defendant’s responsibility in respect of transfers or homeseekers so far as preventing overcrowding is concerned. This reason for the distinction set out in the decision letter under challenge was flawed.

Second, he submits that the asserted justification that transfers would have to surrender their secure tenancy and move into private rented accommodation failed as an objective or reasonable justification because moving into the private rented sector was not the only way to address overcrowding. A common method was to make an exchange with another secure tenant, which is excluded from the Part VI allocation provisions.

Third, in any event the distinction did not effectively engage with the stated objective of supporting those who are most in need when the vast majority of those seeking allocation are in the private rented sector and the financial statistics show that private sector rents exceed the local housing allowance levels for the provision of benefit, which is in any event subject to reduction under the benefit cap.

Fourth, he submits that the particular circumstances of the Claimant in seeking alternative accommodation in the private sector where no landlord would accept a tenant on benefit is not addressed anywhere in the evidence or documentation produced by the Defendant.

Thus the evident objective to favour the council’s own tenants over the largest element of those subject to the same need was not justified on any objective basis. Moreover, there was no actual evidence or research to back the suggestion that there may be some who did not follow up a homeless offer of alternative accommodation or delayed seeking alternative accommodation in the private rented sector. The feedback from consultation, such as it was, did not provide any support for the assertion. The direct evidence from the Claimant together with the overall financial evidence demonstrated that it was without proper foundation.

Harrow argued:

The claimant was given a reasonable preference, by Band C.

The decision to modify the scheme was not taken arbitrarily but in the light of the advice from its officers based on monitoring the effects of the Original Scheme and following consultation. That was in the context an acknowledged and growing pressure on the housing stock, where demand greatly exceeded supply.

He points out that the proposed amendment was subject to consultation and based on the professional of advice of the officers who could be expected to have experience in and an understanding of housing conditions and the market in the area.


In respect of article 14 he submits that transfer cases were clearly not analogous to homeseeker cases within the context of housing allocation. The differences in tenure and security were fundamental and meant that the implications for priority and for other means of meeting the housing requirements of the household were different. The benefits of their existing tenure for transfer cases included rights of succession, lower rents, the right to buy, rights to take in lodgers, management consultation rights and much stronger security of tenure. What was a realistically available option for homeseekers to find more suitable accommodation in the private rented sector did not reasonably apply to transfers, who could not realistically be expected to forego their security as tenants in the public sector.

The High Court found for Harrow:

in my judgement considerable weight is to be given to the decision of the Defendant as housing authority in making decisions which Parliament has entrusted to it. That is reinforced in this case where the Defendant had the benefit of the advice of its officers, who could have been expected to be experienced in the relevant housing conditions and how the housing market and allocation and other matters operated, as Mr Allen explains in his witness statement. The extent of the excess of demand over supply for public sector housing was explained in the Scheme, both in terms of the overall figures and for the different sizes of accommodation, including in particular the shortfall of larger dwellings.

As to whether the two tenure groups were analogous for the purposes of article 14, I consider that for the purposes of the present scheme there is a relevant comparison to be made between the transfer and homeseeker groups in that arbitrary discrimination between the two so as to affect their article 8 rights would in principle come within article 14. However, that is not to put to one side the significant differences in tenure between the two groups as set out above. In my judgement the Defendant was fully entitled to take those into account in considering the practical effects of the scheme in the allocation of housing and the best use of its housing resource to achieve its objectives including the reduction in overcrowding.

The differences as to tenure and security between the transfer and homeseeker groups are not in dispute and are on any view significant in terms of the willingness or realism of moving from one group to another. As Mr Allen explains in his witness statement, it had become apparent that applicants were not coming forward to be assisted with overcrowding through the homelessness route, which meant that children were remaining in overcrowded conditions for longer than they need, because applicants were declining properties in the hope of obtaining a secure tenancy under the Original Scheme. The intention was that by reducing the priority preference to the same as homeless cases the incentive to decline offers through that route would be removed. There is no evidence before the court to challenge that advice or its basis as reported by the officers. Moreover that was in my judgement a legitimate aim for the purposes of article 14 and otherwise.

The reasons for the change were set out in the consultation material in question 3, including the perverse incentive and the option for homeseekers to look for alternative accommodation in the private sector, while transfers would have to give up their existing tenure security and other benefits. The report to cabinet was clear as to the recommended basis for this change, including that the Original Scheme led to some families choosing to remain in overcrowded conditions and that the change would reduce the homeseeker priority preference to the same as that of homeless households. The difference with transfer households was explained that, while home seekers could meet their housing need by moving to alternative accommodation in the private rented sector, transfers did not realistically have that option.
In my judgement it is plain that the decision to amend this scheme was driven by the objective of making the best use of what was an increasingly scarce housing resource and not arbitrarily to favour the Defendant’s own tenants over those in the private sector. On the advice of the officers the result would or should be a relative overall reduction in over-occupancy, albeit that only 23 households were directly affected by the change in priority banding. The question then arises whether any discriminatory effects on the homeseeker group or other consequence was unjustified or disproportionate.

In short, this was a reasonable and proportionate means to achieve an aim, given the advice of the council’s own officers.


It is unfortunate, though not surprising, that no evidence could be provided on the sheer incoherence of Harrow’s position.

There was no rebuttal to Ms O’s evidence that the council’s offer to her of a deposit bond if she found another private tenancy was of no use because no landlord in the borough would offer a tenancy at housing benefit rates.

So, the practicality of Harrow’s position was that those overcrowded in the PRS should either:
a) apply as homeless, to be placed in overcrowded temporary accommodation pending an offer of an out of borough PRS tenancy
b) Leave the borough (and London) to find a PRS tenancy of an adequate property.

The ‘advice’ of Harrow’s officers, that people would stay in overcrowded PRS tenancies purely to gain a secure tenancy, despite the harm to their own and childrens’ lives, was, of course, entirely unevidenced. yet the court was sadly willing to accept it under the cover of the reasonable discretion for a council to set its allocation policy.

The suggestion that secure tenants should get Band A for overcrowding because they have incentives to remain secure tenants is also incoherent. Secure tenants could only be transferred to another secure tenancy. The suggestion that they might or might not give up the tenancy for a PRS one is beside the point as that was not part of the transfer policy.

I don’t know if this will be appealed. It is a tricky argument in law. But Harrow’s evidence deserved better scrutiny than it received.

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.

1 Comment

  1. suelukes

    Let’s hope for an appeal. Seems the issue of race discrimination not raised and there is real evidence that some communities (especially recent migrants) much more likely to be in private rented sector and less likely to be in social housng so this looks very like a continuation of many local authority practices of favouring some tenants over others apparently on rational grounds but having the effect of securing better housing for some national or ethnic groups. Also these accounts of applicants “gaming the system” usually turn out to be convenient urban myths. And often reflecting quite unpleasant sometimes unconscious assumptions about applicants. I never met a teenager who had had a baby just to get a council house in years of housing aid practice. And I doubt there are many families living 6 in a one bedroomed flat saying “we’ll wait 20 years for the secure tenancy rather than apply as homeless”. More likely saying “what’s the point of applying as homeless when all we will get is enormous disruption, lots of intrusive questioning from people who clearly don’t believe us and look like they despise us, and at the end of it we will be offered a two year PRS tenancy in some place we have never event visited probably a100 miles away. Especially since successive benefit changes clearly targeting large families like us have made it impossible for our friends to sustain those tenancies anyway”. But it would be really interestging to research decision making by homelessness and allocation applicants in the current housing market and indeed to see how and why that may be different in different groups. Anyone know of anyone doing that?


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