Recommendation 6

Some local authorities face increasing gaps in their budgets because of the way DWP Housing Benefit regulations work. Local authorities pay housing benefit directly to providers and ‘subsidy loss’ is the gap between how much rent a housing provider charges to a local authority and how much of it the local authority can claim back from DWP under Housing Benefit rules. In some cases, local authorities cannot claim the full amount of rent back and must cover the remaining costs from their own budgets. Subsidy loss varies across different local authorities, but overall, the problem is increasing, while local authorities already face financial pressures. Local authorities in England experienced a subsidy loss of £108 million (cash terms) in 2021–22 compared with £53.8 million in 2017–18. Successful bids from local authorities for the Supported Housing Improvement Programme have included work to reduce subsidy loss in local areas. DWP says that local authorities can reduce subsidy loss by more scrutiny of Housing Benefit claims, but this alone is very unlikely to bridge the gap in funding that local authorities are experiencing. The Supported Housing (Regulatory Oversight) Act 2023 does not have any measures to deal with subsidy loss, so we are pleased that DWP has told us it will look at other solutions. Recommendation 6: As part of the consultation with local authorities on the Supported Housing (Regulatory Oversight) Act 2023, DWP should consider how to reduce subsidy loss, and then implement solutions. 8 Supported housing 1 Challenges in supported housing