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Government proposes new funding system for supported housing

Short-term supported housing would be funded by council grants while sheltered housing rents and service charges would be capped under proposals made today 31 October 2017) by the government.

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The government proposed different funding models for sheltered, transitional and long-term supported housing from April 2020 in a policy paper published today with two consultations.


The paper follows the prime minister’s announcement last week that the local housing allowance (LHA) cap would not be applied to supported or social housing.


For sheltered and extra care housing the government has proposed a “sheltered rent”, covering both rent and service charges which will be set by the social housing regulator along with annual limits.


Existing properties will join the new system at their current rent and service charge levels and new homes will be subject to the cap.


The government proposed that the rent be set at the formula rent for social housing plus or minus 10 per cent to take into account the extra costs of supported housing plus an allowance for eligible service charges.


For short-term supported housing – services lasting up to two years for homeless people with support needs, people escaping domestic abuse, those with drug and alcohol problems, offenders and young people at risk – a ring-fenced grant to local authorities will fund housing costs that were previously met though housing benefit. Services will be commissioned locally. Grant conditions will set out how provision should be planned, made and monitored and the government will publish statutory guidance on short-term supported housing.


Rent and service charges for long-term supported housing for people with learning difficulties, mental health conditions, physical disabilities and highly specialised supported housing will be paid through housing benefit or Universal Credit. The local housing allowance rate will no longer apply so all costs will be funded through the welfare system. The consultation said the government would “work with the sector to develop and deliver improvements to cost control, quality and outcomes”.


Local plans

Local authorities will produce a local plan to say how funding will be used to meet needs.


They will also produce a needs assessment to identify current provision and future needs for groups of people who use supported housing. Local authorities, commissioners and providers will establish local partnerships.


The government published a draft “statement of expectation” today for supported housing covering fair use of funding, focus on individual outcomes, value for money, quality of provision, arrangements for residents to move out of supported housing and how local authorities should deal with people who do not have a local connection.


The government also published two consultations on supported housing today. One of them asks about the allowance for sheltered housing to be included in the rent and service charge cap formula to understand the reasons for variations in service charges and to “ensure the model is fair” and a definition of sheltered and extra care for housing for this model.


The second consultation on short term supported housing asks to what extent councils already have supported housing plans and needs assessments, for comment on the commissioning process and for features that are needed to assure providers that costs will be met.


The consultations run until 23 January 2018 and there will be a further consultation in the new year on the sheltered and extra care funding system as part of the rent standard. The government will work with councils on how much new burdens funding they should receive to implement the new models.


Local government minister Marcus Jones said: “This government is committed to boosting the supply of new homes, and helping people to live independently and with dignity for as long as possible. This is why we are giving the supported housing sector the certainty of funding they need to get building new homes.


“These reforms will deliver quality and value for money, funding certainty for the sector and give local areas a greater role in commissioning services.”


The changes were generally welcomed by the sector although some were concerned about the model for short-term supported housing which would rely on a local authority grant.


Long-term security

David Orr, chief executive at the National Housing Federation, said: “I am confident the new system outlined by the government today addresses concerns about the long-term stability of funding for most schemes. This, coupled with assurances about levels of funding and a new timetable of 2020, will give housing associations the certainty they need to keep providing and building these homes.


“The government has provided assurances that automatic entitlement will remain in place for people in short-term services, however we do need to consider the implications of a system where housing costs are paid through a local authority grant. We want to work with the government to ensure users and providers are confident that the entitlement to payment is secure for the long term.”



Terrie Alafat, Chartered Institute of Housing chief executive, said the proposals "give the majority of providers and the many vulnerable people who need this vital housing much-needed reassurance following a long and damaging period of uncertainty”.


She added: “Though it is reassuring to see that long-term supported housing will continue to be funded by the welfare system, we are concerned the proposals fall quite a way short of what is needed to properly support other vital forms of specialist housing that provide immediate and short-term support to people who have been victims of homelessness or domestic abuse, for example. It is imperative that people who need this type of housing are not disadvantaged and we will be making the case for this.”


Richard Hill, chief executive of supported housing provider One Housing, said: “While we are still looking at the detail, today’s statement and consultation launch appears to be a significant step forward for the thousands of older people whose lives are transformed by supported housing.


"We are, however, concerned about the model for short-term supported housing that could leave some people out in the cold. Vulnerable people live better in a home that is right for them, reducing pressure on the NHS and the taxpayer and these homes must be available to those in need.


“We will continue to press the government to look at options to help more people to find a home that is right for them. It should also encourage more supported housing as part of mixed developments and look seriously at removing stamp duty for older downsizers.”


Rachael Byrne, executive director, new models of care, Home Group, said: “The three-pronged approach set out today recognises the diversity of the sector and the people it supports.


"Of particular interest is the proposal to introduce supported housing strategic plans which will encourage joined-up working, and meet the future needs of local communities. It will be great to look at how these plans can further integrate housing, health and care – one of our key strategic priorities."


After the government announced last week that it would scrap the LHA cap for supported housing Home Group said it would invest £50m in three new supported housing schemes.


*Hear reaction to the plans for supported housing funding at a session at the Social Housing Annual Conference on 9 November 2017. Click here for more.

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