Does your homelessness unit sometimes pay money to private landlords to prevent homelessness? If so, are you taking full advantage of the deposit protection rules to ensure the money you pay out is recycled?
This article aims to provide an introduction for homelessness officers on why paying tenancy deposits is often the most cost effective way of using prevention funds to secure private tenancies.
It also explains the importance of ensuring your paperwork and processes are fit for purpose when paying tenancy deposits, and highlights some of the contractual terms you may wish to consider.
This article follows my previous post about a landlord deposit payment agreement.
If you work for a council homeless team you'll no doubt have a pot of money specifically set aside for preventing homelessness.
If you're faced with a family at risk of eviction it just doesn't make sense to spend thousands of pounds on temporary accommodation if you can get the request for possession withdrawn by spending just a few hundred quid, e.g. by clearing rent arrears.
And of course the same principle applies if you're trying to help someone obtain privately rented accommodation.
There can be many barriers to getting a private landlord to accept a homeless applicant as a tenant. Of course the barriers are often financial, for example:
Nowadays homeless officers have to problem solvers and negotiators who look for opportunities to overcome these barriers.
Prevention funds provide a finite amount of money each year. And with the downward pressure on council budgets there's a need to make this money go further.
There's often a choice about how you can 'spend to save'.
This choice manifests itself at a policy level (via guidelines for staff on how prevention funds should generally be spent) and when deciding how money is spent in a particular case.
A prevention fund payment is often only one piece of a jigsaw; when trying to make a potential tenancy 'stack up' financially it can be combined with money from other sources.
In addition to the money (if any) that the homeless applicant can contribute you could be helping them obtain money from:
Staff will often have a choice about what to pay from the prevention pot and which items other parties should be asked to fund. The fact that DHPs can often be requested for similar items (e.g. rent in advance, deposits, removal costs) provides additional flexibility. However, it should be noted that if a DHP is used to fund a tenancy deposit the housing benefit department cannot usually reclaim the money (see paras 2.15 and 5.9 of the current DHP Guidance Manual).
The homeless officer is a key player when it comes to exercising this choice. By working with the homeless applicant they can propose to the various stakeholders - applicant, landlord, housing benefits etc - how the various funding sources should be used. The officer can then help the applicant submit any necessary applications for financial help.
Many homeless departments have traditionally offered a cashless bond guarantee to landlords. Bonds are very cost effective (although they require investment to cover potential claims on the scheme).
However in today's competitive rental market up-front cash payments are often required to lever homeless applicants into the private sector.
Cash can be paid for a variety of items. In addition to the types of payments already mentioned some councils make non-returnable incentive payments to private landlords. These are generally paid when the alternatives have been unsuccessful in facilitating the required number of private lets.
Paying a tenancy deposit to a landlord* to secure an assured shorthold tenancy has the following advantages:
*There's a difference between paying a tenancy deposit to a landlord directly and giving the money to a prospective tenant to pass onto the landlord. I've encountered councils who routinely do the latter. Sometimes the money is paid as a loan. However the amounts repaid by tenants will be far less than where landlords are paid directly under a well managed scheme.
It will be apparent that many of the advantages of paying tenancy deposits result from the statutory framework regulating how landlords must deal with the money.
In practical terms the deposit protection rules mean there's more opportunities for homelessness teams to legitimately demand repayment of deposit money when the landlord is in breach. And the legal sanctions for non-compliance strengthen your position.
You also have the opportunity of imposing contractual requirements on the landlord (providing of course that the landlord accepts them).
For example, an agreement can impose terms requiring landlords to return the money if they:
The first three requirements in the above list can easily be justified because landlords must by law take these actions anyway.
You should make sure that your agreement with the landlord:
It's vital of course to maintain good relationships with those private landlords with whom you have arrangements to house homeless persons. After all there are already numerous reasons why your average private landlord might choose not to work with a homeless team! We don't want to add to those reasons by appearing to act unreasonably, e.g. by imposing overly restrictive conditions on our offer of monetary help.
Also, when individual landlords are found to be in breach, staff will need to carefully consider how best to proceed. Factors needing to be taken into account may include any potential adverse implications for:
The powerful legal remedies available to the council for breach of the statutory deposit protection rules - including the right to sue the landlord for compensation - shouldn't be pursued without careful consideration. There will often be less punitive measures that can be taken to safeguard the council's money which are less likely to adversely affect landlords' willingness to work in partnership.
However local authorities do have a role in ensuring that private landlords understand and abide by the rules governing tenancy deposits.
Providing you're clear with landlords from the outset about how your scheme and the deposit protection rules operate there's no reason in principle why they shouldn't agree to abide by their statutory obligations.
I'd suggest that requiring landlords to comply with the protection rules if they take a tenancy deposit - and a few additional contractual provisions - isn't onerous or unreasonable. After all deposit protection has been in place for 10 years (not that you'd guess from the number of landlords who don't comply).
At the same time getting private landlords on board is about being flexible. For instance you might find that a landlord requires a larger deposit than the standard one month's rent equivalent to address the riskiness of housing homeless applicants. Meeting this demand may be cost effective if you're team is experiencing a shortage of private lets. Particularly if your processes and contract mean that - absent evidenced loss by the landlord - you're likely to get your money back. And even when you're able to agree with landlords in advance how your incentives will operate you may still sometimes need to be flexible to ensure certain applicants can be re-housed.
Of course there may well be cases where a deposit doesn't meet the landlord's needs and it's cost effective to offer other incentives, either as an alternative or in addition to a deposit.
The contractual obligations you impose when paying a deposit don't necessarily all have to be for the council's benefit either.
The landlords in your area may be more willing to work with you (and accept deposit payments) if you undertake to provide a service they value.
For example you could commit, as part of the agreement, to:
It will often be more appropriate for such interventions during the tenancy to be delivered by a housing support service rather than by housing options (or by housing management staff if you're offering comprehensive management of tenancies).
So what should we be doing to ensure our arrangements for paying tenancy deposits are fit for purpose?
Key steps include:
Reviewing your prevention payments policy
While there's no legal duty to have a policy it's clearly desirable. A policy helps to ensure that decision-making is consistent and meets the council's strategic and operational objectives.
It should be based on a thorough understanding of applicants' needs and take account of the particular barriers preventing homeless applicants from renting privately in your particular district. These issues should have been covered when your homelessness strategy was last reviewed.
The policy should also provide guidance for decision-makers on how their discretion should be exercised. The factors that staff must have regard to when making decisions should be spelt out. For example whether a payment will be repaid to the council should usually be a factor staff take into account when deciding what type of payment(s) to make.
Reviewing your procedures
It's crucial to review your processes from the landlord's perspective. For example do you take too long to issue payments? If so can payments be expedited?
In relation to the payment of tenancy deposits you should:
Obtaining legal advice
You should ensure your policy and contractual documentation is reviewed by your legal section.
Combining the inspection function with suitability inquiries
Are your prevention fund processes integrated, where appropriate, with the inquiries you undertake to decide whether accommodation is suitable under the homelessness legislation? (Including the requirements under Article 3 of the 2012 Suitability Order, or for applicants in Wales who may have a priority need, Article 8 of the 2015 Suitability Order).
Are your 'landlord offer' documents professionally designed? Is key information available online for both landlords and applicants? It's a good idea not to 'tie yourself down' when advertising the type of help that's available. Staff will then have the flexibility to offer different kinds of incentives where appropriate.
You'll also need of course to ensure other necessary documentation is in place, including the standard letters and emails staff will need to recover monies from landlords.
You may want to check out the documents in the Resources section for this purpose.
It's essential that staff issuing and monitoring prevention payments can practically apply the relevant principles.
For example staff will need a basic understanding of the following:
Staff should be confident enough to recognise when help should be sought from a supervisor (or the legal section) e.g. when a landlord's tenancy agreement includes terms that may be unlawful or provisions that potentially conflict with your standard landlord agreement.
The reforms contained in the Homelessness Reduction Act reinforce the need to source private lettings to discharge homelessness duties. Approving an applicant for a deposit will often be a 'reasonable step' that the council can take under the new section 189B duty to secure that the applicant is able to obtain accommodation.
So now is a good time to review your policies and processes to ensure that you're facilitating effective relationships with private landlords, but also to make sure that best use is made of the money paid out to prevent homelessness.
Funding tenancy deposits is only one way to prevent homelessness. However they have the potential to minimise your overall expenditure on incentives.
When there's a choice between paying a deposit and funding another item it's often not a hard choice to make.