The Mayor's Executive Decision Making meeting of Tower Hamlets Council on 31 October 2025 was scheduled to discuss ways to maximise the amount of Housing Benefit Subsidy income that the council receives for council owned properties when they are used as Temporary Accommodation to house homeless residents. The report pack recommended agreeing to steps to maximise income from General Fund¹ and Housing Revenue Account² properties used as temporary accommodation for homeless households, noting the findings of the Equality Impact Screening Assessment, agreeing to the establishment of a new hardship fund for existing households in affected temporary accommodation, and delegating authority to the Corporate Director of Housing and Regeneration to align rents for properties owned by the council and used as Temporary Accommodation with any future increases in Local Housing Allowance³.

Maximisation of Housing Benefit Subsidy Income

The report pack included a report by David Joyce, Corporate Director of Housing and Regeneration, regarding the maximisation of Housing Benefit Subsidy income from council owned properties used for Temporary Accommodation. The report noted that permission to use Special Urgency and Call-In Urgency was being sought. The report stated that the recommendations, if approved, would yield an additional £300,000 of income, and that delaying the decision to a scheduled meeting of Cabinet would cost the council circa £75,000 a week.

The report stated that the purpose of the report was:

to seek approval to take steps to maximise the amount of Housing Benefit Subsidy income that the Council receives for council owned properties when they are used as Temporary Accommodation to house homeless residents.

The report stated that this would be achieved through a combination of updating how affected properties are treated for Housing Benefit purposes to a classification that does not incur subsidy loss, and uplifting the rent on those properties to current Local Housing Allowance rates. The report stated that while the number of affected properties was relatively small (currently 587 properties), the proposals in this report were forecast to deliver the council additional income of circa £7.1 million per annum and circa £3.0 million in the current financial year. The report also stated that for the vast majority of affected households (88%), any increased rent charge would be funded by an equivalent increase in the Housing Benefit award they are able to claim, and that for the small number of affected households that are unable to claim Housing Benefit, the report further sought approval to establish a hardship fund to avoid any adverse impact on those households.

The report recommended that the Mayor agree to the recommended steps to maximise income from General Fund and Housing Revenue Account properties used as temporary accommodation for homeless households, note the findings of the Equality Impact Screening Assessment, agree to the establishment of a new hardship fund for existing households in affected temporary accommodation, and agree to delegate authority to the Corporate Director of Housing and Regeneration to align rents for properties owned by the council and used as Temporary Accommodation with any future increases in Local Housing Allowance.

The report stated that the recommended decisions would help ensure that the council effectively manages its General Fund and HRA budgets and can continue to discharge its statutory duties through additional income of circa £7.2 million per annum.

The report considered the alternative options of doing nothing, which would prevent the council from reducing its expenditure on Housing Benefit subsidy loss, presenting significant risk to the council's overall ability to balance its revenue budget both in the current financial year and across the life of the Medium-Term Financial Strategy, and increasing rent levels for affected properties to the 2025/26 LHA rates but not amend the Housing Benefit classification of council owned properties to allow claims of 100% of the actual rent charged, which would only deliver a smaller reduction in the council's overspend on Housing Benefit subsidy loss and would not be in keeping with the council's statutory duties to achieve best use of its resources.

The report noted that the council currently provides Temporary Accommodation to circa 3250 households, of which 587 are housed in properties owned by the council, of which 159 are HRA properties that are being used for Temporary Accommodation and 428 are properties owned by the General Fund. The report stated that in line with previously established custom and practice, the council classifies properties that it owns and uses for Temporary Accommodation in such a way that it is only able to claim back rent costs up to a maximum of 90% of the January 2011 Local Housing Allowance rate in subsidies from the Department for Work and Pensions (DWP). The report stated that as Temporary Accommodation costs have dramatically increased across London in recent years, there is emerging new practice that Local Authorities can reclassify properties that they own and use as Temporary Accommodation so that full Housing Benefit Subsidy can be reclaimed from the DWP. The report stated that having sought external legal opinion on this emerging practice, officers have been advised that it is a reasonable step for the council to reclassify those properties that it owns and uses for Temporary Accommodation so that Housing Benefit subsidy can be claimed for 100% of the actual rent charged, and that advice covers properties in both the General Fund and the Housing Revenue Account when used as Temporary Accommodation for homeless residents.

The report stated that the council currently charges Social Rent to homeless households who are housed in Temporary Accommodation owned by the HRA and the General Fund. The report stated that Social Rent is a type of affordable housing rent set according to a government formula based on property value, local earnings and bedroom size, and is significantly lower than normal market rates. The report stated that in order to fully maximise Housing Benefit Subsidy income, it is also recommended that rents for council owned properties be raised from Social Rent levels and made consistent with current Local Housing Allowance rates. The report stated that Local Housing Allowance (LHA) rates are set annually by the DWP and are the maximum amount of Housing Benefit households living in private rented accommodation can receive, and that LHA rates are based on average rents and vary across both property sizes and different geographic areas, and are based on private market rent being paid by tenants in a broad rental market area and are intended to reflect the cost of renting modest accommodation. The report stated that as recent years have shown that the DWP updates LHA rates at sporadic intervals, it is recommended that the Corporate Director of Housing and Regeneration be delegated authority to ensure that rents for council owned properties used for Temporary Accommodation are reviewed and, subject to proper consideration, are kept consistent with LHA rates when they are updated by the DWP. The report noted that the proposal to align rents with current LHA rates for homeless households that are housed in council owned temporary accommodation is in keeping with what already happens when such households move out of Temporary Accommodation and into settled accommodation in the Private Rented Sector, as the housing element of Universal Credit is already aligned to current LHA rates.

The report included a forecast of the impact of these changes, based on a snapshot of the existing makeup and number of council owned properties being used for Temporary Accommodation on 13 October 2025. The report stated that based on those numbers, the combination of making rents for council owned Temporary Accommodation consistent with current LHA rates as well as reclassifying them to maximise Housing Benefit subsidy income is forecast to increase income for a full year as follows:

The report also included an in-year forecast, based on an implementation date of 01 November 2025:

The report noted that actual additional income that will be collected will vary from the above forecast numbers, and that the variation will be caused by fluctuating demand for Temporary Accommodation, the cost of an additional hardship fund, and fluctuations in the collection rate.

The report stated that whenever the council places households in temporary accommodation, it has a statutory duty to ensure that the rent is affordable for the applicant, and that this test also needs to be properly considered when reviewing rent levels. The report stated that for most households currently placed in council owned Temporary Accommodation, there will be no change to affordability as their Housing Benefit will increase in line with the uplift to current LHA rent levels:

The report stated that based on current households in council owned Temporary Accommodation, 516 of 587 (88%) will not be affected as they are in receipt of Housing Benefit, and that support will be provided to all households that are not currently in receipt of Housing Benefit through proactive intervention, including writing to all affected tenants and direct text messaging, offering personal advice sessions to discuss options to ensure that they are not negatively affected by the rent increase. The report stated that these options will include undertaking a review of their welfare rights assessment, considering moves to more affordable Temporary Accommodation where suitable, offering money management advice, and where all other options are exhausted, providing a top-up hardship grant to cover any additional in-year rent costs that the household would otherwise be facing as a result of the decisions recommended in this report. The report stated that the establishment of a hardship fund is to ensure that there are no additional in-year costs for the small number of existing households that will otherwise be negatively affected by these proposals to maximise Housing Benefit Subsidy income, and that the hardship fund will be available to cover additional rent costs that cannot be mitigated through other means, and will also cover any additional costs that may occur in a small number of Households in relation to the total benefit cap, bedroom tax and some legacy benefits. The report stated that this will be funded from the additional income generated by the proposals in this paper, with £0.404k set aside in the current financial year, and that this is a maximum forecast amount based on current affected households. The report stated that the number of affected households will reduce each year as they move out of Temporary Accommodation, and the provision for this hardship fund will be reduced in tandem in future budget years and in line with the changing personal circumstances, and that officers will also keep affected households under periodic review and bring back proposals for the 2026/27 financial year as part of the normal budget setting process.

The report stated that an equalities impact screening assessment had been undertaken and was included at Appendix 1 of the report, and that as the impact of the proposed changes on affected households will be neutral, there are neither negative nor positive equalities impacts to be assessed. The report also noted that the council's Temporary Accommodation placement policy is operated in line with the Public Sector Equality Duty, and all placements require affordability to be considered before they are made.

The report stated that implementation of the proposals in this report will support the council in tackling its significant overspend on Temporary Accommodation, which if left unchecked would diminish the council's available resource to deliver its statutory duties, including its Public Sector Equality Duty, and that the proposals will also support the council in ensuring it achieves best consideration for the properties that it owns and uses as Temporary Accommodation in line with its statutory Best Value duties.

The report included comments from the Chief Finance Officer, who stated that by increasing rent to current LHA levels and funding this through housing benefit classifications that do not incur a subsidy loss, this is expected to generate an additional £7.2 million of rental income for council owned properties per annum and £2.9 million in the current year, subject to a 1 November implementation date, and that any slippage from this date will reduce the level of additional income received in year. The Chief Finance Officer also stated that the majority of households will not be adversely affected by the increase in rents to current LHA levels as they claim full housing benefit and the rent increase will be met from these benefit contributions, but that there will be small cohort, estimated at 71 households, where there is partial or no liability for housing benefit, and that these households will be liable for the increase in rent. The Chief Finance Officer stated that the council will introduce measures to support those residents adversely affected, and that this cohort will be reassessed for housing benefit based on the higher rent levels and in some cases eligibility may change, giving them partial or full claim to housing benefit, and that where the household remains eligible for the rent increase, it is proposed that a hardship fund is created which will be used to mitigate these adverse impacts on those households not liable for housing benefit, and that it is estimated that the maximum size of the hardship fund in year 1 will be £404k and this fund will be created from the additional income received from the rent increase, and that decisions will need to be taken as to whether the hardship fund continues after the initial year.

The report included comments from Legal Services, who stated that the council is under a duty to provide temporary accommodation for homeless individuals and households under Part 7 of the Housing Act 1996⁴, and that Section 206(1)(a) of the Housing Act 1996 states that the council may discharge their duties under Part 7 by securing that suitable accommodation provided by the council is made available. Legal Services also stated that Section 24 of the Housing Act 1985 concerns the setting of rents, and that Section 24(1) HA 1985 states that the council may make such reasonable charges as it may determine for the tenancy or occupation of its houses, and that Section 24(5) of the Housing Act 1985 states that in exercising the functions under section 24, the council shall have regard in particular to any relevant standards set for them under section 193 of the Housing and Regeneration Act 2008. Legal Services also stated that Section 206(2)(a) of the Housing Act 1996 also concerns the setting of rents and states that the council (as a local housing authority) may require a person in relation to whom it is discharging functions under Part 7 to pay such reasonable charges as it determines in respect of accommodation which it secures for their occupation (either by making it available itself or otherwise). Legal Services stated that the Regulator of Social Housing sets a Rent Standard under section 194 of the Housing and Regeneration Act 2008 which applies to 'low cost rental accommodation', and that the Rent Standard does not apply to temporary accommodation which is not held within the HRA, and is held by the council by way of lease or licence with a term of between 2 and 30 years, and that neither does the Rent Standard apply where the rent is not below the market rate. Legal Services stated that case law provides that it is often determined that a reasonable charge for temporary accommodation owned by a local authority would be the market rent. Legal Services stated that Section 210(1) of the Housing Act 1996 provides the Secretary of State with power to issue orders specifying the circumstances in which accommodation is or is not to be regarded as suitable for a person and matters to be taken into account or disregarded in determining whether accommodation is suitable for a person, and that one such order is the Homelessness (Suitability of Accommodation) Order 1996 (the 1996 Order ). Legal Services stated that Article 2 of the 1996 Order sets out some of the matters to be taken into account when determining whether it is reasonable for a person to occupy accommodation and whether the accommodation is suitable, and that Article 2(a) requires the financial resources available to that person to be taken into account, including (but not limited to) (ii) social security benefits , and that Article 2(b) requires the costs in respect of the accommodation to be taken into account, including but not limited to (among other things) (i) payments of, or by way of, rent; (ii) payments in respect of a licence or permission to occupy the accommodation . Legal Services stated that the Income-related Benefits (Subsidy to Authorities) Order 1998 (the Subsidy Order ) sets out the rules for what housing benefit subsidies may be claimed by the council from the Department for Work and Pensions, and that where the council holds property for the purpose of self-contained temporary accommodation by way of long lease over 10 years or on a freehold basis, the council should (and where none of Articles 14, 16, 17, 17A, 17B and 17C of the 1998 Order applies) be able to recover 100% of its qualifying expenditure as defined at Article 11(2) and (3) of the Subsidy Order, regardless of whether the accommodation is accounted for within a HRA or within the General Fund. Legal Services summarised that on the basis of the advice they have received, a reasonable argument can be made that the council is able to charge rent at the market rate, and that further, in the context of considering suitability for a specific individual, the council is required to assess the financial resources available to that individual, which includes taking into account the social security benefits (including housing benefit) available to them, and that therefore if the applicant has access to housing benefit which would meet the rent (or which would supplement other means which the applicant had to pay towards the rent), then the accommodation would be suitable in that respect (but of course subject to the other factors that need to be taken into account when assessing suitability).

Equality Impact Assessment Initial Screening Tool

The report pack included an Equality Impact Assessment Initial Screening Tool, completed by Stephen Rowan, Strategic Lead for Continuous Improvement, on 30 September 2025. The objective of the proposal was stated to be to maximise the council's income from Housing Benefit subsidy for properties that it owns and uses for temporary accommodation, and to achieve this, it is proposed that the council increases charges for such properties from Social Rent levels to Local Housing Allowance 2025 (LHA) levels, and changes how they are categorised for Housing Benefit Subsidy purposes so that 100% of LHA can be reclaimed from the Department of Work and Pensions. The screening assessment stated that while the proposed change will impact 565 households, there will be no negative impact upon any household, because for 501 of those households who are already in receipt of either full or partial Housing Benefit, their Housing Benefit award will increase in line with the move to LHA rates, and that for the remaining 64 households, a proactive engagement campaign will be held to ensure that there is no negative change in financial position, and that this engagement will focus on ensuring that each household is accessing all benefits that they are entitled to, and that where additional costs cannot be mitigated through increased welfare entitlement, the council will provide a top-up hardship payment to ensure that no household is negatively impacted. The screening assessment stated that using LHA rates as a benchmark creates more consistency between local authority TA rents and private sector rents at the lower end of the market, and that this standardisation promotes transparency and reduces the perception of inequity between housing sectors. The screening assessment noted that the council's Temporary Accommodation placement policy is operated in line with the council's Public Sector Equality Duty, and all placements require affordability to be considered before they are made, and that in line with statutory requirements the council's Temporary Accommodation Placement Policy is available on the council's website. The screening assessment stated that implementation of the proposals will support the council in tackling its significant overspend on Temporary Accommodation, which if left unchecked would diminish the council's available resource to deliver its statutory duties, including its Public Sector Equality Duties.

The screening assessment considered the impact of the proposal on various groups of people, and concluded that the impact would be neutral for all groups, including age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion of belief, sex, sexual orientation, people who have care experience, parents and carers, and socio economic status. The justification for this conclusion was that as any increase in rent will be offset by either a corresponding increase in Housing Benefit, or a payment of top-up grant, there will be no substantive impact on any household.

The screening assessment concluded that a full Equality Impact Assessment did not need to be performed, because there will be no impact, positive or negative, on the 565 affected households.