Special Report 53 - Rent Supplements
Published on 06 April 2006
Summary of Findings
Rent supplement payments are made to persons who rent private accommodation but are unable to afford the cost. The payments are means tested.
The Department of Social and Family Affairs (the Department) is responsible for policy, legislation and the provision of funding in relation to rent supplements. However, claims for payment of rent supplements are processed and administered by Health Service Executive (HSE) staff in Community Welfare Service offices, generally operating out of the local health centre network.
This examination was undertaken to
- identify the factors that gave rise to the rapid increase in expenditure on rent supplements in the period 2000 to 2005
- establish if the Department managed the scheme with due regard for economy during the period
- ascertain how the scheme is administered and the associated costs
- review operational controls over the scheme
- review rent supplements in the overall context of social housing provision and the recently introduced Rental Accommodation Scheme.
Increased Expenditure on Rent Supplements
In the six year period 2000 to 2005, a total of €1,636 million was paid out by the State on rent supplements. Expenditure increased from €151 million in 2000 to €369 million in 2005.
The examination concluded that about one third of the overall increase can be explained by increases in the number of recipients. This increased from 42,700 at the end of 2000 to 60,100 at the end of 2003. Since then, the number of recipients of rent supplements has stabilised at the higher level.
The remaining two thirds of the increase in spending is related to increases in the average rent supplement payment. This went up from around €73.70 a week at the end of 2000, to around €124.40 a week at the end of 2005. The bulk of the increase appears to be related to increased rents paid by rent supplement households with a small part due to changes in the kind of housing units rented because of the changing composition of rent supplement households.
Managing the Risk of Excess Expenditure
The Department sets rent limits as a means of controlling the level of expenditure on rent supplements. Different limits apply for different household types and different areas, reflecting the variation that occurs in market rents. In 2005, rent limits were generally at, or a little below, corresponding average market rates.
In practice, tenants (and landlords) have little incentive to agree rents below the rent limit levels. At end 2005, 84% of rent supplement recipients were paying rents equivalent to the relevant rent limit. Given the number of households dependent on rent supplement, and a combined expenditure on rent estimated at around €440 million a year, the Department should have considerable potential to influence market rents in certain segments of the market, through the rent limits it sets. Rent limits were increased for most household types and in most areas in response to the rapid increases in market rents in 2000/2001. Market rents fell about 10% between the start of 2002 and the end of 2004, but the Department did not bring down the rent limits. Selective lowering of rent limits when market rents fell could have resulted in lower expenditure.
The Department did not maintain information in a form that would enable it to readily isolate the factors giving rise to increased expenditure on rent supplements in the period 2000 to 2005. Given the variation and volatility in rents, the Department needs to adapt its electronic recording systems to capture and report information on the factors underlying cost fluctuations in order to monitor trends and effectively manage the scheme.
Administration of Rent supplements
Rent supplements is one of a wide range of supplements payable under the Supplementary Welfare Allowance scheme. While the scheme is administered by the HSE on behalf of the Department, there is no service agreement between them setting out service levels and targets to be achieved. Such an agreement should be put in place.
As well as meeting the full cost of supplementary welfare payments, the Department paid the HSE €45.7 million in 2005 for its administration of the scheme. The payments were based on a long-standing cost recovery formula, but this may no longer be an accurate estimate of the costs incurred by the HSE in administering the scheme.
There is considerable variation in the way that rent supplement payments are made in different regions. The Department and the HSE intend issuing revised guidance to all Community Welfare Service staff on how the Supplementary Welfare Allowance scheme should be administered.
At claim processing stage, there is considerable variation between Community Welfare Service areas in the application of controls over rent supplement claims. The HSE and the Department need to take measures to introduce greater consistency in the application of checks on claims.
After claims are put in payment, a significant amount of review is happening at Community Welfare Service area level and overpayments of rent supplements are being detected as a result of this control work. However, there is a need to make this more effective by developing methods to identify the extent of fraudulent or unwarranted recourse to the scheme.
The prompt removal of such cases from payment assumes an added importance in circumstances where recovery of overpayment is unlikely – whether due to a lack of means on the part of the claimant or lack of effective prosecution.
Very few prosecutions have been brought against persons alleged to have carried out frauds in rent supplements cases. The Department and the HSE should sort out the impediments that currently prevent prosecutions being taken, and adopt a policy of prosecuting quickly in serious fraud cases.
Meeting Social Housing Needs
Rent supplements started out as a scheme to assist households that had a short-term need for assistance in meeting their housing costs until their temporary difficulties had been resolved. In practice, many of those who are granted rent supplements remain as recipients for extended periods. This examination found that around 70% of those in receipt of rent supplements at a point in time are likely still to be in receipt of rent supplements one year later. Around 55% of those in receipt of supplements are likely to be still in receipt of rent supplements two years later.
Rent supplements has evolved into a major social housing assistance programme in its own right. Around the time of the last census of population (2002), households dependent on rent supplements accounted for up to one-third of publicly-assisted housing provision nationally. The contribution of rent supplements towards social housing is significantly greater than the national average in some areas.
Despite the sizeable role that rent supplements plays in providing social housing assistance, the Department considers that rent supplements should be primarily a form of short-term income maintenance. It has set no explicit objectives in terms of the housing impacts that the scheme should achieve, or the kinds of housing need that it is intended primarily to address through the scheme.
In July 2004, the Government decided that local authorities will assume responsibility for meeting long-term housing assistance needs of households receiving rent supplements. A new scheme — the Rental Accommodation Scheme — has been established to deliver on that objective. The Department of the Environment, Heritage and Local Government, which has primary responsibility for overall national housing policy and for policy in relation to social housing, expects that all local authorities will initiate the Scheme by the middle of 2006.
Based on the current profile of rent supplement households, it is estimated that around 30,000 rent supplements recipients will transfer to the Rental Accommodation Scheme. However, the rate of transfer has been slow. Up to the end of 2005, only 505 recipients had transferred to the new scheme — and almost all of these were tenants living in voluntary housing units. While a central objective of the Scheme is the achievement of better value for money in the provision of accommodation for households who would otherwise avail of rent supplement assistance, no specific targets have been set in relation to the savings to be achieved under the Scheme.