The Comptroller and Auditor General John Purcell, has today published a report on a value for money examination of rent supplements for private accommodation.
|John Purcell, Comptroller and Auditor General at Dublin Castle|
The Department of Social and Family Affairs pays rent supplements to persons who rent private accommodation but are unable to afford the cost. The payments are means tested, and most recipients of rent supplement depend on welfare payments as their main source of income.
A total of 1,636 million was paid out by the State on rent supplements in the six-year period 2000 to 2005 inclusive. Annual expenditure on rent supplements increased from 151 million in 2000 to 369 million in 2005. The Comptroller and Auditor General carried out an examination that identified the factors that gave rise to the rapid increase in expenditure, reviewed how well the Department managed the scheme and considered its future direction.
Reasons for Increase
About one third of the increase in expenditure can be explained by increases in the number of recipients. At the end of 2000, there were 42,700 recipients. This had increased to 60,100 at the end of 2003 and then settled at the higher level.
The remaining two thirds of the increase in spending on rent supplements was related to increases in the average payment up from 73.70 a week at the end of 2000 to 124.40 a week at the end of 2005. Most of the increase appears to be related to increased rents paid by rent supplement households. A small part of the increase in the average payment was due to changes in the kind of housing units rented, related to changes in the composition of rent supplement households.
Operation of Rent Limits
The level of rent supplement payable is governed by maximum rent limits set by the Department for different household categories and by reference to the area in which the rented accommodation is located. The highest rent limit of 276 per week is for a family with two or more children in the East region.
Rent limits act as a means of controlling the level of expenditure on rent supplements. In practice, tenants (and landlords) have little incentive to agree rents below the rent limit levels. At the end of 2005, 84% of rent supplement recipients were paying rents equivalent to the relevant limit. The recipient is required to make a minimum contribution of 13 per week towards the rent. At the end of 2005, recipients were making an average contribution of 22 per week.
Rent limits were increased for most household types and in most areas in response to 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.
In order to maximise the value of its spending and avoid the risk of windfall gains to landlords, the Department needs to be in a position to promptly adjust the rent limits for new tenancies (nationally or on a selective basis), and to exploit its effective purchasing power in response to market conditions.
Management of Scheme
Rent supplement payments are one of a wide range of supplements payable under the Supplementary Welfare Allowance scheme. The scheme is administered by the Community Welfare Service of the Health Service Executive on behalf of the Department.
There is considerable variation between Community Welfare Service areas in the application of controls over rent supplement claims at initial claim processing stage. 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 work more effective by developing methods to identify the extent of fraudulent or unwarranted recourse to rent supplements.
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.
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. However, the examination established that around 70% of those in receipt of rent supplement at a point in time are likely to be still in receipt of the supplement one year later and about 55% two years later. In practice, rent supplement has evolved into a major social housing assistance programme in its own right.
In July 2004, the Government decided that local authorities will assume responsibility for meeting long-term housing assistance needs of households receiving rent supplements, under a new scheme called the Rental Accommodation Scheme. It was estimated that around 30,000 rent supplement recipients would transfer to the new 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.
The report makes recommendations on how management of rent supplements might be revamped in light of recent policy developments in the area of social housing provision.