Ask CPAG Online - What is a Discretionary Housing Payment?

Discretionary Housing Payments (DHPs) can be paid by local authorities (LAs) to claimants who are entitled to housing benefit (HB) or universal credit (UC) for their rent, if they need extra help to meet their full housing costs. DHPs are ‘discretionary’ because LAs can decide whether to make a payment, how much, and for how long.

What does the law say?

The law for DHP’s is set out in the ‘Discretionary Financial Assistance Regulations 2001’.

  • LAs can pay DHPs to HB or UC claimants who ‘appear to require some further financial assistance (in addition to the benefit) to meet housing costs’ (regulation 2). ‘Further financial assistance’ and ‘housing costs’ are not defined.

  • The Department for Work and Pensions (DWP) issues guidance to LAs in a Discretionary Housing Payments Guidance Manual and Good Practice Guide. Although not law, it is authoritative guidance on how LAs can ensure their decisions and procedures are lawful.

  • A claim must be made for a DHP (regulation 3) with reasons and relevant information (regulation 7) in an approved manner (regulation 6).

  • Decisions can be reviewed (regulation 8) and overpayments due to errors, misrepresentations and disclosure failures can be recovered (regulation 8).

  • Payments to HB claimants calculated as a weekly sum cannot exceed the amount of weekly payments which can be met by HB and payments to UC claimants calculated as a monthly sum cannot exceed payments for UC for rent and / or service charges (regulation 4). 

  • Regulation 3 lists payments which cannot be covered by a DHP including ineligible service charges and council tax.

Where does the money come from and what is it for?

The Government allocates funding to LA’s for DHPs according to a set formula related to each LA’s need. The total amount allocated for DHPs rose sharply from £20 million in 2010/11 to £165 million in 2014/15. The amount allocated for 2015/16 is £125 million. The Government announced in the July 2015 Budget that £800 million is allocated for DHPs over the next 5 years.

The increased funding from 2010/11 is to mitigate the effects of welfare reforms that have reduced HB and UC payments for housing costs, notably the benefit cap, the ‘bedroom tax’ and cuts to local housing allowances. The total funding includes amounts for each of these reforms (e.g. the £125 million allocated for 2015/16 includes £60 million for the bedroom tax). However, there is no ‘ring-fencing’ and LAs can spend the DHP money in whatever way they see fit.

In effect, DHPs give LAs the ability to compensate claimants in their area who are affected by Government cuts to help with housing costs. Note, however, that:

  • the amount available for DHPs is strictly cash limited and can only make a limited contribution to mitigating the effects of the cuts;
  • critics claim that the replacement of statutory payments by right with discretionary local payments sets up a ‘post-code lottery’, with claimants in similar circumstances receiving different decisions because of where they live.

The Government argues that LAs are in the best position to identify who needs extra help and DHPs have become a key element in its strategy for managing reductions in entitlement to housing costs. This is highlighted by the fact that it has regularly cited the availability of DHPs as a defence against legal challenges to the bedroom tax

The Government also announced further cuts to HB and UC housing costs in the July 2015 Budget including the freezing of benefit rates for 4 years and reductions in the benefit cap (due to take affect from Autumn 2016), which are likely to result in increased demand for DHPs.

How much can LAs spend on DHPs?

LAs are allowed to use their own funds to top up their Government DHP allocation by an additional 150% in England and Wales and by any amount in Scotland (i.e. the legal limit in England and Wales is 2½ times the Government contribution).Any decision to refuse a DHP on budgetary grounds can be challenged unless the legal limit has been reached. In 2014/15, 145 LAs spent more than their DHP allocation (including Scotland), while 218 spent less.1

  • 1. Article 7 DHP (Grants) Order 2001; Scotland Act 1998 (Transfer of Functions etc) Order 2014