Hostel service charges covered by housing benefit

People staying in a hostel usually have to pay rent or a licence fee, as well as service charges.

Most people staying in homeless hostels can claim housing benefit for their rent or licence fee.

When calculating housing benefit entitlement, the local authority works out the maximum amount of rent and other charges that can be covered by housing benefit. This is called the ‘eligible rent’.

To work out the eligible rent for most homeless hostel residents, the local authority must:

1. determine whether any of their charges are defined as service charges

2. assess whether they are eligible or ineligible service charges for housing benefit

3. deduct any ineligible charges

Some service charges can be paid by housing benefit if paying them is a condition of occupying the property.[1]

Service charges are defined as periodical payments for:[2]

• services which are performed

• facilities that are provided, including the use of furniture

The letting agreement might show service charges as a payment which is either:

• included in the total rental figure

• added as a separate charge to the rental figure

• classified as something else, such as a ‘housing management fee’

How a charge is expressed in an agreement does not determine whether it is defined as a service charge for housing benefit purposes.

Services that are funded by a third party and are not included in the charges to the resident are not part of the calculation for housing benefit.[3]

Eligible service charges usually relate to services in communal areas.[4] This can include:

• water charges[5]

• laundry facilities, such as a laundry room[6]

• TV and radio relay charges[7]

• fuel[8]

• charges relating to cleaning and maintenance[9]

This list is not exhaustive.

A service charge can only be included as part of the eligible rent for housing benefit if:

• its payment is a condition of occupying the property[10]

• it is not one of the charges that are listed as ineligible in the regulations[11]

• the amount is reasonable[12]

Reasonable service charges

The local authority must compare the cost of an eligible service to similar services to decide whether it is excessive. If the local authority considers it to be excessive, it must decide how much would be reasonable and deduct the excess amount.[13]

Most charges that relate to a resident's non-communal daily living expenses are ineligible for housing benefit. Ineligible service charges are payments for:[14]

• fuel

• water

• meals

• personal care and support

The local authority deducts ineligible service charges from the total weekly charge when it calculates the eligible rent for housing benefit. The amount deducted depends on the type of service charge.

When charges are made for fuel, the actual amount is used if known. Otherwise, a fixed-rate is used to decide how much to deduct from the eligible rent.[15]

When charges are made for meals, a fixed-rate deduction is applied based on the number of meals provided.[16]

The rates are set by the DWP each April.

For any other charges, the amount specified in a claimant's tenancy agreement or other supporting documents is usually the sum that is treated as ineligible for housing benefit. When the amount charged cannot be identified, or is unrealistically low, the local authority decides the reasonable amount for that service.[17]

Residents are expected to use other income to pay service charges that are ineligible for housing benefit. If residents do not pay service charges they could be evicted or be prevented from securing other accommodation.

Discretionary housing payments (DHPs) cannot be used to pay for service charges that are ineligible for housing benefit.[18]

In some circumstances, the DWP can use its discretion to deduct money from a resident's other benefits and pay it directly to their landlord to help pay for ineligible service charges.

The rules about service charges which are described on this page do not apply when the eligible rent is calculated using the local housing allowance (LHA). For this to be the case, all of the following must apply:[19]

• the hostel landlord is a charity, voluntary organisation or other private landlord

• the accommodation does not come under the definition of ‘exempt accommodation’

• none of the rent covers board and attendance

The rules about service charges are different for universal credit. Residents who are claiming universal credit for their hostel costs might be able to get help with their service charges if they meet the universal credit payment condition.