R(IS) 9/91

Mrs. R. F. M. Heggs	CIS/355/1990
17.12.90 

Housing costs – claimant living in an unnecessarily expensive area and able to buy suitable alternative accommodation without a mortgage – whether housing  costs nil 
The mortgage interest on the claimant’s home had been allowed in full for sometime in the assessment of income support. In November 1989 the adjudication officer decided that as the house was located in a more expensive area than other areas in which suitable alternative accommodation existed, it was reasonable to expect the claimant to obtain alternative accommodation and that the housing costs were excessive. In restricting the housing costs to nil the adjudication officer concluded that with the money available from the sale of her present home the claimant would be in a position to purchase a suitable alternative property in the area without recourse to a mortgage. On appeal the tribunal upheld the decision of the adjudication officer. The claimant appealed to a social security Commissioner.
Held that:
1.	in applying paragraphs 10(3) and (4) of Schedule 3 to the Income Support (General) Regulations 1987 the test is a subjective one in which the comparison of housing costs lies between those of the existing property and those of the appropriate suitable alternative accommodation. Where the housing costs of the latter amount to nil the claimant is not entitled to housing costs. In so concluding the Commissioner followed the reasoning of the Commissioner in decision R(SB) 6/87 on a like provision in the former supplementary benefit scheme (para. 18);
2.	paragraph 11 of Schedule 3 to the Income Support (General) Regulations, as referred to in paragraph 10(3) of that Schedule, has no relevance where the housing costs of the suitable alternative accommodation are nil (para. 19).

DECISION OF THE SOCIAL SECURITY COMMISSIONER
1.	My decision is that the decision of the social security appeal tribunal given on 30 January 1990 is erroneous in point of law and accordingly I set it aside. However as I consider it expedient to give the decision the tribunal should have given, which I can do without making fresh or further findings of fact, I further decide that the claimant is not entitled to housing costs from 28 November 1989.
2.	This is the claimant’s appeal against the decision of the social security appeal tribunal of 30 January 1990, leave having been granted by the tribunal chairman. The claimant did not attend the oral hearing of the appeal held before me, but was represented by Mr. Nicholas Warren, Solicitor, of the Birkenhead Resource Unit. The adjudication officer was represented by Mr. P. N. Stevens from the Chief Adjudication Officer’s office. I am grateful to them both for their helpful submissions.
3.	At the material time the claimant, then aged 54, was separated from her husband. She lived in owner‑occupied property with her non‑dependent son, daughter and grandson. She was in receipt of income support and has no savings.
4.	Her husband claimed supplementary benefit for both of them in November 1986. On 1 April 1987 they were visited at their home by an officer of the Department of Social Security. They were advised that due to their property being in an unnecessarily expensive area a restriction might be placed on the amount of mortgage interest payable. On 3 June 1987 a letter was sent to the claimant’s husband advising him that the adjudication officer had decided that his housing costs were excessive and reasons were given in support. At that time the housing costs amounted to £98.97 a week.
5.	The claimant’s husband placed the property on the market in November 1987. The claimant and her husband were again visited at their home on 22 January 1988. They were again advised that they must make every effort to obtain cheaper accommodation.
6.	The claimant’s husband left the household on 12 May 1988. The claimant was visited by an officer from the Department on 17 May 1988 and she submitted a claim for income support. She was again advised that her mortgage interest was likely to be restricted if every endeavour was not made to obtain cheaper alternative accommodation.
7.	On 16 November 1989 it was ascertained that no restriction had been placed on the claimant’s mortgage interest payable by income support and the property had not been sold. On 28 November 1989 the adjudication officer decided that the claimant was not entitled to housing costs from 13 October 1989 because the immediate area in which the house was located was more expensive than other areas in which suitable alternative accommodation existed; it was reasonable to expect the claimant to obtain alternative accommodation and the housing costs were regarded as excessive. The claimant appealed to the tribunal on the ground that she had made every effort to sell her property and that her son, daughter and grandson were sharing the accommodation and not contributing to housing costs.
8.	In his written observations on the claimant’s appeal the adjudication officer stated that three bedroomed properties in the area were available for approximately £45,000. The claimant’s property had been valued at £175,000 and was subject to a mortgage of £45,000 (later stated to be £39,000). Allowing for expenses involved in the sale and re‑purchase of another property of £5,000 and a half share of the equity to which the claimant’s husband might be entitled, the claimant would have capital of £85,000. The adjudication officer deducted half the mortgage outstanding which left the claimant with a balance of £62,500 to purchase cheaper alternative accommodation. As a result the adjudication officer concluded that the claimant was in a position to purchase suitable alternative property in the area without recourse to a mortgage. He had regard to paragraph 10(3) to (7) of Schedule 3 to the Income Support (General) Regulations 1987 (the Income Support General Regulations) and concluded that the claimant’s housing costs should be restricted and reduced to nil from 28 November 1989.
9.	The claimant attended and was represented by Mr. Warren at the hearing of the appeal before the tribunal on 30 January 1990. In the event the tribunal dismissed the appeal. After recording all relevant findings of fact, the tribunal gave the following reasons for their decision:
“Schedule 3 [erroneously stated as R10 (4)(2) and subsequently amended] IS General Regulations applies. The appellant was made aware of the regulations restricting housing costs by VO’s on 1 April 1987 and 22 January 1988. She was in attendance although at that time her husband was the claimant. She was well aware of the need to place the property on offer for sale and of the actions taken by her husband. The tribunal is not satisfied that the appellant was also informed of the regulations on 17 May 1988. It was not referred to in the VO’s report and there was no direct evidence from the VO. It is not regarded as significant that the appellant was not the actual claimant when notice was given. This is distinguished from R(SB) 7/89. The AO was entitled to review the amount of IS awarded when the son became a member of the household and claimed IS. This was a relevant change of circumstances with S104 SSA 1975.
The tribunal also consider that a failure to achieve a sale of the property after a reasonable period of time could be a change of circumstances which would justify review with the terms of S104. The tribunal does not accept that the appellant is taking reasonable steps to sell the property. Her own evidence displayed no sense of pressure on agents or urgency on her part. There is no evidence from estate agents confirming an asking price or explaining difficulties relating to this specific property or other factors that may affect a sale. The tribunal come to the conclusion that the appellant was content to let the present situation continue notwithstanding the reduction in IS. It is not unreasonable to expect the appellant and her family to move. A smaller house in another district of Birkenhead or Wirral may be less attractive and not as spacious and convenient but these are not valid reasons for saying that the restriction is unreasonable.
The tribunal considered R(SB) 6/89 which related to an appeal in a case of SB but the regulations in this appeal are similar to the former SB Requirement Regulations. On the evidence before it the tribunal determined that the appellant would not be involved in mortgage costs if the present property was sold and suitable alternative accommodation was purchased. This means that there would not be any other housing costs to take into account so that the difference would be the whole of the current housing costs incurred by the appellant. This is the effect of the appeal decision.”
10.	Section 104(1)(b) of the Social Security Act 1975 provides that a decision of an adjudication officer may be reviewed at any time by an adjudication officer or, on a reference by an adjudication officer, by a social security appeal tribunal if there has been any relevant change of circumstances since the decision was given. The claimant’s non‑dependent son became an occupant of the claimant’s house on 6 October 1989 and claimed income support in his own right. This constituted a change of circumstances and the tribunal rightly concluded that the conditions for review were satisfied.
11.	Regulation 17(e) of the Income Support General Regulations provides, so far as relevant to the present appeal, that a claimant’s applicable amount shall include “any amount determined in accordance with Schedule 3 (housing costs) which may be applicable to him in respect of mortgage interest payments or such other housing costs as are prescribed in that Schedule.” Paragraph 7 of Schedule 3 lists the circumstances in which the amount of interest on a loan to acquire an interest in the dwelling occupied as	the home (the “eligible interest”) shall be included in a claimant’s housing costs. Paragraphs 8 and 9 of Schedule 3 deal with interest on loans for repairs and improvements to the home and other housing costs and are not relevant in the present case.
12.	Paragraph 10(3), (4), (5), (6) and (7) of Schedule 3 to the Income Support General Regulations provides: 
“(3)	Where the amount to be met under paragraphs 7 to 9 and, subject to any deduction applicable under paragraph 11 are excessive, they shall be subject to restriction in accordance with sub‑paragraphs (4) to (6).
(4)	Subject to sub‑paragraphs (5) and (6) the amounts to be met shall be regarded as excessive and shall be restricted and the excess not allowed, if and to the extent that -
(a)	the dwelling occupied as the home, excluding any part which is let, is larger than is required by the claimant and	his family and any child or young person to whom regulation 16(4) applies (foster children) and any other non‑dependents having regard, in particular, to suitable alternative accommodation occupied by a household of the same size; or
(b)	the immediate area in which the dwelling occupied as the home is located is more expensive than other areas in which suitable alternative accommodation exists; or
(c)	the outgoings of the dwelling occupied as the home in respect of which the amounts to be met under paragraphs 7 to 10 are higher than the outgoings of suitable alternative accommodation in the area.
(5)	Where, having regard to the relevant factors, it is not reasonable to expect the claimant and his family to seek alternative cheaper accommodation, no restriction shall be made under sub-paragraph (3).
(6)	Where sub‑paragraph (5) does not apply and the claimant (or other member of the family) was able to meet the financial commitments for the dwelling occupied as the home when these were entered into, no restriction shall be made under this paragraph during the first six months of any period of entitlement to income support nor during the next six months if and so long as the claimant uses his best endeavour to obtain cheaper accommodation.
(7)	In sub‑paragraph (5) “the relevant factors” are -
(a)	the availability of suitable accommodation and the level of housing costs in the area; and
(b)	the circumstances of the family including in particular the age and state of health of its members, the employment prospects of the claimant and, where a change in accommodation is likely to result in a change of school, the effect on the education of the child or young person who is a member of his family, or any child or young person who is not treated as part of his family by virtue of regulation 16(4) (foster children).”
13.	Mr. Warren did not dispute the tribunal’s conclusion that the claimant had been given notice of the impending restriction on housing costs by a visiting officer on 1 April 1987 and 22 January 1988. He agreed that if the claimant sold her home, she would be able to purchase suitable alternative accommodation in the area for £45,000 free of mortgage. He submitted that in considering paragraph 10(3) the tribunal had erred in law by failing to deduct for the presence of non‑dependants under paragraph 11 before considering whether the level of housing costs was excessive and subject to reduction.
14.	Mr. Warren then concentrated on the interpretation of sub‑paragraph (4). He stressed that the operative words were “the excess not allowed”. The reduction was limited to that excess. Sub‑paragraph (4)(a), (b) and (c) introduced a new criterion for determining the level of such excess. Each head was separate and distinct and provided for the level of the excess to be ascertained by reference to a comparison. The question at issue was “whether the appeal tribunal erred in law by holding that, once it had been decided to restrict housing costs, they should do so by calculating what would happen if the present property was sold (following R(S)B 6/89), or whether they should have asked themselves to what extent the actual housing costs were excessive”. In his view the latter approach was correct. He submitted that the tribunal had erred in law by following R(SB) 6/89. That decision was limited to the interpretation of regulation 21 of the Supplementary Benefit (Requirements) Regulations 1983, which provided so far as relevant to the present appeal:
“21.– (1) Subject to paragraphs (3) and (4), the amounts applicable under regulations 15 to 18 shall be regarded as excessive and shall be restricted and the excess not allowed if and to the extent that –
(a)	the home, excluding any part which is let or normally occupied by boarders, is unnecessarily large for the assessment unit, . .; or
(b)	the immediate area in which the home is located is unnecessarily expensive; or
(c)	the outgoings of the home in respect of which the amounts are applicable under those regulations as aforesaid are unreasonably high by comparison with the outgoings of suitable alternative accommodation in the area.”
15.	Mr. Warren submitted that although the supplementary benefit scheme and income support scheme both provided for the restriction on payment of interest on loans to acquire an interest in the dwelling occupied as the home, the provisions were different. As a result Commissioners’ decisions on the interpretation of regulation 21 of the Requirements Regulations did not assist in the interpretation of parallel provisions contained in paragraph 10(4) of the Income Support General Regulations. He found support for this in paragraph 3 of decision R(SB) 7/89 in which the Commissioner compared the relevant provisions and stated “sub-paragraphs (3), (5) and (7) substantially repeat (with minor variations which do not materially alter the sense) paragraph (1), (3) and (5) of regulation 21 of the Requirements Regulations”. Mr. Warren noted that sub‑paragraph (4) was omitted.
16.	Mr. Warren accepted that the claimant was not assisted by sub-paragraphs (5) and (6) and he then referred specifically to paragraph (4)(b), which was relevant in the present case. That required a comparison between the housing costs of the present home with those of the suitable alternative accommodation. The level of those housing costs should be ascertained objectively using a broad brush approach. The comparison had to be by reference to the maximum housing costs of suitable alternative accommodation. He suggested the following examples as a guidelines for comparison. If in the area of suitable alternative accommodation, a first time buyer was being granted a mortgage of 90% of the purchase price, the interest payable on that mortgage should form the baseline for comparison, similarly if in the area of suitable alternative accommodation a purchaser of a newly constructed home was being granted a mortgage of 95% of the purchase price and in addition the builder allowed a further 5% of the purchase price to remain on mortgage, the interest payable on both the mortgages should form the baseline for comparison because both loans were obtained to acquire an interest in the dwelling occupied as the home; further, if a claimant was unable to meet the housing costs because of a change of circumstances, as in the present case, the burden fell on the adjudication officer to satisfy the tribunal that after the necessary deductions under paragraph 11, the housing costs were higher than maximum housing costs in the area in which suitable alternative accommodation existed. In other words the actual housing costs had to be compared with the maximum housing costs available in similar circumstances for suitable alternative accommodation. He again stressed that paragraph 4 was directed at the amount of the excess, which did not permit such amount to be reduced to nil. The tribunal had further erred in law in so concluding.
17.	Mr. Stevens submitted that paragraphs 3(2) to (7) of paragraph 10 of Schedule 3 to the Income Support General Regulations did no more than rearrange and clarify the previous provisions contained in regulation 21 of the Requirements Regulations. The provisions were couched in similar terms and any variations in the provisions were due to their application to different income related benefit schemes. He analysed and compared the provisions of regulation 21 with the corresponding provisions in paragraph 10(4). He submitted that in substance they were identical. Regulation 21(1) provided for “the amounts applicable... shall be regarded as excessive and shall be restricted and the excess not allowed...” whereas paragraph 10(4) provided for “the amounts to be met shall be regarded as excessive and shall be restricted and the excess not allowed...” He argued that the provisions of paragraph (4)(b) merely specified in greater detail the provisions of regulation 21(1)(b). It did not introduce a new criterion for the calculation of the excess subject to reduction. He argued that the tribunal had rightly applied the interpretation of the word “excess” in regulation 21 to the corresponding provisions in paragraph 10(4). He referred me in particular to paragraph 10 of decision R(SB) 6/89 in which the Commissioner held:
“10. It is clear that the restriction imposed on the housing requirements by regulation 21(2) [now incorporated in para. 21(l) by regulation 2(5) of the Supplementary Benefit (Housing Requirements and Resources) Amendment Regulations 1987 as from 26 January 1987] is limited to disallowing the excess amount; in a case such as the instant one the loan interest is to be limited to that which would be allowed for the new home and the excess is to be disallowed. In so far as interest is concerned, whether interest on an improvement loan or a mortgage, the word “excess” is used in the paragraph and can only be interpreted in this way. Regulation 21(1) refers to a situation where the existing amounts applicable are excessive, that is excessive because the home is unnecessarily large for the assessment unit or is located in an unnecessarily expensive area and regulation 21(2) [now 21(1)] provides that the excess is not to be allowed. In my judgment, in so far as interest is concerned, the greater figure is the interest on the existing loan and the lower figure is the interest which would be allowed in respect of the home of necessary size or that situated in a less expensive area. But in a case such as the instant one nothing would be allowed by way of interest under regulation 17 because there would be no question of borrowing money for repairs or improvements to the home, nor would anything be allowed under regulation 15 as the claimant would not require a mortgage for the purpose of acquiring it...”
18.	I accept Mr. Stevens’ submission and reject Mr. Warren’s submission. Both regulation 21 and paragraph 10(4) provide for the restriction on meeting housing costs. At paragraph 11 of decision R(SB) 6/89 the Commissioner explained the intention of regulation 21 as follows: 
“... in my judgment the intention of the regulation, and what is clearly expressed there, is that supplementary benefit is to be limited to what is necessary to cover the outgoings on accommodation which is reasonable for the claimant’s needs, and the occupation of an unnecessary large home or one located in an expensive area is not to be subsidised out of public funds. .”
In my view the above quoted passage applies equally to the intention of paragraph 10(3) and (4) of Schedule 3. In the present case the tribunal concluded that the claimant’s housing costs were excessive. It is common ground that if the claimant sold her property, the mortgage equity would be in excess of £45,000, the purchase price for suitable alternative accommodation. The tribunal rightly concluded that the test was subjective and that the comparison of housing costs lay between those of the claimant’s existing property and those of the appropriate suitable alternative accommodation. As the housing costs of the latter amounted to nil, the tribunal rightly decided that the claimant was not entitled to housing costs.
19.	I should add for completeness that I do not consider the tribunal erred in law by failing to refer to paragraph 11 of Schedule 3 on the facts of this particular case. In considering paragraph 10(3) the housing costs of the suitable alternative accommodation were nil. In those circumstances any deduction from the existing housing costs were irrelevant. Paragraph 11 would, of course, be relevant in any case where the housing costs of the suitable alternative accommodation were in excess of nil.
20.	Finally I have to consider the date from which the claimant is not entitled to housing costs. The adjudication officer’s decision referred to 13 October 1989 whereas his written submission to the tribunal referred to 28 November 1989. The tribunal failed to specify the date and as a result the decision was erroneous in law. Mr. Warren strongly argued that the correct date was 28 November 1989 and by virtue of paragraph 10(6) the claimant was entitled to housing costs for a further period of six months, because throughout the period the claimant had used “her best endeavours to obtain cheaper accommodation”. She had been unable to sell the property in a falling market. I reject this. The tribunal found as fact that “the appellant is not taking all necessary and reasonable steps to achieve a sale of the property and find alternative accommodation in a less expensive area”. They concluded that her evidence “displayed no sense of pressure on agents or urgency on her part” and that she “was content to let the present situation continue notwithstanding the reduction in IS”. I have considered all the evidence with care and in my view the tribunal were justified in reaching this conclusion based on the evidence before them. The claimant became entitled to income support in her own right on 17 May 1988. No restriction was placed on her housing costs until the adjudication officer issued his decision on 28 November 1989, more than 18 months after the date on which she became entitled to income support. The claimant exceeded her entitlement under regulation 10(6) and I am satisfied that the adjudication officer was right not to extend entitlement beyond the date of his decision. In my view such decision should take effect from 28 November 1989. There is nothing to indicate the relevance of 13 October 1989.
21.	For the reasons stated above the tribunal’s decision was erroneous in point of law. The tribunal recorded full findings of fact and in accordance with my power under section 101 (5)(a)(i) I give the decision the tribunal should have given. This is set out in paragraph 1.

Date: 17 December 1990	(signed) Mrs. R. F. M. Heggs
	Commissioner