Affordability of suitable alternative housing
The assessment of affordability measures the tenant’s ability to afford suitable alternative housing (with any financial assistance and resources available to them). Affordability looks at the tenant’s income as a percentage of equivalent benefit to determine if the tenant can afford alternative housing.
Generally to be assessed as having continued eligibility for social housing on the affordability criteria, the tenant’s ratio of residual income will need to be less than 55%.
Calculation of affordability formula
The formula used to determine whether the household can afford alternative housing.
Step number | Description | Total $ |
Step 1 | Calculate net weekly income (including family tax credit received) | Total A = income including family tax credit received |
Step 2 | Calculate lower quartile weekly rent in the area the tenant needs to live minus accommodation income currently received from additional occupants and the Accommodation Supplement the tenant may be able to get | Total B = lower quartile rent minus accommodation income currently received from additional occupants and the calculated Accommodation Supplement |
Step 3 | Subtract Total A from Total B | Total A - Total B = Total C |
Step 4 | Divide Total C by the full main benefit rate they would get for that household type (including family tax credit) x 100 | Residual income % |
Step 5 | Determine whether the client can afford suitable alternative housing. |
Note
- Accommodation income for Step 2 only includes current amounts received from those who are or will be additional occupants.
Consider whether assessment outcome as determined by the formula is accurate
MSD will need to consider whether the outcome of the formula accurately reflects the tenant's level of need including whether the tenant has a ratio of residual income under 55% by choice.
The affordability outcome may need to be reviewed in the following situations (but is not limited to):
- they are not getting their full entitlement to benefits or family tax credit by choice. The assessed entitlement to benefit and family tax credit should be used as their net income in this situation.
- they have a sanction against their benefit which has reduced their rate paid. The assessed entitlement to benefit should be used as their net income in this situation.
- they are getting Temporary Additional Support to assist with high rent costs and this may increase their level of residual income if it was taken into account
- they are a seasonal worker and their income pattern has been assessed as a spike and they are currently on a benefit or lower wage for a short period of time, however the lower quartile rent will be sustainable when they are working or in a normal season
- they are a student and get a Student Loan to cover living expenses (a Student Loan is not considered income for the assessment of social housing or Income Related Rent purposes). If the Student Loan was included it may cause an increase in their level of residual income if this income was taken into account and change their affordability rating.
- they are a student who gets Student Allowance and Accommodation Benefit, and the use of Accommodation Supplement has resulted in a higher level of residual income
For more information see:
Legislation
- Housing Need clause 7 Ministerial Direction on Continued Eligibility for Social Housing
- Schedule 1 - Calculation of Affordability Formula Ministerial Direction on Continued Eligibility for Social Housing
- Agency may review housing eligibility section 117 Public and Community Housing Management Act 1992
