Written evidence submitted by Shabana Mahmood MP [EXA 064]

Background

Birmingham has been described as the epicentre of the exempt accommodation sector, with over 22,000 people living in supported exempt accommodation units in the city.

Whilst there are some legitimate providers doing important work, there have been too many others willing to game the system. Multiple reports have proven that the sector is rife with abuse. Too often in my constituency we see unscrupulous providers falsifying contractual agreements, failing to provide adequate care provision, and obscuring their activities with not-for-profit status.

The exempt accommodation sector has been estimated to cost local authorities £1 billion[1]. In addition to this eye-watering amount of public money that is being wasted, there is a human aspect to this problem, which is seeing some of our most vulnerable left with no support or a decent home.

For this evidence submission, I have drawn on my experience as the MP for Birmingham Ladywood, as my office receives complaints and concerns from residents in exempt accommodation on a near daily basis. I have outlined key issues with the regulation (or lack thereof) of the exempt accommodation sector, which the Government must address. I have also included some practical examples of casework I have received which highlight the impact this is having on my constituents and the complete dysfunction of this system which isn’t doing much to support anyone.

Key Issues

The exempt accommodation sector is dangerously under-regulated, with legal loopholes allowing unethical operators to exploit vulnerable people and take millions of pounds from public finances. I have outlined below a number of areas where there are significant issues, which the Government must address through increased regulation and improved guidance.

1.     Properties in Disrepair

It is commonplace for exempt properties to be left in a dismal state of disrepair. Residents are being asked to live in shocking conditions with little by way of redress as the owners and providers of the properties are often far removed, working through various managing agents. In my own constituency we have dealt with several cases of residents being left without hot water or electricity for considerable lengths of time. This is completely unacceptable but is happening because there is next to no regulation of the conditions these providers must adhere to.

2.     “More than Minimal” care, support and supervision

Not only are vulnerable residents left in substandard accommodation, they are being left without the specialized support they need. It is commonplace for rogue operators to register as providing supported housing or support services to residents in order to bypass regulations but will often not provide any support services.

Exempt accommodation can be a lifeline to someone who has been sleeping rough, exiting the criminal justice system, recovering from drug or alcohol addiction or is a survivor of domestic abuse. But without specialised support, these vulnerable residents are being placed at further risk. Substance abuse and antisocial behaviour are commonplace as the system is failing these people.

Providers are able to get away with this because in order to qualify for providing supported exempt accommodation they just need to prove that they are providing “more than minimal” support services. The Government must clarify a new definition of “support” and write this into law will help to clean up the sector.

3.     Housing Benefit Fraud

Birmingham City Council in my constituency have rightly cracked down on benefit fraud, but in their investigations, providers have been wrongly claiming that residents have not been engaging with care and support services. Providers have even been falsifying documents to try and prove to the council that they have been giving support services when in fact, the providers are often not providing any additional support at all. This leads to innocent residents being rejected for housing benefit and subsequently evicted from their accommodation.

4.     Organised crime

Given the lack of regulation for these properties, some of them are safe havens for organised crime with some providers even participating in it. Birmingham City Council’s report to Cabinet on Exempt Accommodation in April 2021 highlights serious concerns of potential criminality and sharp practice within exempt providers. The report describes “a concerning prevalence of housing providers linked to organised Crime Groups which in turn exacerbates the vulnerability of their residents”[2]. The lack of regulation overall is allowing organised crime to fester in pockets of the country, where people are most vulnerable. This is destroying lives and communities and the Government must acknowledge the link and address it. Prospect calls for providers using lease-based models to maintain greater oversight over those it engages to manage accommodation and deliver services[3]. Swifter action and more proactivity as well as working with key agencies such as the police is also needed to stamp out criminal activity within the exempt accommodation sector.

5.     An Ineffective Regulator

In many cases that myself and my office have been working to solve, the Regulator for Social Housing’s (RSH) hands are tied, due to the methods that the providers have devised to avoid scrutiny. A Registered Provider (RP) can classify only a small percentage of its overall portfolio as social housing, classifying the remainder as private rented accommodation. Despite this difference in classification, there is no obvious differentiation between the provision of services for each type of accommodation. For providers of less than 1,000 units, the RSH is reliant on self-disclosure of noncompliance or third-party referrals of malpractice. Even where this is the case, the RSH is limited to the extent to which it can intervene and it can only be applied to those residents in designated social housing, meaning those in what has been classified as private rented stock have no such recourse.

As the provider is classed as an RP, it can operate all its units as exempt accommodation regardless of whether it is private rented or social housing. This makes the units eligible for enhanced Housing Benefit payment within current regulations. Therefore, providers can operate under no regulation or assurances of its standards and there is nothing that can be done to protect and improve the lives of residents.

Prospect estimates that this approach is now being applied by providers responsible for over 65% of lease based exempt accommodation in Birmingham.

The Government must revisit Housing Benefit Regulations in order to ensure that they applied only to RPs who are providing exempt accommodation which is classified as social housing.

6.     No protection from eviction

Excluded Tenancy Agreements give residents no protection from eviction and a landlord or provider can evict a tenant with only 7 days’ notice, as opposed to 28 days’ notice for all other tenancy agreements. The Regulator has confirmed that this is illegal and that providers widely use the “excluded licence agreement” to evict residents who do not have an excluded licence. The Regulator explained that this licence agreement should only be used in certain defined circumstances such as hostel-type accommodation where residents have access to a bed such as in dormitory type accommodation. However, providers are exploiting this loophole, allowing them to evict vulnerable people with next to no notice. These are highly vulnerable people often with nowhere else to go. Threatening them with eviction notices will do nothing to support them to live stable and healthy lives and can lead to homelessness.

7.     Concentration of exempt properties in one area.

Within my own constituency there are multiple areas where exempt properties and Houses of Multiple Occupancy have become concentrated often bringing anti-social behaviour and fly-tipping to otherwise quiet residential streets. Whilst this is almost certainly the product of such a broken system, it is causing significant distress to residents. Currently, there is no particular threshold for the number of properties that can be converted into exempt properties within an area, allowing unscrupulous providers to take over whole neighbourhoods.

8.     Waste of public finances

It has been estimated that the exempt accommodation sector is costing local authorities £1 billion a year. This is an extortionate amount of money for a system that is so blatantly failing those it should be protecting. I asked the Department for Work and Pensions for an official figure on the money being spent in the sector, but the Government answered that it does not collect statistics on this issue as it would be “too costly” for it to do so[4]. The Government is looking the other way, refusing to address the problem and pouring potentially billions of pounds of public funds into the pockets of rogue operators.

The human impact: why the system must change

NB: Names have been changed to protect the anonymity of my constituents

Erin

Erin and her partner were attacked by the other residents and there were significant repair problems, including lack of basic amenities including hot water. Their provider, Concept was also causing a number of problems including lack of support and forged tenancy agreements. My office referred this case to the Regulator of Social Housing (RSH) in January 2021 after making a number of complaints to the Council and Concept.  The Council investigated in April 2021 and deemed that Erin had not engaged with the support provided by Concept but did not contact Erin for her views on this. Erin was then evicted with only 7 days’ notice due to the withdrawal of housing benefit.

Sally

Sally was left without any hot water or electricity in her self-contained property. She also alleged that she was subject to harassment from her provider, Reliance and was unable to afford the additional charges of £90 per week for “services” that Reliance was requesting. This case was also referred to the Regulator but 5 days later, Sally was given an eviction notice. Sally had been given an excluded licence agreement and there was a significant discrepancy between the two contracts held by the Council and the provider regarding her signature, suggesting the contact had been forged. My office managed to refer the case to the Community Law Partnership, and they subsequently issued a formal letter to Reliance stating that her tenancy did not fit the mould of an excluded licence agreement and have now stopped the eviction.

Conclusion

The exempt accommodation sector is well overdue a complete overhaul. It is currently failing to support or protect vulnerable residents and is being exploited for profit by unscrupulous operators. The Government must strengthen the regulations in the sector, close the legal loopholes, and improve oversight and enforcement. I urge the Committee to explore Prospect Housing’s latest report for a number of recommendations that would improve the environment that my constituents are being asked to live in.

The forthcoming Social Housing Regulation Bill will provide opportunity for some of the issues I have outlined to be addressed. But the Government could also seek to amend guidance and regulations on Housing Benefit, explore the use of a licencing scheme and strengthen the Regulator’s response to the exempt accommodation sector.

January 2022