Written evidence submitted by HBV Group [EXA 065]

 

Introduction

HBV Group are submitting evidence to the Exempt Accommodation Committee as the leading provider of bespoke, new-build Supported Living accommodation for adults with disabilities. Working in partnership with Local Authorities, housing & care providers and institutional investors since 2011, we have delivered more than fifty individual supported living and extra care developments across the United Kingdom. Our team has unrivalled expertise in the supported living and extra care marketplace, exclusively under the Exempt Accommodation model and as such, we feel we are in a position to provide in-depth and relevant feedback to this request for information.

  1. The quality of Exempt Housing Accommodation is disparate in its nature despite all Supported Housing being considered under the same accommodation model – there are measurable differences between what is required to ensure provision of a good quality home for an identified client group with less support needs i.e., those presenting as homeless and those with greater support needs and those with multiple learning and physical disabilities). However, even amongst these more specific sectors, the standard of accommodation differs massively. The information provided below will focus on the provision at the more support intense / bespoke end of the accommodation spectrum. Our Feedback will focus on the structural issues associated with delivery of exempt accommodation of this nature.
  2. It is widely accepted that affordable housing must be determined against a criterion which sets its cost to rent / purchase at a minimum level of 20% discount on the open-market values within that locality. This is achieved by developers (be they private, public or third sector) via either significant grant funding or the offsetting of this lost revenue against the 100% income derived from the majority of the units across the relevant development – essentially, the economies of scale see that in the vast majority of cases, proportional affordable requirements are largely sensible and do not impact scheme viability (indeed, if viability is demonstrably affected, there are mechanisms in place to ensure a fair and transparent process through which a developer might mitigate their liabilities, bringing the scheme back into the realms of feasibility).
  3. There are few such systems in place for Specialist Supported Housing and any assessment of viability – processes are reliant on the level of expert knowledge of SSH legislation and the understanding and the goodwill of individual Housing Benefit Officers. However, it is difficult to communicate clearly the wider picture outside of purely legislative assessment of submission in that the sector does not operate within a bubble and it is often competing against the general property market, which includes high density development, Housing Associations purchasing land with grant funding and even higher-end residential.
  4. Additionally, it is often not given due weighting that Specialist Supported Housing is subject to major variances and is disparate in nature despite falling under a single category. Whilst the criteria for its assessment is shaped by standard, accepted legislation largely based on the quantum and type of care / management associated with the accommodation, the differing standards of build quality and specification required for specific needs are often not given necessary weight when assessing rent levels, with exempt rent banding being applied more generally across an authority with large disparities against socio-economic identities. Born of Lord Best’s 2017 report, this geographical weighting was a sensible starting point in attempting to regulate a sector desperately in need of such, however this has unfortunately led to an over-preoccupation of cost control amongst some authorities. Whilst this is an important measure, it can ultimately lead to greater long-term financial liabilities and poor long-term outcomes for service users if applied too strenuously.
  5. As developers exposed daily to the practicalities of constructing such accommodation, we have an intimate relationship with understanding the costs of delivery and via a completely transparent, open-book process and will always work closely with HB departments to ensure these costs be reflected in the rents in order to maintain viability. Various commentators within the sector believe that the housing based additional needs component of Supported Housing Rent should be paid at three levels: low, medium and high – we believe that this should be how the lease rent levels are also assessed alongside the concept of Value Generation. Value Generation, whilst not a complex concept, provides for 3 principles to measure the quality of supported housing: outcomes for people; cost benefit (to the public purse) & wider social/community benefit. In so doing, it allows for both qualitative and quantitative means of measuring quality. As above, the current preoccupation with cost control often leads commissioners of supported housing having to commission the ‘more affordable’ option as part of a process of ever-reducing investment in preventative, enabling services - the frequent upshot of which is otherwise avoidable cost inflation elsewhere within the health and social care system.

 

Scheme Considerations

  1. Below the main elements across any scheme which feed into the determined rent levels are set out – namely: location (& socio-economic profile), level of specification required (linked to the profile of customer) and associated delivery costs (Registered Provider / Care Provider / Fund charges) making the case for rents to be assessed against need, locality and overall Value Generation.

 

•              Location & Land Value – Whilst impossible to determine the exact number of SSH schemes across the UK, it is apparent that the majority are located in lower value areas – particularly in more urban localities. This leads to lack of quality provision and outcomes for all stakeholders as lower value areas can become saturated, whilst a dearth of supply remains in higher value areas where need might be just as acute - this disparity is frequently evidenced when assessing where need remains in many authorities. Whilst an element of this pertains to the availability of land, when an opportunity has become available and has significant support at Commissioning level, projects are frequently prevented by restrictions on rent levels (based on comparable local analysis) that do not take into account the comparable residential market rents in the area – it is ultimately this (as well as more SSH-specific elements) which intrinsically feed into the required rent levels.

•              Specification – It is clear that SSH, particularly when attempting to produce high quality, measurable outcomes, will accompany increased construction costs. Comparatively, BCIS has basic construction costs at circa £1,650 m2 on average for open market residential builds, whereas over HBV’s last 50 developments, our build cost rate has averaged out around £2,000 m2 (we have seen an increase of around 15% in inflation over the past 4 years). This is accounted for by the general specification, i.e. wider corridors, larger door widths requiring specialist manufacturers, robust build standards, increased mechanical / electrical packages to facilitate genuine future-proofed design and the assistive technology packages which come as standard on all our builds. This equates to a general premium of circa 15% against general medium-level housing construction costs

•              Associated Delivery Costs – The vast majority of SSH schemes carry upfront costs not associated with general needs or open-market housing – these amount to payments of an agreed figure to the Registered Provider and Support Provider to mitigate their risks around carrying the void liability. Taking the sectors most prominent RP’s management cost at 4% of build and an equivalent of a 3-month rent free period and 3 months void cover over a 16-unit scheme at £220 rents per week sees an equivalent of an extra £200,000 in set up costs. Additionally, the associated funding costs (fund monitor, valuation, agency and fund legal fees – up to £150,000) from any purchasing fund will be levied onto the developer.

•              Nature of SSH vs general property market – The general property market works on the concept of highest and best use – it is difficult for SSH to compete on this basis unless the site is in a lower value area. Even if this is the case, the restriction on density applied to Supported Living can also create viability issues. A site of 0.5 acres can often take significantly more apartments than the sub 20 units often stipulated by Commissioning teams based on CQC guidance should the residential developer believe the demand is there. In order to make up for these economies of scale, it is inevitable that the rents must reflect the lost income in order to be competitive on the land purchase process.

 

Recommendations

  1. Our first recommendation is around how rents should be assessed on proposals. There is still an element of comparing disparate services and standards of accommodation, which evaluate bespoke, new-build accommodation built to robust design standards with significant amounts of technology (sometimes for the most complex cases with Profound and Multiple Learning Disabilities) against refurbished or existing buildings for lower levels needs (or often EMH accommodation). It is clear that these are in no way comparable and although there is often some consideration of difference, it is often not enough to take into account increased risk, construction costs associated with build and finance costs due to timings of delivery amongst a myriad of other factors. If we are to continue to be able to transition the most complex cases out of institutional settings, the cost benefit and value generation associated with transitioning the identified cohort profile should be taken into account and compared against the context of the rents. It is feasible that there might be some form of link between the cost of the care packages of the customers (more complex vs lower-level needs and an understanding that the costs of building suitable accommodation) and accepted rent levels.
  2. The secondary resolution is in relation to a blanket assessment of rent comparables that do not give due weight to location or socio-economic profile of the areas where the LA suggests needs are particularly acute. It is apparent that some form of weighted approach based on identified socio-economic profile whereby incremental raises are detailed and quantified would assist in making delivery possible in these locations – it is easy to assess this against land value in the immediate area. This will ensure the sector avoids the saturation of SSH (as seen in many authorities) in lower value areas caused by developers who have little interest in long term outcomes and rely on under-pressure commissioners to approve less than desirable schemes in compromised locations with the goal of maximising profit. More generally, the potential of creating a perception of ghettoisation and stigma around SSH due to location, which has pervaded general social housing for the last 40 years must also be curtailed.
  3. It is clear that the quality of SSH (within certain parameters) should not be compromised by a preoccupation with cost-control –whilst there is a place for making savings, this should assessed on the basis that each project must be considered on its own merits and characteristics (Location / Unit Numbers / Cohort Profile / Bespoke Nature of Design) and that the savings on certain schemes (lower level needs in a lower socio-economic area where a landlord / developer realises an increased profit margin due to lower costs) might be deployed in a more affluent location where there is an acute need for SSH and / or the profile of customer might be more complex.

 

January 2022