Written evidence submitted by Westmoreland Supported Housing Ltd [EXA 075]
1.1 Introduction
WSHL are a non-profit, charitable, registered provider of social housing (RP). As such, we are regulated by the Regulator of Social Housing. We offer Specialist Supported Housing (SSH). Whilst this sits under the definition of Exempt Accommodation (EA), the model stands slightly apart from the majority of classifications of EA, in that the objective is to provide a combined package of long-term care within a home setting that allows as much personal independence as possible. Our service users live in homes provided by us for as long as they require intensive care support. Often, this can be for the rest of the customers life. The home setting is deliberately not ‘institutional’.
SSH accommodation is provided alongside separately commissioned long-term support provided by commissioned Care Providers. Our service user base is those with long term mental health, autism, learning disabilities and other mental and physical health needs. Our properties are commissioned in agreement or arrangement with the Local Authority or NHS and the care received is personal care. SSH is defined by statute.
Our properties are in the main provided through long-term, index linked leases from Real Estate Investment Trusts (REITs) and other funders with a small number being funded by private individuals. Where eligible, the rent is paid by Housing Benefit – it is above standard LHA rate but is below the rental cost of institutional settings. Despite being exempt from the Rent Standard, we elect to follow rent review rules laid down in the 2020-25 rent settlement. Hence, annual rent increases are restricted to CPI+1%.
1.2 What is the quality of exempt accommodation?
SSH accommodation has been provided for many years. Historically, with some exceptions, it was provided through small scale charitable institutions, often family-led, that owned and managed a small number of properties. The majority of these providers were unregistered. From c.2016, a rapid expansion of private sector capital entered the market, working with these providers and offering a long term leased based model to allow rapid expansion. The model was advertised amongst funders as very low risk (‘100% government backed’) with solid returns. A number of varied funders entered the market quickly. The immaturity of the model and the rate of expansion was such that the quality of the properties becoming available for SSH use was not consistent, with some funders of different scale, intent and longevity acquiring and letting at pace. Some excellent properties became available, as did poor quality, poor condition and inappropriate types. The majority of these portfolios entered the market on long-term leases. These properties were offered to small organisations, who accepted them, in some cases, without the professional skills to understand the liabilities they adopted, nor the organisational skill set to effectively operate and manage them. The market took on a mix of properties, in a range of states, some not suitable for the SSH model and mostly on high risk and long-term index linked leases.
Since 2019, the sector has been maturing rapidly, with all players improving knowledge of the operation and risks of the model and professionalising operating models. Immature registered providers have brought in stronger leadership and driven improvements in most aspects of the service. The majority of the investors active in the market are a long-term presence and have invested significantly in the existing portfolios. The majority of the poor properties have been either invested in, removed, and / or their use changed to a more appropriate one. In general terms, the quality of the stock currently in the market is good. Some poor legacy remains, but RPs and investors are working together to improve or remove.
New investments into the sector are of good quality, standard builds and increasingly aligned to the intent of the SSH model; high quality, smaller, disability-friendly properties in locations appropriate for the service users in question. New properties are often commissioned to meet a specific need, for a specific (group of) service user(s) and often commissioned with all parties together – LA, investor, RP, care provider. The main investors in the sector and RP partners are currently actively engaged with the building safety and energy performance agendas.
As with other RPs, home standards are measured against regulatory standards.
1.3 Is the current model of exempt accommodation financially viable and does it represent value for money?
Those investors that remain in the market are learning from this experience. As new portfolios come on the market, funders are working with counterparties to see a reduction in cost to the public purse, to more appropriately allocate income and risk between the parties. New funders are seeking to come onto the market with more radical approaches to this. There are ongoing extended negotiations with funders to improve the commercial viability of the legacy stock. There have been a number of successes in this, but there is a significant distance to go.
The growth models coming into the market are proving much better balanced. With RPs being more commercially astute, these models remain low margin, but are viable long term.
Value for Money (VfM) is challenging to measure in this space. SSH is and will continue to be ‘expensive’ compared to other social housing, driven by an increased need for services from the RP, increased repair and management costs and investor returns. Investors must seek returns. Without investors coming into the market, SSH is undeliverable. There is no government funding, yet this cohort includes some of the most vulnerable in our society. Reports have demonstrated that the SSH model is cheaper than care homes or long stay hospital services, which would be the primary option for a large number of our service users. On this basis, SSH provides VfM. Yet there is much more that we can do to improve the impact on the public purse. The worst excesses of this sector appear to be over. RPs and commissioners continue to seek a cost and risk glidepath and there are options available to us within the sector to further drive value through scale and increasing professionalisation.
1.4 Are there significant geographical and regional differences in the provision and the problems of exempt accommodation.
Not that we experience – we are a national provider across 75 Local Authorities and find that our experience is consistent across England. Other providers have accommodation in Wales, Scotland and Northern Ireland.
1.5 What is the proportion of exempt accommodation that is provided by registered compared to non-registered providers and is an appropriate balance being struck?
Unknown to us.
1.6 What is the proportion of exempt accommodation provided by commissioned compared to non commissioned providers, and is an appropriate balance being struck?
Unknown to us. To meet the specialised supported housing criteria, we evidence that our properties are commissioned by agreement or arrangement with the Local Authority or NHS.
1.7 How does whether a provider is registered or non-registered, or commissioned or non-commissioned, impact the quality of provision
Our direct experience is only with registered providers. We are sure that there are strong providers and weak providers, both registered and otherwise. However, SSH is a service for highly vulnerable people. Appropriate regulation and commissioning services provides a protection against poor service or service providers, poor assets or poor management of assets and – at worst – damage or abuse of our customers. A strong regulatory regime is, in our view, a core foundation for an effective system of SSH provision. Equally so, for appropriate commissioning.
RSH regulates property standards and related occupancy risk, provider corporate risk and consumer standards. The standards for property and consumer service are appropriately increasing in the coming months. A non-RSH regulated entity has a lower initial and ongoing test of suitability for delivery of such services. In light of our customer cohort, to reduce such standards would be counter intuitive.
There is, however, a counterpoint, in that ineffective regulation can become obstructive or otherwise counterproductive to delivering SSH services. Having multiple regulators involved with different parties to one combined service can create issues from misaligned priorities to conflicting approaches to risk. In the case of SSH, RPs are regulated by the RSH and care providers by the CQC, each with a different regulatory outlook.
1.8 How should exempt accommodation be provided and what should the service cost?
For us, the question on provision of SSH should cover both funding and provision.
As discussed above, SSH services receive no grant funding from government, unlike the majority of other housing provision in the UK. Our view is that this policy decision effectively drives the nature of SSH provision and its cost. The benefits of this model to the service user (vs long term institutional care) have been demonstrated and demand for the service is increasing. Our view is that government should provide grant funding similar to the remainder of social housing. If government elect not to fund it, yet support its existence, private sector capital is the only realistic option. Using private sector capital to fund these drives both the cost – investment returns are required – and the delivery model.
The model partnering housing specialists (RP’s) with care specialists, both working jointly with commissioners, brings specialist skills together and – managed well – is a strong model for long term delivery of these long-term services.
For housing providers, scale and financial strength are vital to be able to provide the quality and breadth of customer and asset facing services, to manage unforeseen risk / damage to property and to be able to build an underlying resilience to changes in demand / regulation.
However, this type of capital creates the long-term index-linked leased model for RP’s. A model that historically generates low (if any) returns and passes significant long tail risk to the provider. The risk profile created is unsupported by RSH. The combination of regulatory challenge and poor commercials deters the larger general social housing providers from participating in the market. Delivery is therefore left to small and specialist players, who often rely 100% on this model to fund their activities. The SSH sector has a large number of small players, with national coverage, whose services are naturally variable and restricted in scope. As a result of the history and evolution of these products, the specialist SSH RPs spend a significant amount of time remediating historic problems, rather than looking forward to evolving the market further.
In our view:
In order for generalist RP’s to enter this market, they need to develop SSH experience and skillset, which could be done through the systematic merger of current market players into larger RPs.
In the absence of grant funding, three areas of change would greatly assist improved quality and consistency of delivery:
1.9 How should the regulatory oversight of exempt accommodation be organised?
In our view, all providers of SSH should be regulated entities to improve consistency in risk controls and customer service.
The end-to-end model should be under the remit of a single regulator to ensure effective decision-making and prioritisation along the supply chain.
If not under the remit of a single regulator, all involved regulators should have a single set of prioritised outcomes at the core of regulation, focused upon maximising the service users’ benefits arising from the model and absolute clarity over which aspects of the model are regulated under which authority.
Increased clarity is required in respect of budgetary ownership and control.
1.10 What should be the regulations governing exempt accommodation and should those regulation be enforced?
Overall, the regulations should be governed as they are in the housing and care sector now – through evidence based co regulation with the ability of the regulator to step in where necessary. Any provider must receive regulatory permission to enter the market.
Overall, there needs to be tighter definitions of what comprises each classification of Exempt Accommodation, definitions of who the service users are and what care services are, property and landlord standards and financial/risk controls.
Model risk should be managed and priced along the supply chain, with funders within scope of the regulation.
Should SSH RPs remain under the auspices of the RSH, consideration should be given to creating a specific regulatory environment to deal with the unusual nature of these privately funded long term leases. RPs should be required to be non-profit but encouraged through the regulatory structure to secure margin sufficient to manage accepted risk.
1.11 Is there sufficient publicly available information about exempt accommodation?
January 2022