Written evidence submitted by the HMO Action Group [EXA 076]

Submission to the LUHCC Committee Inquiry into Exempt Accommodation

From the (Birmingham) HMO Action Group, in consultation with Deer's Leap Residents Association, Summerfield Streetwatch, Safer Neighbourhoods Partnership Group, Brandwood Together, NEAT (North Edgbaston Action Team), Langleys Road Neighbourhood Watch, Handsworth Wood Residents Association, Perry Barr Constituency Housing Action Group, North Moseley Residents, and the Community Partnership for Selly Oak.

Summary

In recent years Birmingham has seen an explosion of non-commissioned supported housing provision that is exempt from the normal rules determining eligibility for housing benefit and it illustrates some of its worst consequences. Unscrupulous providers have knowingly exploited the shortage of formally commissioned supported accommodation and have developed an ever-expanding supply of non-commissioned housing, much of which offers poor quality services to vulnerable residents/service users whilst generating ‘hidden profits’ for supposedly ‘not-for-profit’ organisations and their agents.

The effectively uncontrolled and unregulated growth of non-commissioned supported housing (hereinafter referred to as Exempt Accommodation or EA) is best understood as the unintended consequence of separate policy decisions, which have created a market opportunity that has been exploited by certain providers and their agents and by private landlords, whose run-down properties are leased for EA schemes. Some key factors are:

• There is a shortage of good quality supported housing in Birmingham and an overall shortage of affordable rented housing. Against this backdrop, there has been inadequate strategic planning for the provision of supported housing to meet a variety of needs.
• Supporting People funding to cover the cost of care and support has been significantly reduced and this has meant that the Council has come to rely increasingly on non-commissioned supported housing or EA.

• The way housing benefit for EA has been administered has enabled unscrupulous providers to take advantage of the higher levels of rental income, whilst failing to provide adequate standards of accommodation and care.

• Most of the large providers of EA are registered by the Regulator of Social Housing. It has been too easy for them to become Registered Providers and the monitoring of their activities has been inadequate.

• The conversion of leased properties mainly used to supply EA has not been effectively contained by planning and other measures, while other controls have not been available as licensing and other measures relating to Houses in Multiple Occupation (HMOs) do not apply to Registered Providers. Furthermore, the uncontrolled spread of EA has had a destructive effect on a growing number of neighbourhoods and communities.

There is a pressing need to improve the processes used to administer the enhanced housing benefit that funds EA and to significantly tighten the registration and monitoring of Registered Providers. In Birmingham, this will lead to significant market adjustments that need to be planned for and managed.

More fundamentally, however, the problems originate from inadequate Supporting People funding. Exempting accommodation from normal housing benefit rules was always a partial and inadequate response. If supported housing was properly funded (partly through the savings to be made from inflated housing benefit expenditure), the need for housing benefit exemptions (and the current opportunities for exploitation) would be removed.

Responses to the Select Committee’s Questions

Question One: What is wrong with EA as a means of providing supported housing for vulnerable people and groups?

This question addresses points P1, P2 and P10.

P1). The quality and adequacy of EA

Whilst not all providers/schemes exhibit these problems, the quality of EA in Birmingham has been shown to be inadequate in a wide variety of ways as follows.

• Many residents/service users of EA receive inadequate care and support from providers/agencies which lack expertise and rely on inexperienced and unqualified staff.  A wide range of groups depends on EA, including vulnerable and frail older people, people with mental health problems, people suffering from alcohol or drug dependency, ex-offenders, people at risk of domestic violence, young people leaving care. However, far too many schemes are not tailored to the specific needs of their residents/service users and placements take little account of the collective needs of people being housed. As a result, people with quite different needs can find themselves living alongside each other and this can generate conflicts and stress for those concerned.  Rather than enabling people to move towards a more independent way of life, such mismanaged schemes often exacerbate their problems and keep them trapped in a state of dependency. Conversely, residents successful in finding work are commonly required to leave, whether they need further support or not.

• Residents/service users are frequently housed in poor quality and unsafe housing, which has been ‘converted’ into EA the necessary permissions being obtained and which fails to meet basic housing standards. These problems are compounded when the housing is owned/managed by Registered Providers as the housing they provide, even when it is clearly multi-occupied, is not subject to the formal controls which apply to HMOs (including licensing schemes and planning controls that limit concentrations of HMOs).

• The uncontrolled spread of EA has had a destructive and destabilising effect on local communities and neighbourhoods, and it is distorting the housing market. Whole streets and neighbourhoods have been ‘blighted’ by concentrations of EA schemes where there already large numbers of houses in multiple occupation (HMOs). Larger EA schemes, consisting of seven or more occupants, explicitly require planning permission but this is often evaded by simply converting an existing HMO into EA and trusting the change is not observed. Smaller EA schemes of six or fewer occupants pose a particular problems. Providers claim (questionably) that smaller schemes form ‘single households’ meaning they fall into category C3b and do not require planning permission. This is a complex area of planning law, which requires clarification, but many planning authorities have taken a more rigorous approach to large and small EA schemes to contain the growth of EA. In Birmingham, providers exploit these ambiguities and smaller EA schemes are spreading into more suburban areas. Furthermore, the widespread conversion of properties into EA is having a serious impact on the overall supply of general needs (particularly family) housing.

• The spread of mismanaged EA schemes impacts in a variety of ways. 

• It leads to a significant increase in neighbourhood nuisances. These include accumulations of rubbish, vermin outbreaks and regular incidents of anti-social behaviour and various forms of street crime.

• It fosters criminal activity. Vulnerable and unsupported residents/service users are at serious risk of criminal exploitation, whether this is sex trafficking or drug dealing. While corrupt providers use EA to launder money and to cover up other dubious activities.

• It increases the pressure on already hard-pressed local services and generates unsustainable costs. It places a severe strain on local environmental services, and it necessitates repeated visits by the police, ambulance and fire services.

P2) The financial viability and value for money of Exempt Accommodation

• The costs of providing EA are mostly carried by enhanced Housing Benefit, which providers claim on behalf of individual residents/service users. This enhanced housing benefit is made available to ‘not for profit’ providers supplying accommodation for people that need ‘care, support and supervision’. However, the enhanced housing benefit can only be used to meet housing costs (which can include ‘intensive housing management’ but not personal care and support).

• The assumption is made that care and support costs will be funded in some other way, most commonly from the Supporting People budget of the relevant local authority. Following substantial cuts, few supported housing schemes are funded in this way leading to an increased reliance on non-commissioned Exempt Accommodation. In most of these schemes, residents/service users are expected to cover the cost of their care and support through a weekly service charge of £10-£20 per week, drawn from their Universal Credit or other benefit entitlements, such as Personal Independence Payments. Either way, a service charge of £20 per week would seem to be insufficient to meet the ‘more than minimal’ threshold for care and support specified in the HB regulations (which case law has established as at least 3 hours care per week per claimant).

• Many large providers claim to be able to deliver supported housing for the full range of need groups despite the obvious funding limitations. They make it work by misusing/overclaiming on enhanced HB and by cutting costs at every turn. They procure cheap and run-down housing, they carry out minimal and basic conversions (avoiding planning and other building controls), and they employ low paid and unqualified staff (who do little more than collect the weekly service charge). Troublesome complaints from vulnerable residents are dealt with by threatening them, by moving them on, or by evicting them (which is straightforward as they are on licence agreements rather than shorthold tenancies).

• It is important to recognise that many smaller providers succeed in making EA work - particularly where they receive pro-active support from local authorities or other public bodies. These are often specialist charitable organisations with ‘in house’ expertise and able to access other sources of funding and support. However, where client groups require very high levels of care and support, such as those with alcohol or drug addiction problems or serious mental health difficulties, it is difficult to see how EA can be viable, unless the care and support element of the accommodation is commissioned and funded by a public body. 

P10) Publicly available information about EA.

• The nature of the EA sector in Birmingham and the extent of the problems associated with it have only recently come under scrutiny. There is a lack of public information and understanding of EA as well as a dearth of official statistics. In Birmingham, much of the information about EA and its impact has come to light as a result of the work of local action groups and the development of city-wide networks such as the HMO Action Group mapping the scale of the problem.

• Nationally there are few detailed statistics on EA covering the numbers of people housed in EA, the nature of their care and support needs, the performance of providers, the outcomes for people housed in EA, and the level of public expenditure, which could be as high as £1 billion annually.

Question Two: how does EA work in Birmingham (as compared to other areas)?

This question addresses points P3, P4, P5 and P6.

P3) What are the regional differences in the provision of EA and in associated problems? The Birmingham scenario.

• Birmingham is at the epicentre of the dramatic growth and spread of EA. The number of claims has doubled over the last three years to reach almost 22,000 out of a national total of 154,000. Up to 15% of all EA claims are in Birmingham, the reasons for this high figure include:

• Local market factors, especially the availability of relatively cheap suitable for conversion into EA in a central location

• The lax application of Housing Benefit and other regulations and controls by Birmingham City Council (BCC). This has been referred to by some providers as an ‘open door’ policy.

• The evolution of a Birmingham ‘model’ designed to exploit the situation. Until recently this model was not properly understood by the Regulator of Social Housing (RSH).

• The openness of Birmingham’s EA market and its use by referral agencies from across the country, with such agencies finding it easier to place people in Birmingham rather than meeting their support needs closer to home.

• The EA market is dominated by seven large providers, who supply 75% of all the EA in the city and receive huge sums of enhanced HB. The market currently costs £172 million per annum, equivalent to £7,800 per claimant. These providers all use a similar model. They are all Registered Providers and specialise almost exclusively in providing EA. Most have been established in the last five years entirely for this purpose, whilst others are repurposed small housing associations repurposed to circumvent registration requirements. They all operate an ‘umbrella’ model of provision, with the parent ‘not for profit’ entity leasing properties on a short-term basis from a range of landlords and delivering most management and care services through a network of agencies. These are often connected indirectly to the parent undermining transparent contractual relationships. The purpose of the ‘umbrella model’ is to generate ‘hidden profits’ to be dispersed between the various parties that hide behind the ‘not for profit’ front.

• It has become clear that these large providers were set up to exploit the Birmingham market. Until recently they were able to grow rapidly as so few questions were asked about their credibility, competence, and mode of operation. Nor was the destructive impact of their methods of procuring run-down and unsafe properties in certain locations recognised or understood.

• Some important steps have been taken to address the situation. Firstly, the Regulator of Social Housing has begun to realise the scale and nature of the development of the EA market nationally and, especially, in Birmingham. This includes the ways in which some Registered Providers have exploited weaknesses in a regulatory regime that focuses on the financial viability and governance of larger RPs whilst leaving smaller RPs to ‘self-regulate’. The seven main providers have now been placed under formal review and/or found to be non-compliant. Significantly, the replacement boards imposed on two of these providers uncovered such corrupt and negligent practices that they have both withdrawn from the market.

• Birmingham City Council has introduced a more rigorous set of multi-disciplinary and cross-sectoral arrangements to tackle the EA sector, following the example of other local authorities, including Sandwell MBC and Hull City Council. A recent BCC Scrutiny Committee inquiry received powerful evidence of the negative impact of EA, and a number of recommendations for further action were adopted in December 2021.

• Developing an ‘exit strategy’ will be a considerable challenge, as providers are slimmed down or closed in the face of the demands of the RSH and BCC. It has been estimated (in a preliminary needs assessment) that Birmingham has twice as many units of EA as are needed and, therefore, reducing the size of the market is desirable. However, such restructuring will involve thousands of residents/service users being rehoused or relocated, a major challenge when mainstream housing is already in short supply and existing small EA providers have limited scope to expand their operations. There is a great risk that some of the most vulnerable residents will be made homeless.

P4, P5) What is the balance between commissioned vs non-commissioned provision and the division between registered vs non-registered providers?

• In Birmingham only 6% of supported housing is now directly commissioned. Beyond general cutbacks, there seem to be several reasons for this. The costs of commissioned housing impact on BCC’s overall budget, whereas the costs of non-commissioned housing can be ‘outsourced’. And providers, aware of these pressures and of the opportunities that EA offers, have been happy to fill the gap.

• Non-commissioned EA providers have developed a speculative and expanding market by:
• Claiming they can meet the needs of each and every client group, notwithstanding their lack of specialist staff and expertise

• Promoting their services to referral agencies across the country

• Generating and sustaining demand through self-referrals

• Maintaining the dependency of their clients by creating a circular market, in which people move from one scheme to another.

• All of the large providers operate as Registered Providers, which might seem to be counter intuitive as registration implies closer scrutiny of their activities and greater accountability. However, until recently, being a Registered Provider was attractive as it gave providers greater freedoms when they procured and converted properties and gave them greater legitimacy in the eyes of the public. Furthermore, there is an advantage for the local authority in encouraging providers to become registered as it means that 100% of the costs of the HB funded by the Department of Work and Pensions, whereas with other providers 40% of the costs are borne by the local authority. Now the RSH is taking a more stringent approach, the attraction of the RP model is diminishing, and there is evidence that new providers hoping to exploit EA are switching to the Community Interest Company model which is less closely regulated.

P6) How do these factors affect the quality of provision?

• The model of provision developed in Birmingham is not fit for purpose and the quality of provision delivered by the dominant providers is unacceptable. Tighter supervision is beginning to have an impact, but it will be impossible to restructure and rebalance the non-commissioned supported housing market without a significant tightening of the regulations and controls.

Question Three: How should EA be reformed and/or replaced as a means of provision?

This question addresses points P7, P8 and P9.

• In our view, the medium-term ambition must be to replace the current system. It does not work for those in need of care and support or for local communities and neighbourhoods. What is needed is a carefully planned, fully funded and regulated system of community-based supported housing that is commissioned by local authorities and other public bodies.

P7) How should EA be provided and funded - on an interim basis?

• Until the present system can be replaced, there is a need for various changes and reforms. The starting point must be a national review of the impact and delivery of Exempt Accommodation. This review would:

• Establish the full extent and distribution of EA (both commissioned and non-commissioned) on an area-by-area basis

• Analyse the range of needs currently being met by EA

• Assess the comparative performance of different local authorities in managing EA

• Set out the total costs of delivering EA via enhanced HB and how these costs vary.

• Measures alongside the review should include:

• Clarifying and strengthening the roles and responsibilities of local authorities. Including, direct controls over referrals, the accreditation of local providers, and approval of individual schemes. To support these responsibilities, local authorities should receive a ring-fenced grant to cover the costs of managing and regulating EA.

• Strengthening and tightening current HB regulations and controls by drawing on and embedding current best practice.

• Introducing new restrictions on the organisations that can provide EA. Such organisations should be fully regulated, either as Registered Providers or as Registered Charities.

• Placing clear responsibilities on referral agencies, giving them an explicit ‘duty of care’ when making placements and a requirement to liaise with local authorities over referrals.

P8) How should EA be regulated? P9) What should the regulatory framework for EA look like?

• For the time being, the responsibility for regulating EA should lie within the current arrangements, but with new requirements and duties as follows.

• Local authorities should be given a strategic role in the management, supply and supervision of supported housing in the form of EA, encompassing both commissioned and non-commissioned provision.

• Local authorities should have a duty to ensure that supported housing schemes are developed taking account of wider housing and planning policies ensuring that unacceptable pressures are not placed on local communities and local services.

• The Regulator of Social Housing should introduce specific guidance and new standards for RPs involved in the provision of EA. In the recent paper on ‘Reshaping Consumer Regulation’, under the ‘neighbourhood’ theme RPs will be expected to contribute to the ‘well-being’ of the neighbourhood but beyond this they must tackle any kind of nuisance caused by their tenants/residents. And in the ‘tenant satisfaction measures’ there should be a requirement to ensure the quality of care provided to residents/service users of supported housing is evidenced.

Concluding Comments

• The huge expansion in the use of non-commissioned supported housing via EA has been the unintended but disastrous consequence of what was intended as a ‘stop-gap’ measure. It is now imperative that the damage caused by the uncontrolled spread of EA is addressed and a viable form of supported housing is put in place. 

• Interim reforms should not stand in the way of the introduction of new national supported housing policy. Such a policy must be based on funding arrangements that would cover both housing costs and the costs of personal care and support.

• The details of a national supported housing policy are beyond the scope of this submission. However, a good starting point would be to look at the best use of the approximately £1 billion per annum currently spent on enhanced HB for EA.

January 2022