Written evidence submitted by Prospect Housing [EXA 086]

1. As a former provider of Lease Based, Non-Commissioned, Exempt Accommodation, Prospect Housing understands the many issues with the system and with the quality of provision. This led to our difficult decision to cease providing this accommodation and close the organisation. The company voluntarily de-registered from the Regulator of Social Housing (RSH) and will soon dissolve.

2. The factors that led to the closure decision are not unique to Prospect, and link to difficulties implicit in the exempt-sector operating model that Prospect and other similar organisations work within. These relate to long-term viability, inadequate oversight and risk management, insufficient governance arrangements, and unfavourable lease arrangements.

3. Prospect has worked hard on a legacy to improve the issues that characterise poor provision of Exempt Housing. That legacy consists of its observations of the sector which were released in its October 2021 Safe, Successful, and Secure report[1], its evidence to this Inquiry, and the creation of a legacy fund to find better solutions for residents impacted by poor exempt accommodation.

4. This evidence is primarily concerned with non-commissioned provision primarily for people who are homeless or at risk of homelessness. Our recent report[2], conservatively estimated that in 2020/21 this group of people numbered at least 106,000. However, we support Crisis’ view[3] that this number is likely to be closer to 150,000.

5. Our evidence is based primarily on the “Lease Based Model”, as this is our area of expertise.[4]

What is the quality of exempt housing provision?

6. Following the appointment of an interim CEO and new Board Members in 2020, Prospect began an audit of the quality and the health and safety of our properties. This revealed that there were significant issues in both regards as well assignificant issues with some of the support being provided. This resulted in the organisation being further downgraded by RSH[5]. Issues included:
1. Significant failures of health and safety compliance.
2. Quality issues in terms of standard of provision, failures to repair or replace broken fixtures, including security fixtures such as door and window locks. Many properties were untidy, and cosmetically in a poor state. Some property images are included in Appendix 1.
3. Some residents, where we did not directly provide the support, were not receiving adequate support, or in some instances were not receiving support at all. This resulted in Prospect making referrals to Housing Benefit departments as the provision of “more than minimal” levels of support is required for enhanced funding awarded to exempt accommodation.

7. Having highlighted the poor quality we found, it is important to make the committee aware that we also found examples of high quality, life-changing provision, and support.
1. The first example is Lindale Recovery - an exceptional drug and alcohol rehabilitation service that in 2020 supported 241 people through a recovery journey and abstinence. In their social impact report, they reported system-wide cost avoidance of £3.1m against a spend of £586k.[6]
2. The second example of life-changing service is delivered by Move On, a service focused on supporting ex-offenders in their journey to rebuild their lives after prison. The impact of this service is significantly reduced re-offending rates compared with other ex-offenders. 
3. There are also numerous examples of excellent provision of these types of services in the traditional RP sector.

Is the current model of exempt accommodation financially viable, and does it represent value for money?

8. Following an FOI request[7] made to all relevant Local Authorities in 2020, Prospect believes that at least £816m was spent in 2020/21 on the provision of exempt accommodation. Our experience regarding the standard of provision in place currently would suggest that this does not represent good value for money and that this money could be better spent to support this group of people.

9. A key issue of financial viability in this model, for both the provider and the resident, is the cost of support. The resident receiving more than minimal support[8] is a requirement of HB legislation. Elsewhere in the HB legislation, it is set out that support is an ineligible cost from the perspective of Housing Benefit[9]. This leaves the resident responsible for funding the support. Prospect, common to many other providers, levied a charge of £20 a week on residents, £5 to cover ineligible utility costs and £15 to cover an hour of support a week. This approach is not viable for several reasons:

1. £20 a week is a real challenge for residents to afford. It is particularly problematic for young people, where this charge takes them close to the level of destitution.
2. Due to the challenges paying this fee poses residents, it is difficult for providers to recover this amount. The typical recovery rate for Prospect was around 50%.
3. The cost to provide support and ensure that staff are sufficiently trained and supervised is more than £15 an hour. The minimum price set out by the Homecare Association is £23.20 per hour for 2022/23.[10] Even if Prospect had managed a 100% collection rate, there would have been a gap of £8.20 for each hour of support provided.
4. As can be seen in the table in Appendix 2, more than 72% of our directly supported residents received more than two hours of support to meet their needs. Those residents who might have historically received Supporting People funding are those with the most profound needs.
5. Residents in non-commissioned exempt accommodation do not as matter of course undergo a Care Act Assessment of need as set out under the Care Act 2014. If this were to routinely happen it is our view that a large proportion of the 72% of people requiring more than two hours of support would likely be eligible for some level of Adult Social Care funding. The significant pressure that Local Authorities are already under to deliver their current commitments is well reported, without a potentially additional 108k people[11] placing a call on the Adult Social Care budget.

10. Before making the difficult decision to close, Prospect undertook an extensive options appraisal, which looked at a wide range of options that would enable financial viability, quality provision, and compliance with DWP Housing Benefit regulations and RSH rent standard. However, we were unable to find a model that met all these requirements due to:

1. The high cost of leases to acquire suitable properties the operation area made compliance with the Rent Standard[12] very challenging.
2. The requirements set out in the Regulations[13] that Service Charges must represent the actual costs. This therefore requires any profit/surplus to come from the Rent portion of the overall property charge. Prospect is aware that it is common practice in the sub-sector for profit/surplus to be disguised within the Service Charge, often in the portion of the charge for “enhanced housing management”. A lack of transparency through our Managing Agents of costs categories that formed part of eligible Service Charges made it difficult to ensure that only eligible charges were being claimed.
3. Prospect was hindered by its existing contracting arrangements, which informed the rent levels and placed potential contingent liabilities on the organisation.
4. The lack of an adequate funding stream to support the cost of providing support.

Are there significant geographical and regional differences in the provision and the problems of exempt accommodation?

11. The FOI request made by Prospect in 2020 shows that there are regional differences in terms of the number, the spend, and the cost per unit of Exempt Accommodation. Some can be explained by regional variance in accommodation costs. It is important to consider the spend and the number of units in the context of the population of the Local Authority.

12. However, the more striking finding from the FOI analysis is that there are lots of common themes across England:

1. The number of people needing this accommodation, and with it the spend, is growing year on year in almost every local authority area.
2. Only six Local Authorities reported that they had a specific policy, or undertook additional verification for Exempt Accommodation claims. The local authorities that did have a policy had no obvious geographical nor political grouping.
3. A significant number of local authorities did not hold sufficient data on either the number of people in Exempt Accommodation, or the cost of provision in their area.
4. We had hypothesised there would be a strong correlation between the numbers of people in exempt accommodation and the socio-economics of the area. This hypothesis is not borne out by the data, indeed there are notable examples where the case is exactly the opposite.

13. Most crucially, our data showed that this is “not just a Birmingham and Blackpool problem”. Indeed, we would predict that large parts of the North West, Yorkshire, and the Midlands will continue to see growth in this area.

14. It is worth the committee noting that a large percentage of our former residents were from outside of the West Midlands. Anecdotally, residents told us that some had chosen to move to be closer to friends or family, or had needed to leave their homes due to abuse. However, a number of our residents told us that other local authorities had provided them with “a train ticket and a sandwich” and directed them to Birmingham. Whilst we have been unable to validate this claim, it has been claimed consistently by a number of unrelated residents migrating to the city in recent years.

What is the proportion of exempt accommodation that is provided by registered compared to non-registered providers, and is an appropriate balance being struck?

15. Prospect’s FOI data suggests that for the Local Authorities who knew how many units of Exempt Accommodation they were providing, around 57% was provided by RPs.

16. It is important to note that there are a large number of RPs providing “umbrella services” to enable a large number of private-sector providers to access Exempt Accommodation funding. Therefore, it will be challenging for the inquiry to get a clear answer to this question.

How does whether a provider is registered or non-registered, or commissioned or non-commissioned, impact the quality of provision?

17. Our view is that traditional providers who are registered with RSH are heavily bought into the principle of co-regulation and are well placed to deliver the best quality.

18. However, in this sub-sector, as is evidenced by the large number of providers under regulatory enforcement actions[14], we see RPs with insufficient governance and oversight to assure the quality of their provision. This is an area of focus for RSH and should in our view continue to be a priority. We welcome the enhanced powers that will be given to RSH under the White Paper and feel this will support more effective regulation.

19. We would urge the inquiry to consider the emerging risks presented by providers registering as a CIC, with no registration with either RSH or the Charity Commission. The Regulator of CICs describes their responsibility as “light-touch regulation of CICs, with the minimum of interference”[15], a level of regulation which we believe is inappropriate for the vulnerable individuals housed within this type of accommodation.

How should exempt accommodation be provided and what should the service cost?

20. Prospect believes that a different model of operating is necessary. We emphatically believe that RPs must own the relationship with their residents. This must include all key parts of the resident journey, including resident sign-up, support planning, outcome monitoring, complaint handling, and resident exit from the services.

21. Prospect is agnostic to whether the RP needs to own the stock, and whether it uses partners to deliver some of the services to the resident. However, appropriate commercial arrangements must be in place to ensure commercial viability, and to ensure that appropriate oversight and quality control can be assured.

22. We believe that the future model needs to acknowledge the following key principles:

1. A need to adequately administer and control the entry of residents into Exempt Accommodation, so that only those residents with requisite support needs (as set out in legislation[16]) are housed. We believe that there is a crucial role for Local Authorities in this referral process. Currently the Housing Benefit legislation makes it difficult for Local Authorities to refuse a claim for exempt funding. Therefore, we believe that the legislation should be enhanced to allow Local Authorities to reject a claim based on the quality of the property, and also to have discretion to remove the exemption from HMO licencing that is given to RPs. A short-term workaround would be for DWP to issue enhanced guidance in this regard, to reduce the risk to Local Authorities of Judicial Review.
2. Exempt Accommodation (for this client group) should be temporary, with a focus on supporting residents to independent living.
3. The provision must be outcome-focused and acknowledge the changing needs and level of support and type of accommodation that residents may require over their tenure. Funding needs to reflect the changing needs of the resident.
4. Consideration as to how and, to what level, support is funded by the state.

23. Therefore, we put forward a “lifecycle model” as an alternative.
1. Having been initially assessed by the Local Authority as having requisite support needs, the resident would be housed for a six to eight-week period in an assessment unit, with 24-hour support. This would be akin to the “discharge to assess” models used widely in health. The resident would receive intensive support over this period and access to appropriate third-party agencies. Our experience is that up to 20% of residents given this level of intensive support may be able at the end of this period to move into independent private rented sector accommodation, with very light touch support offered to them for a short transition period.
2. Whilst in the assessment period, residents who were judged to be likely to have ongoing extensive support needs would be referred for a Care Act Assessment. We anticipate that the impact of this would be that around 10% of residents would be assessed to have significant support needs that required the provision of commissioned accommodation and services to properly support them.
3. The remaining 70% of residents, before moving from the assessment unit into exempt accommodation, would have a clear support plan, setting outcomes for the resident and a plan and trigger points for their move into independent accommodation.
4. The provider should work with the resident to support employment and volunteering opportunities. Benefits need to enable residents to move towards paid work without them being forced to leave Exempt Accommodation, otherwise residents are effectively being trapped in poverty.
5. When the resident is ready, they will be supported to move into independent accommodation, either in the social or private rented sector. It is our experience that these points of transition are when residents absolutely require support, and as such there should be a mechanism for a defined period for residents to access support to adjust to their new accommodation.

24. The service costs should be on a zero-cost basis and should be managed in the same model as used for leaseholders. An estimate will be made at the beginning of the year as to the costs within each service charge line, and these need to be accounted for and reconciled at least annually, to demonstrate the veracity. The Local Authority would have a role in validating and assuring these costs.
25. Whilst the cost per week for those who go through the full lifecycle is unlikely to reduce significantly, there would be savings in this model by supporting circa 20% of people out of exempt accommodation at the end of the assessment period. Additionally, and most importantly, the quality could be significantly enhanced, and alongside that the outcomes for vulnerable people could be improved hugely. In the current model, large numbers of residents go through numerous cycles of Exempt Accommodation, moving from provider to provider. In this model, by focusing on outcomes, the number of residents in this cycle could be hugely reduced, and with it the cost.

How should the regulatory oversight of exempt accommodation be organised?

26. Prospect believes that it would be more straightforward if all providers delivering housing to vulnerable people were regulated by RSH. We acknowledge the practicalities of this, and that this would exclude smaller specialist charitable providers. However, we believe that provision by non-registered providers should be on an exception basis.
27. As noted previously, we are very concerned about the increase of CICs due to the lack of regulation, and the potential risks  this presents to vulnerable people. We would question whether CICs who are not also registered with either RSH, Charity Commission or CQC should be operating in this sub-sector. It should not be possible for Boards to evade regulation based on the company structure they choose to operate.
28. RPs should continue to be regulated by RSH, and we would support the enhancement of their powers and the enhanced role of the Housing Ombudsman as proposed in the White Paper, and potentially beyond. It is important to remember that RSH is a regulator of businesses, and therefore will never be best placed to manage the property level regulation. We believe that for RPs operating in this sub-sector, RSH should be able to apply their full range of powers even if the provider has less than 1,000 units.
29. We believe that there should be an enhanced role for Local Authorities in the oversight of Exempt Accommodation, at a property and individual resident level. We thinkthese should include:
1. Local Authorities to set a plan as to how exempt is to be used in their area, including minimum standards on quality.
2. The oversight of the referral process (as described in paragraph 23a).
3. The discretion to apply HMO licencing for all providers including RPs operating in this sub-sector.
4. Change to Housing Benefit regulations (and in the meantime DWP guidance) to enable housing benefit assessments to require the quality of the accommodation to be a factor in deciding whether to grant the claim.
5. The powers to stop providers from operating in their area on the basis of poor quality.

We acknowledge that there is currently no funding to support this, an issue that would need to be addressed to enable Local Authorities to provide further oversight.

What should be the regulations governing exempt accommodation and how should those regulations be enforced?

30. We have set out throughout our response areas where there is a need to amend, enhance or add regulation, and offered views as to how this should be enforced.
31. There is a heavily exploited loophole in the current regulations which enables RPs in this sub-sector to only register a small portion of their provision as social housing[17], thus enabling them to evade the full powers of RSH, whilst benefiting across their full portfolio, from the high rent levels associated with Exempt Accommodation. This issue could be resolved with a simple addition in the annual Statutory Instrument update to the Housing Benefit Regulations.[18]
32. The inquiry should also consider the role of other agencies, such as the police, in ensuring the safe operation or Exempt Accommodation. Birmingham City Council highlighted serious concerns of potential criminality and sharp practice. They describe “a concerning prevalence of housing providers linked to organised Crime Groups (OCGs) which in turn exacerbates the vulnerability of their tenants”[19].

Is there sufficient publicly available information about exempt accommodation?

33.              The FOI responses we received demonstrate the significant gap in publicly available information in this area. Data held by Local Authorities and DWP is incomplete. Therefore, getting an accurate national (and in many cases local) picture of demand and cost of this housing is difficult. The FOI data showed that there are issues with:

1. An agreed nomenclature as to what is included within this type of provision.
2. A lack of standardised data as to the number of people living in this accommodation, their needs, and the cost of provision.

Appendix 1-Photographs of properties

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[21]

[22]

[23]

Appendix 2-Resident needs in terms of hours of support

January 2022