Written evidence submitted by Manchester City Council [EXA 089]
Executive Summary
Manchester City Council is responsible for commissioning supported accommodation and for administering and applying the Housing Benefit Regulations that apply to exempt accommodation. We have a depth of experience of working with the present set of regulations with expert officers who understand how to enable the development and provision of exempt accommodation while also recognising the barriers and limitations that the current framework presents.
Our commissioned exempt accommodation is of high quality, delivered by trusted partners. We operate a Support Needs Monitoring Group which aims to ensure supported housing is developed in appropriate areas of the city but there are no mechanisms in place to assess the quality of support and if planning is not required there is no legal obligation for exempt accommodation providers to engage with the council. Consequently, it is not possible to regulate the quality of all non-commissioned exempt accommodation, which is concerning.
Exempt accommodation rents are based on how much Housing Benefit (HB) can be obtained. We rarely see consideration given to ‘self-funder’ tenants within new scheme proposals. Although ‘the HB exempt accommodation’ definition provides for ‘not for profit’ housing providers it offers weak controls over unreasonably high rents. Rent costings need robust scrutiny. HB subsidy rules often result in schemes not being viable as they do not represent overall value for money once subsidy loss is factored in. The exempt model excludes the whole of the private sector even though they are often used to provide commissioned supported accommodation. In these cases, Housing Benefit/Universal Credit rents come under the more robust rent control rules as referred to above, driving some trusted providers out of the market.
We mapped HB specified accommodation provision in early 2021 and this showed a proliferation of schemes in the lower rental market areas of the city. Greater local control of service development and mapping would help commissioned services to support growth of schemes in areas where there is a clear demand for a service to meet an identified need. Providers often claim when making HB proposals that similar schemes and rent levels have been agreed by other LAs. But, after checking with other LAs, we usually find this is not the case.
Most commissioned schemes are delivered by registered providers and presently we are increasingly looking to involve registered providers as it is easier to make things work financially and avoid issues with rent restrictions and subsidy loss.
Whether a service is commissioned or non-commissioned does not directly affect the quality of provision but the ability of local authorities to monitor quality and intercede if there are any concerns can do. A lack of formal mechanisms for oversight means it is difficult to build a picture of the quality of non-commissioned provision and to step in when there are concerns.
We consider that a diverse marketplace of provision is best to meet need with a mix of commissioned and non-commissioned, registered provider and smaller charities delivering schemes. The concept of exempt accommodation is out of date and should be replaced with supported accommodation coming under one definition for HB to support development of a diverse marketplace providing robust regulatory oversight and allowing for unreasonably high charges to be better controlled, but at levels that reflects the true nature of the accommodation rather than the unrealistic levels directed by the Valuation Office Agency.
We recommend a clear legal framework with standards and guidance for local authorities to use including Quality Standards, agreed on a national level to ensure transparency between different areas. Regulations should also include a focus on tenants knowing their rights, so cases of poor-quality accommodation and support can be raised through clear channels.
We have identified our key points and recommendations at the end of the report and would welcome a discussion with DLUHC with a view to aiding deeper understanding of the impacts of the present framework and exploring options for a smarter and simpler future framework.
Note: This response sets out the views of Manchester City Council, but for the sake of clarity the reply to each question is split into two parts to give a separate commentary from both Benefits and Commissioning services. We feel that replying in this way helps best describe the full impact the current arrangements are having and shows an overall agreement from both, of the need for change and the recommendations for change.
Revenues and Benefits Comment
The HB (Housing Benefit) definition of ‘exempt’ is nothing to do with the quality of provision. Quality falls under other existing regularity controls via the Social Housing Regulator, or commissioning contracts. However, these often do not apply to some of the ‘non-commissioned’ provision, which can mean we are left with the HB exempt definition which only provides regulation in terms of HB and HB subsidy. There is often little accountability, even for commissioned schemes.
This current position provides little protection for vulnerable residents within these schemes and can result in excessive rents being charged.
There is no formal duty for benefits teams to assess the quality of the exempt housing provision (neither is there a duty to assess or monitor the quality of general needs accommodation). In terms of the ‘care, support or supervision’ it only needs to pass the threshold of being a ‘more than minimal’ provision to qualify the accommodation as ‘exempt’ accommodation. There is no requirement to ensure if it is meeting / continuing to meet the needs of the tenant - who may have substantial support needs. This is also something that would be ‘out of scope’ for most benefits teams and there needs to be a multi-disciplinary approach to this.
Commissioners Comment
Exempt housing provision is split across commissioned/directly delivered and non-commissioned services.
Commissioned/directly delivered exempt accommodation is of high quality, delivered by trusted partners with years of experience in housing related support. Current provision is diverse with a range of scheme sizes, types, and levels of need. A mix of registered providers and smaller charities and organisations also ensures a diverse marketplace.
Given financial constraints commissioners recognise and support the value that non-commissioned services can offer and therefore work closely with providers where possible to develop non-commissioned schemes. Consequently, commissioners have established relationships with a number of organisations delivering exempt accommodation and know their accommodation to be of high standards and quality.
At the same time, the council coordinates a planning advisory group called the Support Needs Monitoring Group (SNMG) which has the aim of ensuring that supported housing services are developed in appropriate areas of the city. The SNMG are an advisory group that feed into the relevant Planning Officers report which the Planning Committee use to inform their determination of an application. As part of the council’s planning processes the SNMG liaise with supported accommodation providers and planning to provide feedback and recommendations as to the suitability of proposed schemes. This includes assessing whether there is a demonstrated demand for a particular type of service in relation to identified need, ensuring areas of the city remain or become more sustainable in economic and social terms, and ascertaining whether proposed schemes create stress on local services such as health and education.
The work of the SNMG provides some safeguards against the establishment of inappropriate, accommodation schemes. However, there are currently no mechanisms in place to assess the quality of support delivered and if planning is not required there is no legal obligation for exempt accommodation providers to engage with the council. Where possible, schemes that are inappropriate, don’t meet strategic need, or don’t meet standards around quality of housing and/or outcomes, are actively discouraged but there is no framework in place to specifically prohibit these schemes. Consequently, it is not currently possible to assess or regulate the quality of all non-commissioned exempt accommodation, which given the vulnerable nature of many of the individuals housed in these schemes, is concerning.
Key points:
Revenues and Benefits Comment
Exempt accommodation providers and the rents charged are based on how much Housing Benefit can be obtained. We have very rarely seen any consideration given to tenants who could be ‘self-funders’ when we receive proposals for new schemes. The assumption is that only those who qualify for Housing Benefit can occupy this type of supported accommodation. An individual with support needs and the means to pay the rent for one of these schemes would be very unlikely to choose it because it does not represent value for money, so find themselves excluded from this sector. We have been told by some schemes that residents will have to leave if they find work and are no longer entitled to full HB.
Although ‘the HB exempt accommodation’ definition provides for ‘not for profit’ housing providers, so excluding the private rented sector, it provides only weak control to prevent unreasonably high rents being changed. Even for social rents, where there is some rent control, it does not prevent high service charges. We find that all the rent costings, both core rents and service charges need robust scrutiny.
The way the ‘exempt’ definition works for HB means that housing providers often try to manipulate the scheme arrangements to be what is known as an ‘exempt accommodation provider.’ They do this because they believe, quite rightly, that the weak HB regulation on rent restriction will enable them to obtain a higher rate (an enhanced rate) of Housing Benefit. Where the housing provider is not a registered provider it will often mean the LA is penalised under the HB subsidy rules, so there is a cost to the LA for applying the HB rules to claims.
The current HB rules push Non-Registered Providers of social housing, such as charities down this route where care and support are provided by a third party. Otherwise, a mandatory rent restriction such as Local Housing Allowance will apply making the scheme unviable. These rent caps are very much out of sync with the supported housing sector as they are set at general needs housing rates.
The exempt model excludes the whole of the private sector even though they are often used to provide commissioned supported accommodation. In these cases, HB/UC rents come under the more robust rent control rules as referred to above, driving some trusted providers out of the market. As these do not fall within the definition of specified, they are not being recorded, so have become a hidden sector in terms of welfare benefits. It is then often confusing for HB and UC (Universal Credit) staff and can lead to lengthy delays in deciding who is responsible for providing help with rent.
Examples of some of the types of situation / complexities are given below:
To protect against such situations, clearer and firmer regulation is needed, so that where there are clear links between the groups involved, we can look beyond who the actual landlord is to decide how the accommodation should be treated for HB purposes. Or an additional paragraph should be included in the HB regulation around contrived arrangements to exclude such situations from eligibility.
As already mentioned, the current HB subsidy model for ‘exempt accommodation’ is not fit for purpose and following the HB rules can themselves result in a cost to the Local Authorities. How can it make any sense that a specified exempt accommodation scheme provided by a Registered Provider can receive 100% HB subsidy whereas LAs will incur a subsidy shortfall for the same scheme if the landlord is a ‘charity'. This anomaly needs to be removed as it does not add up to value for money.
Commissioning Comment
From the commissioned perspective, issues with housing benefit subsidy will often result in schemes not being viable as they will not represent overall value for money once the subsidy loss is factored in. Rent restrictions for providers such as charities and not for profit organisations who are looking to deliver an accommodation-based support scheme can result in proposals not being financially viable. We have relationships with some charities and not for profit organisations who are not registered providers, but we are confident that they would provide quality accommodation and support. The existing regulations can deter development of supported accommodation from some good providers. A revision of the regulations on exempt accommodation and the housing benefit subsidy rules would help commissioners consider options from a wider range of provision which could deliver quality support and achieve better value for money.
Financial viability of accommodation is also a relevant consideration for any occupants. Residents who are in employment or are unable to claim the full rate of HB will struggle to afford the full rent costs in these schemes. The high rents in support schemes can often discourage, or work against people moving into employment as part of a step towards independence, as they would be unable to meet the rent payments once they commence employment. Similarly, people who are employed but experiencing homelessness may not be able to move into a supported accommodation scheme that would be suitable for their needs as the rent is unaffordable.
Key points (a full list of key points and recommendations is shown in section 11):
Revenues and Benefits comment
We mapped the HB specified accommodation provision in early 2021 and this showed a proliferation of schemes in the lower rental market areas of the city. Providers often target properties in these areas, leasing or taking properties on company lets, especially where there are larger properties available. Though these lower rents are not always then reflected in the charge to the service users.
There often seems little that can be done to prevent someone opening a scheme if they want to, unless planning permission is required. This applies even if the development does not receive approval from the local authority. This can then have a knock-on effect in terms of crime, anti-social behaviour and other social issues and can create many additional issues for the LA and other public services in terms of time, resources, cost, and planning and so on.
Providers often claim when making HB proposals that similar schemes and rent levels have been agreed by other LAs. But, most often, after checking with other LAs, we find this is not the case.
Commissioning comment
Although the Strategic Needs Monitoring Group (SNMG) acts as a check and balance against an excessive concentration of schemes in certain areas, this is only applicable in situations where planning permission is needed. Provision is generally centred around lower income areas where rental costs are more affordable. Greater local control of service development and mapping would help commissioned services to support growth of schemes in particular areas where there is a demonstrated demand for a service to meet an identified need. This would mitigate issues of provision being concentrated in lower cost areas and reduce circumstances where vulnerable people are placed in geographic areas away from their existing support networks.
Key points (a full list of key points and recommendations is shown in section 11):
Revenues and Benefits comment
This should not really be about registered versus non-registered providers but about need, intention, quality, affordability, and the best interest of service users. Although being a registered provider gives some regulatory control over rent and housing standards, we have found over the last few years that small ‘registered providers’ are being created via investment groups / developers as a front to achieve HB exempt accommodation status to provide a disguised profit via enhanced HB return (leased based scheme). There is often little margin for property maintenance and ongoing investment in the accommodation in these schemes. It seems, these Registered Providers pay little heed to the decent homes standards or rent control applicable to Registered Providers, often claiming to be Specialised Supported Housing.
Commissioning comment
Most of the schemes we commission are delivered by registered providers; however, we do have a small number of charities and not for profit organisations that form part of the portfolio of accommodation schemes. When working with providers to develop new schemes to meet a particular need that we face within the service we are increasingly looking to only involve registered providers as it is easier to make things stack up financially and avoid issues with rent restrictions and subsidy loss, as mentioned above.
Key points (a full list of key points and recommendations is shown in section 11):
Revenues and Benefits Comment
We don’t currently need to record this data for HB statistical returns, but our own manually maintained records indicate there is a maximum of around 6,000 units of specified accommodation available in the city of which around 360 units are not commissioned by Manchester City Council, so around 6% of the provision (some of these may be out of area placements from other LAs or commissioned by someone other than the LA).
Apart from non-commissioned schemes run by established charities, it is quite difficult to see how the support provision is funded and these often don’t stand up to scrutiny. We have had a number who have been unable to demonstrate a sustainable model and then withdraw their proposal.
These often claim support is an HB eligible charge, we even had one who claimed, in part, to be funding support by ‘selling stuff via an online auction site.’ On scrutiny we often discover an ineligible support cost within the Housing Management charge.
Commissioning comment
No comment
Key points (a full list of key points and recommendations is shown in section 11):
Revenues and Benefits comment
This is unknown to a large extent, but the simple fact that higher regulation, standards, and inspection more likely in commissioned services is always going to have an impact.
The lack of regulation around the non-registered / non-commissioned is something that needs to be addressed.
The rules especially the HB subsidy rules can impact on the quality of provision. There have been instances where Commissioners have been unable to commission / plan for services that they feel would provide a quality service with good outcomes for residents just because they are not Registered Providers.
It can also lead to some perverse arrangements as LAs and providers look at different ways of making schemes fit the exempt regulations to make schemes viable. This is simply due to the HB subsidy rules and the cost to Local Authority.
More recently, due to the pandemic, Commissioners have had to source providers and accommodation within short deadlines which has been significantly hampered / restricted by the HB subsidy rules, as some of the more established Registered Providers have been unable to participate.
We feel that regulation change to include ‘trusted providers,’ such as these would be beneficial to the sector.
Commissioning comment
Commissioners have good relationships with both registered providers and those who are not registered. Registered providers have experience in delivering accommodation services and often have standards in place to ensure quality. However, equally some smaller charities and organisations deliver high quality outcomes and can sometimes adapt more flexibly to adapt provision to meet local and/or strategic need. We have relationships with some charities and not for profit organisations who are not registered providers, but we are confident that they would provide quality accommodation and support.
Whether a service is commissioned or non-commissioned does not necessarily affect the quality of its provision but the ability of local authorities to monitor quality and intercede if there are any concerns can do. There are some informal monitoring networks in place for non-commissioned services, such as the Manchester Homelessness Partnership (MHP). MHP provides support and guidance for some non-commissioned services and has also developed a set of standards for Temporary Accommodation. Networks such as this help shape and inform local provision and non-commissioned provision that wishes to link in with organisations involved in the MHP for referrals, support etc. will need to deliver high quality services that reflect the needs of Manchester’s homeless population. Overall, however, lack of oversight means that it is both difficult to build a picture of the quality of non-commissioned provision, and step in when there are concerns.
Key points (a full list of key points and recommendations is shown in section 11):
Revenues and Benefits comment
As mentioned above the concept of exempt accommodation is out of date and should be replaced with supported accommodation coming under one definition for HB
The HB eligible cost of supported accommodation should be based on the true bricks and mortar cost with a clear set of rules and guidelines as to what is eligible and not eligible.
All supported accommodation providers, both commissioned or non-commissioned, should also come under specific regulatory framework to ensure decent standards, financial viability, and affordable rents. It should not matter on the type of provider and Housing Benefit needs to stop being able to be used as a driver for profit.
If rent valuations are still used, they must be set at a level that reflects the higher levels of rents in supported housing.
Local Authorities should no longer be penalised under the HB subsidy rules for having to pay the genuine cost under the HB rules. This would include, if necessary, amending the HB vulnerable definition to include those placed in supported accommodation.
Commissioning comment
Commissioners feel that a diverse marketplace of provision is best to meet Manchester’s need. This involves a mix of commissioned and non-commissioned, registered provider and smaller charities. The key is that support is of high quality and that this, alongside housing standards, can be clearly monitored, rather than who provides it. Exempt accommodation therefore needs to be supported by a clear regulatory framework and standards to ensure quality of support. There does, however, need to be flexibility within these regulations so that organisations can deliver what is needed without being limited by narrow definitions or criteria.
The focus of costs should be on quality and value for money rather than landlord profit. However, provision needs to be financially viable and the impact of support needs on housing costs needs to be factored in. Importantly, rental costs should not be prohibitive for people in paid employment and being in employment should not be a barrier to accessing exempt accommodation.
Key points (a full list of key points and recommendations is shown in section 11):
Revenues and Benefits comment
The rules on ‘exempt accommodation’ for HB need to be replaced with a much-simplified version that provides more robust regulatory oversight and allows for unreasonably high charges to be better controlled, but at a level that reflects the type of accommodation rather than the current arrangements via the Valuation Office Agency.
There should also be other legislation that prevents the more dubious arrangements. Currently pretty much anybody can set up a ‘not for profit’ company, claim to be a supported housing provider and operate without Local Authority approval. You don’t even need to own any property; you can simply lease or rent properties.
The supported housing market can be seen as a very lucrative income stream by some providers and there is little in the way of regulation, monitoring, control, or inspection. The only real regulation and control can be the Housing Benefit rules which are not fit for this purpose. Providers often seem to only need overcome the limited rules HB provides. While these rules can address some issues around excessive and duplicate service charges, they do not address the quality of provision and standards of the accommodation. It is also clear that some providers will inflate the rent proposal in the expectation of having to negotiate a reduced final figure for HB.
All schemes should be subjected to robust scrutiny at both the set-up stage and once up and running, in terms of both finance and service provision through a multi-disciplinary framework to ensure quality and value for money. This group should have the teeth to block proposals that don’t meet the required standards, through regular qualitative monitoring and be able to act on failing schemes. Scheme providers should also have to submit regular reports and be subject to inspection.
At scheme set up providers must be able to demonstrate they have financial viability to be able to maintain the service proposal at the standards required and this needs to be open and transparent. Providers should be able to demonstrate how they have arrived at the scheme cost and be able to show sustainability projections.
The process must also involve the mapping of provision to ensure there is a fair balance, that there is a need and there is not a saturation / duplication of the same type of scheme in a particular location.
Any links between the parties involved with the scheme must be declared.
Once up and running there should be regular monitoring, inspection, and reporting regime in place through the multi-disciplinary framework to maintain and ensure standards looking at ongoing need, outcomes, turnaround, and quality. Any concerns raised about schemes should be investigated and reported on.
Failing schemes should be subject to special measures and timescales, with the ultimate sanction being closure.
Consideration should be given to bringing private sector supported housing within the umbrella of specified accommodation based on proper supported housing rent valuations. This would bring them back on to the radar and make them more accountable.
Commissioning comment
Commissioners echo the comments by colleagues in Revenues and Benefits. Increased oversight, and the legal framework through which to do it, is crucial for ensuring quality exempt accommodation. However, consideration also needs to be given to how this oversight would be resourced within already stretched local authority services.
Key points (a full list of key points and recommendations is shown in section 11):
Revenues and Benefits comment
There should be a clear legal framework/ guidance in place that set out the rules, expectations, control, and accountability.
As said earlier the current exempt accommodation HB rules should be removed and replaced with rules much more in keeping with the current environment (this is something that LAs have repeatedly been asking for, for years).
It is important to look at the whole when dealing with such schemes and it not just hinging on the amount of HB that can be obtained. LAs should be able to oversee this to ensure the quality and standards of provisions, via a provider register.
Regulation needs to be tightened, simplified and the loopholes removed to prevent vulnerable people being exploited from those just interested in profiteering from HB. These are often short-lived unsustainable schemes that often create / leave additional problems.
The regulations around HB subsidy should be revised to remove the anomaly and complexity around subsidy shortfalls and to ensure where rent control is needed that the higher levels of rent in supported housing.
Commissioning comment
There should be a clear legal framework in place with associated standards and guidance for local authorities to use. This should include elements such as Quality Standards, agreed on a national level to ensure transparency between different areas. Regulations should also include a focus on tenants knowing their rights, so cases of poor-quality accommodation and support can be raised quickly through clear channels.
Enforcement should come from the Local Authority, with the flexibility with guidelines to manage schemes and neighbourhoods as required.
Key points (a full list of key points and recommendations is shown in section 11):
Revenues and Benefits comment
There is often too much of the wrong sort of publicity available. An illustration of this is the consultant's blog at Appendix 2 which shows the type of the marketing / messaging being aimed at potential new providers about supported housing providing an easy ‘attractive / generous revenue stream'.
This is promoting the use of leased based provision which is currently of concern to Regulator of Social Housing and causes difficulty for Local Authorities. It also ignores social housing rent setting and regulation.
Commissioning comment
Our view is that it can often be very confusing for organisations looking to enter this area of work. Some providers come with proposals that are unrealistic or based on a view to achieve a maximum income, rather than delivery of quality support, often relying on unclear or inconsistent information that has been circulated. Some organisations have stepped back from developing proposals for similar reasons when incorrect or unclear information is accessed. A lot of officer time and resource, from both commissioners and revenues and benefits specialists can be taken up dealing with these issues. Clear guidance about exempt accommodation would help to mitigate this.
Key points (a full list of key points and recommendations is shown in section 11):
12. Conclusion
We would welcome a more detailed discussion with DLUHC about this important subject with a view to aiding deeper understanding of the impacts of the present framework and exploring options for a smarter and simpler future framework. Our overarching feedback is that there are significant opportunities for improvement which would have a tangible impact on our ability to support the most vulnerable people in Manchester, supporting our overall demand management strategy for our people services. This is a critical component of our ability to do that and so welcome the opportunity to provide feedback and engage further.
Appendix 1
INVESTMENT RATING:
The previous owner bought this property for £575,000 in July 2020 and sold it for £1,832,530 in July 2020.
They owned the property for less than 1 month before selling it.
During this time, the price rose by £1,257,530 (218.7%), which equates to it increasing in value by - each year.
This sale was recorded as a non-residential transaction. This can be when a commercial mortgage is used, a property is repossessed or if the property is going to be redeveloped etc.
The price data relating to the 17 July 2020 for £575,000 was recorded as a non-residential transaction. This could be because a commercial mortgage was used, the property was repossessed, the owner bought out the freehold or extended a leasehold etc.
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Appendix 2
The Supported Housing Blog
Dear Colleague
Charities, voluntary agencies, and registered providers (housing associations) that provide supported housing and/or tenancy sustainment services are entitled to Enhanced Housing Benefit to provide Intensive Housing Management. However, all things are not equal, and some organisations are, in practice, more entitled than others.
This is primarily because when supported housing providers who are not registered providers claim Enhanced Housing Benefit, local authorities can only reclaim from the DWP 60% of the difference between the appropriate Local Housing Allowance rate and the amount of Enhanced Housing Benefit being claimed. Where a registered provider/housing association claims Enhanced Housing Benefit, local authorities can reclaim all of it.
It is therefore unsurprising that local authorities are increasingly restricting non-registered provider Enhanced Housing Benefit claims and telling supported housing providers to register as registered providers, which is not a practical option.
This blog post (4-minute read) identifies a solution to this problem for local authority approved supported housing providers (including private providers) and local authorities via the Exempt Accommodation Project, which we set up a few months ago. It's not complicated, it costs nothing and adds huge value to supported housing providers, local authorities, and community-based registered providers.
If you work with a supported housing provider struggling to claim Enhanced Housing Benefit, a local authority looking for a solution to subsidy loss or (especially) a small registered provider, such as a YMCA, looking for an attractive revenue stream for helping supported housing providers and local authorities, please read my latest blog post here: https://supportedhousing.blog/2021/10/26/problems-claiming-enhanced-housing-benefit.
Michael Patterson is the author of the Supported Housing Blog and was responsible for reintroducing the terms "Intensive Housing Management" and "Tenancy Sustainment" to the supported housing sector and is currently promoting Value Generation as a means of measuring the quality of supported housing. Michael is available for consultancy assignments on any aspect of supported housing and specialises in Exempt Accommodation, enhanced Housing Benefit revenue, capital finance and supported housing policy.
You can subscribe to the Supported Housing Blog by clicking this link .
January 2022