Written evidence submitted by London Borough of Hackney [EXA 096]

In particular, the inquiry seeks information on the following points:

●       What is the quality of exempt housing provision?

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

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

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

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

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

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

●       How should the regulatory oversight of exempt accommodation be organised?

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

●       Is there sufficient publicly available information about exempt accommodation?

Levelling Up, Housing, and Communities Committee - Exempt Accommodation Parliamentary Inquiry

Background

Hackney is an urban borough in North East London with a growing population of 280,900. In 2020 it was the third most densely populated borough in London, with 14,737 residents per square kilometre, and a population increase of 74,000 since 2001. Over the last 20 years it has witnessed significant economic and social change, transforming from being described as the worst place to live in the UK in 2012, into a desirable and highly sought after area.

However, this change has significantly impacted property and land values; Hackney is one of only two areas of the country where house prices have doubled in the last decade, witnessing an average increase in prices of 105% between 2011 and 2021. The borough's median house price is £607,000 compared to £294,000 a decade ago, and house prices are now 16 -17 times the boroughs average household income.

It is also important to note that there are pockets of extreme deprivation and unmet need. According to the indices of deprivation,  Hackney has the highest proportion of Lower Layer Super Output Areas within the most deprived 10 percent of any London borough.

The borough has above average instances of mental illness, with the 5th highest rate of psychotic and bipolar disorders in England, with 4,500 on the Serious Mental Illness (SMI) register. With growing rents, and limits on social housing development, not only are more households turning to the Council for housing assistance, but a growing number of those approaching have significant multiple and complex housing needs - requiring specialist and or supported housing. This is particularly evident among approaches from single people, who are increasingly highly chaotic, with poor mental health, and require significant support to maintain a tenancy.  In 2020/21 the Service undertook 814  assessments of single households and identified 54%  of them had support needs, and of these 23% had multiple/complex needs.

The high capital and land prices in Hackney make it extremely challenging to source supported accommodation and develop viable supported housing schemes within the borough. This means schemes often do not get off the ground even when short to medium term grant funding for personal support is available. Providers of supported accommodation are increasingly unable to open new supported schemes in the borough, as they are unable to find accommodation, having been priced out by a highly competitive housing market. The costs for leasing or buying accommodation make many schemes unviable without significantly more capital grant funding than is currently available.

Given the growth in need, and difficulties securing new supported provision, the boroughs own commissioned supported housing pathways find sourcing supported units to meet the growing need extremely challenging.

The manner in which supported housing is sourced and delivered has significantly transformed in the last few years. In the past, supported accommodation in Hackney was almost exclusively provided by Registered Social Landlords (Housing Associations) at social rent levels. The Council traditionally had one of the most comprehensive supported housing pathways in London, and commissioned high quality person-centric personal care, on a long-term ongoing basis, with spend on these services in 2016 being the highest per capita in London.

Very few private providers operated in the borough, deterred by the potential that they would not generate sufficient revenue through Housing Benefit; as their rents were “significantly high” compared to alternative available provision.

However, cuts in funding from Central Government and the need for Hackney to find budget savings and efficiencies has led to a significant reduction in the number of supported housing schemes it can afford. With the absence of guaranteed long-term commissioned funding which underpinned much of this provision, providers have found it necessary to repurpose the units, or indeed sell the properties, to balance their own accounts.

Hackney has lost at least 149 directly commissioned supported units between 2017/18 - 2019/20 alone.  Once schemes have gone, capital land values and property prices in Hackney exclude providers from sourcing any new supported provision in the borough, and opening new provision even where government funding is available for accommodation with support. In reality, registered providers and registered housing associations now are simply unable to source accommodation at a cost that would make new schemes viable. This lack of accommodation now often limits Hackney's ability to take advantage of short term government funding sources for housing related support -especially where the rental element’s have to be affordable or are limited to the LHA rate.

In contrast, the demand for supported housing continues to increase and the borough has witnessed scores of new private companies entering the “Supported Exempt Housing Market“. These companies are often moving into the supported housing market for the first time, attracted by high rents and the fact that Supported Accommodation is protected from limits on Housing Benefit.

What is the quality of exempt housing provision?

The quality of supported exempt housing provision is highly variable. Where provision is commissioned or grant funded by a public body such as a Local Authority, NHS, or the GLA, the quality is usually good. This is because with commissioned services there is funding available to provide personal support which is appropriate and tailored to the service user’s needs. There is also a commissioner who is able to monitor the contract against clear set performance indicators and outcomes, and will intervene if there is a noticeable decline in the quality of the provision. Most commissioned supported exempt provision is provided by registered providers who have significant experience working in the supported housing industry and therefore understand what is necessary to provide high quality service.

However, even commissioned services are under growing pressures when delivering high quality support. With pressures on public service budgets commissioned providers are increasingly being asked to make savings - providing the same service at a lower cost or with less hours of specialist support which impacts on quality. With too many supported schemes relying on short term grant funding - and a real squeeze on wages - it is becoming increasingly difficult for suppliers to recruit and retain experienced staff and this is having an impact on the quality of provision as schemes are relying on agency staff, or minimum staffing levels. This will continue unless more money comes into the system to commission housing with support.

In recent times, Hackney has seen a number of new, private sector providers enter the market who have previously only operated in other areas of the country, especially the north and midlands.

However, the London rental market and associated overheads are significantly higher; bringing into question the viability and sustainability of these new schemes. These new companies are completely unknown entities and without an operating history it is often difficult for Hackney to distinguish potentially credible supported providers.

With a few exceptions, the vast majority of these new “Supported Exempt” providers operate under an Intensive Housing Management (IHM) model. No person-centric care is provided, but instead normal housing management landlord services which are eligible for Housing Benefit are intensified, and provided at a significantly higher frequency and level than would be expected of a normal general needs landlord. While in many cases this model can help low needs vulnerable tenants to maintain their tenancies, in other cases without additional personal support - the intensive housing management model is not appropriate to the needs of the individual. Either the resident receives support which is of little benefit, given their need for trauma-informed therapy and treatment, or their multiple and complex needs are too severe to sustain accommodation under an IHM model alone.

Even reputable providers are all too often basing their operating model around maximising the type of support that can be covered from Housing Benefit, (a funding mechanism that was never designed for or intended to cover support for vulnerable individuals) rather than providing support which maximises the outcomes and life chances of the residents. While IHM can help individuals with low to medium support needs sustain accommodation and even successfully move into independent living, Hackney has witnessed schemes fail where the support needs of residents are simply too great to be met via Intensive Housing Management.

Some unregistered non commissioned private providers routinely evict residents because they cannot manage the complexity of their needs without dedicated personal support. In reality many of the new providers either out of necessity or by design focus on the lower end of the need market - leaving those with more complex needs often falling to the Council to support.

While unfunded IHM models do work for low needs clients and as a part of a move on option within a supported pathway, they struggle to function with more chaotic individuals. It is our belief that for IHM schemes to work with more chaotic or high need individuals they need to be supported with a level of grant funding for personal care support and supervision which goes beyond tenancy sustainment and can cover additional counselling, provide psychological help to deal with long term trauma, and treatment for addictions.

With commissioned services, the  contract will specify the amount and type of support to be provided, together with key performance indicators and outcomes the providers must meet. Where providers do not perform, the Local Authority will work with the provider to improve performance, and where this does not improve performance, financial penalty clauses can be enacted, or the contract can be withdrawn.

Unfortunately this oversight and control process does not exist where providers are operating a model that is not based on commissioning of the support or has any ties to the local authority. There is little or no scope to monitor expected outcomes, or ensure adequate safeguarding, staffing, or adequacy of accommodation. In reality, private Supported Exempt Accommodation, despite being aimed at highly vulnerable tenants, is subject to no greater controls or monitoring than any other general needs private rented housing. Hackney are deeply concerned that the unregistered private supported exempt market is not monitored by the Care Quality Commission (CQC) or any other regulatory body, and is not treated differently to any other private landlord despite now providing the majority of Supported Exempt Accommodation in Hackney. 

The main controls on private Supported Exempt Accommodation, and the support provision are found in Housing Benefit legislation. If a provider does not meet the requirements for Supported Exempt Accommodation, then the tenant would only be eligible for Universal Credit - restricted by LHA levels, welfare reform, and the Benefit Cap. To fall under the definition of Supported Exempt Accommodation, the Housing Benefit regulations are clear that the tenancy must fulfil three main requirements:

The tenant must be living in a property where their landlord is

●        a housing association,

●        a registered charity,

●        a non-profit making voluntary organisation, or

●        in England only, a non-metropolitan county council and

●        That body (the landlord) or a person acting on its behalf must also provide the claimant with care, support or supervision.

●        The tenant must have a need for the support, or be likely to find it of use.

Housing Benefit regulations were never designed to control standards or costs in Supported Exempt Accommodation, and these rules are easy to exploit by unscrupulous landlords. For private providers the way to enter the Supported Exempt market is for the landlord to be a not-for-profit organisation or community interest company. Whilst in theory this should prevent profiteering - this not for profit status is easily negated. This is because the not for profit company - who is the landlord, is only the person who issues the tenancy agreements and manages the property, they are not necessarily the freehold owner of the property. The majority of private providers in the market work on a leasing model where they are leasing the property from a third party owner.

One major flaw in the Housing Benefit legislation is that ‘care’ and ‘supervision’ are not defined in the HB Regulations nor caselaw, beyond the fact that “The care, support or supervision being provided by the landlord must be more than ‘de minimis’ or minimal (R(H) 7/07)”,  i.e. that which goes beyond ordinary housing management. However there is no clear definition as to what equates to more than minimal. Case Law has previously found that three hours a week care, support, or supervision may be more than minimal (CH/1289/2007), but 10 minutes a week will not be (R(H) 7/07). But there is no guidance where the level of support falls between the two, and all too often providers giving only a few hours a month in Intensive Housing Management and providing very little real personal support of value are eligible for Housing Benefit despite the best efforts of the Local Authority.

Without clearer legislation, it is difficult to prevent Private landlords who are providing very little support from accessing substantial Housing Benefit rates, and side stepping Housing Benefit restrictions that would apply to any other private landlord. The limits of the legislation mean that high levels of Housing Benefit are often paid (and cannot be restricted), to organisations housing vulnerable tenants where boroughs are not confident that support is being provided or adequate to meet their needs. 

In Hackney, we would not routinely place people with private Support Exempt Providers where we were not confident that the level of care, support and supervision was adequate for the individual's needs. We would make sure that we have a good working relationship with the Exempt provider, and both Hackney and the provider shared clear outcomes for the client, often with the goal of moving them into more general needs accommodation at the end of a set period.

However this does not stop unscrupulous companies who operate in Hackney from specifically targeting vulnerable tenants, particularly prison dischargees or evicted from other provision, and then claiming Housing Benefit in Hackney at a cost to both the Government and the Council.

We are concerned that organisations and even public bodies may be placing individuals with exempt providers when they have never met the organisation, never seen the properties or quality of accommodation, and have unrealistic expectations of the amount of support that is actually being provided.

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

With continued pressures on funding streams, and an increase in costs, registered providers are increasingly struggling to operate within the current funding window. As the number of commissioned specialist supported schemes have closed there is a significant cost shunts to other areas. Without enough high quality supported accommodation, many individuals with poor mental health end up in inappropriate accommodation. Without support often there is a rapid decline in their mental health, leading to greater costs for acute statutory services including the NHS and mental health services. For those individuals previously in supported accommodation, there is a significant cost to Temporary Accommodation services who pick up the individuals as homeless. Eventually these individuals will get picked up by acute mental health services at a much higher cost to the taxpayer.

For those schemes that remain, increasing pressures on funding has required a shift in the operating model. Costs previously funded under commissioned personal care and support, have been moved to fall under the Intensive Housing Management banner and funded via Housing Benefit, so they have a multi funded model with support partly funded through HB and partly commissioned. As a result, in recent years some commissioned providers in Hackney have doubled or tripled their rent charges to cover Intensive Housing Management.

This is a cost shunt that can be counterproductive,  self-funders not in receipt of Housing Benefit have there capital/resources depleted at an alarming rate, whie those who are in receipt of Housing Benefit are vulnerable to even short term interruptions to entitlements, with substantial rent arrears quickly accruing. It doesn’t take very long for service users to owe thousands of pounds in rent arrears. This not only quickly puts their tenancy at risk, but can cause significant stress to an individual who is already vulnerable and is mentally fragile. Where individuals get evicted due to rent arrears caused by high rents, this has significant long term costs to other services including homelessness services, primary care, and mental health provision.

The shift to funding through Housing Benefit is itself an issue; it is normally funded through government subsidy, Provided the claims are paid accurately the Council who administer the claim will be reimbursed by the Government for the cost of the Housing Benefit. But with accommodation that is significantly high cost, Councils do not receive full subsidy from the Government. Once a rent goes above a value determined by the rent office as being significantly high, Council will only receive 60% or even 40% subsidy on the HB which they pay out, and have to cover the remainder from internal budgets. This issue is causing significant and unexpected financial costs to Councils who have to now fund large shortfalls on the Housing Benefit Subsidy claim worth millions of pounds, and is growing.

Whilst private providers running under the Intensive Housing Management model may appear cheaper than commissioned services - in too many instances the overall savings are limited compared to long term commissioned social providers. This is because the rents and management charges under these schemes are met through Housing Benefit are often exorbitant. In Hackney, new schemes often charge £450+ per week for a single person with low to medium support needs in shared accommodation and struggle financially to provide a high quality support even at that HB level. The weekly rents are so high, because of the high costs of sourcing accommodation within the local market. But it is apparent that in some cases unscrupulous landlords have clearly entered the market specifically to make a higher profit, recognising that where a claimant lives in ‘exempt accommodation’ a higher level of rent can be covered, and are taking advantage of the rules and lack of regulation to maximise their return.

For a local authority like Hackney, this is a dilemma; there is a real need for supported accommodation units, but we also must be mindful of the impact on the public purse. While restricting Housing Benefit is an option it is a crude tool for identifying quality provision. If a vulnerable claimant is living in 'exempt accommodation', then their eligible rent for Housing Benefit can only be restricted if their rent is “unreasonably high”. But  for a rent to be deemed unreasonably high, Housing Benefit services must compare the rent charged with rents for equivalent and 'suitable alternative accommodation'. Alternative accommodation must be available in the locality at a lower rent, and when considering whether alternative accommodation is available.

It is often impossible to establish that alternative appropriate accommodation is available in the locality.  Either the provision does not exist, or where there are available units, rents are just as excessive. It is noticeable that when one provider is allowed to push the threshold of what is deemed “unreasonably high”, other providers will quickly follow suit leading to rapid rent inflation across the market.  

In theory there is a good argument for the general model of leasing properties, as it enables genuine supported not-for-profit providers to access the market where due to high capital values they could not afford to buy properties outright. The model is regularly used by high quality not for profit providers to source accommodation from owners, and is perfectly legitimate. However, there is  the potential for exploitation of these rules by using complex legal structures.

There are other concerns. In order to acquire accommodation in a challenging housing market, routinely all of the operating costs, maintenance and repairs are charged to the not for profit company, meaning the owner receives the full benefit rate or significantly more without any deductions. This makes renting for supported accommodation more profitable than renting on the open market to benefit clients. Lease agreements have built in significant annual increases,  often at rates above inflation, with little operating headroom which could make the provision become unviable should Housing Benefit be restricted due to changing

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

There are real challenges in providing Supported Accommodation within London and in particular Hackney due to the high capital costs of development and the property rental market. Supported providers cannot afford to buy or lease property for use as supported accommodation, as the return on the outlay can simply not be covered. Even where the rent is set at LHA rates, before any management or support costs are added on top, it is not financially viable for providers to find properties in the London market. Supported providers in London face other additional challenges including finding and retaining good quality staff, as wages do not fund housing costs in the London market. 

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

The London Borough of Hackney are not able to  accurately record the numbers of units being provided by non-registered providers; not all residents in privately delivered provision will either be claiming Housing Benefit or been supported into the provision by the Council. However there has been significant growth in the non registered market in recent years. As much as 65-70% of provision is now provided by non-registered private providers and this number is only growing. Commissioned registered providers are now becoming the exception. The balance is not appropriate, as many of the non registered providers do not support high needs and complex individuals. Without more high quality registered and commissioned providers, Councils are struggling to house individuals with the most complex needs. These individuals often find themselves evicted and being housed in emergency provision at a cost to local authorities. The Council are also concerned about the lack of quality control and regulation among private providers.

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

With commissioned providers the quality of provision is much higher as they are required to meet much more rigorous oversight. They are able to provide personal support that is appropriate to the service user's needs, as opposed to trying to fit within a HB funding stream that was never designed to cover support costs for vulnerable individuals. With commissioned services there are greater checks on the quality of the support provided, as the contract and provision is monitored by Councils. With commissioned services the exact amount and type of support that should be provided can be clearly specified in the contract, and the provider can be held to this under the contract terms.

With non commissioned services via non registered providers there are few or no controls over the amount of support that is being provided, the quality of the support, or whether it is appropriate for the needs of the individuals. 

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

Exempt Accommodation should be primarily commissioned by local authorities with the government providing Council ring-fenced long term funding specifically for the need of providing personal care and support. If funding for care and support is not adequate or not ring fenced then individuals will potentially end up in substandard accommodation. Supported accommodation should be provided by registered providers who are subject to a high level of inspection and oversight.

How should the regulatory oversight of exempt accommodation be organised, and what should be the regulations governing exempt accommodation and how should those regulations be enforced?

There needs to be a clear register of all supported accommodation providers, with all providers having to register their properties with a central regulatory body. This would also make it easier for the administration of benefits, as Universal Credit and Housing Benefit would immediately know whether an address was or was not supported accommodation, ending the situation where claims get passed between the DWP and Local Authorities while both bodies disagree as to whether or not a particular address is to be classed as supported exempt.

There should be a single independent regulator, who would be responsible for ensuring that providers are offering safe and high quality provision. The regulator would ensure that registered providers are subject to routine inspections to ensure that levels of care are adequate. Inspections would be based on providers having to meet set criteria  - a set of fundamental standards below which levels of care should never fall, as happens with CQC inspections. There should be set minimum hours of support which all providers have to provide (or make available to residents if they wish to take them up), and detailed guidance as to what this support should cover. The level of hours of support and guidance which providers would be measured against would vary based on broad categories of types of support and whether the residents had low, medium or high care needs.

Is there sufficient publicly available information about exempt accommodation?

There is very little information available outlining what exempt accommodation is or what standards it should meet.

Conclusion

The central issue with regard to the provision of supported housing is a lack of long term secure funding.

This lack of funding covers both capital expenditure and revenue. Significant capital reserves are required to develop new, purpose built units, purchase suitable units from developers, or convert existing property stocks into accommodation suitable for this client group. Finding the capital in areas like Hackney where land values are at a premium is beyond most if not all London boroughs. The revenue required to allow these schemes to accommodate clients with medium to high support needs is not deliverable within the funding available to commissioners or through the social security scheme without a significant risk to providers. 

While grant funding is often available, it is short term; usually only 1-3 years in duration. This short nature makes it difficult to set up and maintain viable schemes, both due to problems being able to source accommodation, and then to maintain the provision once the funding source has ceased. Often, the funding from the Government made available to local authorities has a number of caveats and conditions. This conditionally means that risks to both developers and providers are an active deterrent to meaningful engagement.  Many of the clients we would want to support in a support environment will be resident for over three years while we assist them into housing options they can sustain; far beyond the remit of most guaranteed revenue streams.      

It is also difficult to recruit and retain experienced staff where projects are short term.   Successful schemes are routinely closed because the funding period has expired, and it has not been possible to source alternative funding sources for the support costs. Conversely, rather than extending the funding on existing provision, funding is made available to commence new schemes with the same target cohort in mind. The Government offers very little support to local authorities to build the new generation of social housing we so badly need.

January 2022