Written evidence submitted by the National Housing Federation [EXA 101]

Summary

The National Housing Federation (NHF) is the voice of housing associations in England, representing almost 800 housing association members that provide homes for around six million people. Housing associations provide three quarters of all supported

housing for rent, including older people’s and extra care housing, homeless hostels, homes for people with learning or physical disabilities and people with autism, mental health

step-down units and domestic abuse refuges. These homes enable people to live independently and can transforms lives by giving people security to start addressing health or addiction issues.

         Good quality supported housing gives people choice about their lives, provides tailored, person-centred support and gives value for money for the public purse.

         The vast majority of social homes are affordable, good quality and secure.

         The regulatory regime is effective at ensuring that social housing providers are financially viable and that social housing is well-managed.

         We support the proposals in the Social Housing White Paper for stronger consumer regulation and transparency.

         The regulation and administration of Housing Benefit needs to be fit for purpose to meet the legitimate costs of rents and service charges for people on low incomes who live in supported housing.

         We have significant concerns about some ‘exempt accommodation’ including property standards, referral routes into schemes and levels of support as well as whether some services provide value for money.

         There is an acute shortage of affordable housing in the country, which has led to increasing numbers of people desperate for a home. This can make it feel impossible for people to say no to the offer of a home, even if it does not feel safe.

         Financial viability and value for money need to be seen in the context of the wider funding environment for all elements of the scheme – support costs as well as housing costs.

         There is a need to close gaps in the existing system and make sure that local authorities and the Regulator for Social Housing (RSH) have the resources needed for effective enforcement of the rules.

         Changes to the oversight and regulatory system should be focussed on tackling the problematic providers and low-quality provision and should be enacted alongside consideration of how to sustain and adequately fund quality services for people who do not have the means to pay for them. In order to direct resources at tackling the root problem of inappropriate or poor quality provision we suggest that attention is concentrated on non-commissioned services.

Introduction

Good quality supported housing gives people choice about their lives, provides tailored, person-centred support and gives value for money for the public purse.

In recent years testament from residents[1], evidence from local authority and regulatory investigations and reports from other agencies have shown a growing problem with the quality of service and accommodation by a minority of providers who use what has become known as the ‘exempt accommodation’ model of supported housing provision.

While the term ‘exempt accommodation’ is often loosely used to describe housing provision that is in some form problematic, this is not always helpful in either understanding the problem or considering solutions. A recent report from Prospect Housing found that ‘it would more accurately be described as non-commissioned, leased based, supported housing, funded through exempt Housing Benefit.’[2] Unless stated otherwise, this is the definition used in the rest of this response.

The exempt accommodation definition was introduced in 1996 to protect specialist supported housing provided by not-for-profit organisations from rent restriction under the new maximum rent rules. This protection ensured that, where appropriate, Housing Benefit could continue to meet rent levels that exceeded a rent officer determination. The term is now used to describe housing that is leased from private landlords on short- or medium-term leases by a not-for-profit housing provider and the ‘exempt’ rent is funded via Housing Benefit. There may then be third or further separate organisations involved in providing the housing management and day-to-day support service to tenants.[3]  Often, the support element of the service is not commissioned or funded by the local authority. It is the combination of these arrangements that characterises the exempt accommodation provision that can be cause for concern. In understanding the problem and remedies, it is important to recognise that this model is not inherently poor quality or poor value for money; but it has been used by some unscrupulous landlords and organisations to extract high levels of return while delivering poor quality or unsuitable accommodation and services. 

There is also a further distinction to make between shorter (for example schemes for homeless people or refuges for people experiencing domestic abuse) and longer-term services (for example a shared house for people with a learning difficulty). The term ‘exempt accommodation’ is also used to describe longer term commissioned services, where the properties used to house people are leased from private sector landlords.

After the decision in 2013 that tenants living in supported housing would not be able to claim their housing costs through Universal Credit, the supported housing sector experienced a number of years of uncertainty with a range of proposals put forward to pay for rents and housing costs for tenants.[4]  On 9 August 2018, the Government said that, having listened to views from providers, stakeholders and councils, a decision had been made to keep Housing Benefit in place to fund supported housing. This means that the regulation and administration of Housing Benefit needs to be fit for purpose to meet the legitimate costs of rents and service charges for people on low incomes who live in supported housing. 

What is the quality of exempt housing provision?

There are some well-governed organisations using housing leased from private sector landlords to provide well run, non-commissioned services appropriate to people with support needs. In many circumstances, it is better for a separate organisation with a depth of experience of working with a client group to come into the scheme to provide the service to residents. Leasing properties from private sector landlords can enable a flexible and responsive increase in the supply of homes for people with support needs who receive benefits. Charitable activity or other funding can fund the support service where the service is not commissioned by the local authority.

However research[5] has found that residents in some supported housing schemes described feeling financially trapped, excluded from decision-making about their living situations and lacking of control over where they were housed. Media outlets have reported alarming stories of residents being unsafe and not receiving the support they were promised. Rents in these homes can be very high, for the quality and location of the property. NHF members have raised concerns about property standards, referral routes into schemes and levels of support as well as questioning whether some services provide value for money. The RSH has found a number of registered providers working in the exempt market[6] non-compliant with finance and governance regulation including the Rent Standard, which determines how regulated providers should set rents.  

There is an acute shortage of affordable housing in most of the country, which has led to increasing numbers of people desperate for a home. This can make it feel impossible for people to say no to the offer of a home, even if it does not feel safe or is in an area where the person has no local connections. The web of different agencies involved in the provision of the housing can also disempower residents, as it is not clear who can be held to account for problems. 

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

Prior to the pandemic, the National Audit Office found that funding for housing-related support services had been cut by more than two-thirds (69%) between 2010 and 2017 from a total of £1.6bn[7]. Huge pressures on budgets and the increasing demand for care services mean that local authorities have sought to make further cuts since then. The removal of support funding from existing schemes makes the ongoing provision of the scheme financially challenging, as it is very difficult for any not-for-profit provider to sustain a scheme where revenue does not meet costs. Financial viability and value for money need to be seen alongside the context of the wider funding environment for all elements of the scheme – support costs as well as housing costs. Given the funding environment, financial viability is challenging for the best provider. 

Viability for lease-based schemes will depend on the terms of the lease, property maintenance and management costs and the costs of providing appropriate support.  Regulatory judgements from the RSH show the potential fragility of organisations that only lease stock. They are obliged to make payments according to the terms of the lease while carrying all the burden of risk around maintenance and voids. High turnover, the specialist nature of buildings and the housing management cost of schemes mean that rents and service charges in supported housing are legitimately higher than for a general needs social home. Leasing can add further cost outside the housing provider’s control. A few organisations operating in this market have had to close: Prospect stated in 2021 that it would be closing down because it would be “unable to provide the standard of accommodation and support we and the regulator expect, while being financially viable and compliant in the long term”.[8]

Well-managed and adequately funded supported housing provides exemplary value for money in either a common sense or public procurement definition of the term.[9] The government’s National Statement of Expectations for Supported Housing acknowledges this.[10] Good quality supported housing providers want to offer transparency on costs and recognition that in some cases costs are legitimately higher than general needs housing and still represent value for money given the situation and needs of tenants and the high risk of some form of crisis if the support and housing did not exist. For registered providers there are cost control mechanisms enforced by the RSH. These include the need to comply with the Rent Standard[11].

The lease-based non-commissioned exempt accommodation model is being used in a way that extracts large sums in the form of rent paid for by Housing Benefit and unreasonably high returns for property investors. In some cases, there are links between the for-profit landlords and those running the ostensibly not-for-profit housing. Where the standard of accommodation and support is poor or costs are not legitimate, then the public investment in these services through Housing Benefit cannot be justified. However, the Housing Benefit system cannot take the strain of eradicating this overall abuse of the system. Enforcement of rent regulation for registered providers is a route to preventing landlords charging unreasonably high rents.

In some cases, tenants are asked to pay for their own support out of their other benefit income and as a condition of living in the property. This practice is sometimes used in order for the scheme to meet the threshold of providing above minimal levels of care, support and supervision as required under Housing Benefit regulations.

Birmingham Council found that a significant number of people living in designated supported housing did not have support needs.[12] This should not be the case. Needs can fluctuate and some flexibility should exist within any well-managed service, however there should be an effective pathway to ensure the right people are referred in and statutory services e.g. adult social care are able to take referrals from those with higher levels of need, in a context where there are increasing numbers of people with multiple and complex needs requiring accommodation[13]. Referral pathways in some areas have broken down, allowing non-commissioned providers to expand into the market with a financial imperative to fill any voids as soon as possible, advertising on the open market to people without support needs, or taking on residents with support needs without necessarily carrying out needs assessments. The scarcity of housing and the pressure on some services such as probation, to move clients into accommodation as quickly as possible has fueled this approach. 

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

The five DLUHC pilots and anecdotal evidence suggest that there are concentrations of poor quality short-term services in some areas where property owners have found it difficult with low rates of local housing allowance (LHA) and a diminishing student market to get a high return on larger, older properties. The leasing model allows providers to expand rapidly and NHF members report new services being established in many parts of the country: the issue is not confined to large cities. 

There are significant differences between local authorities on the strategic approach to the funding and commissioning of support services. This context is also important in understanding the geographical spread of services, how ‘exempt accommodation’ providers have come in to fill gaps left as the Supporting People programme fragmented, and support services were cut. 

It is very difficult for some homeless people with support needs to demonstrate a local connection and it is necessary for some very specialist services to operate on a regional or national basis. Referral pathways into supported housing need to reflect these needs and ensure that all areas of the country are not effectively closed to people who struggle to show a local connection. 

There are also marked differences in the commissioning of longer-term services that use the lease-based model, mainly to provide housing for people with a learning difficulty or autism. LGA commissioning advice[14] on this type of housing states that ‘there is nothing inherently concerning about the leasing of property to be used as supported housing’ but the advice repeats the concerns raised by the RSH around registered providers who only use this model. These are:

• The concentration of risk that comes from having long-term, low-margin inflation-linked leases as a single source of finance.
• The thin capitalisation of some of the registered providers (RPs) undertaking this model.
• Poor risk management and contingency planning undertaken by some of the RPs.
• Some inappropriate governance practices that have led to poor decision making.
• A lack of transparency about whether appropriate rents are being charged.

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

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

There is no nationally available data on the balance between commissioned and non-commissioned providers. In order to direct limited local authority resources at tackling the root problem of inappropriate or poor quality provision in the sector we suggest that attention is concentrated on non-commissioned services as this is where there is no local check on the support being provided outside the Housing Benefit system.

Again, there is no available national data on the split of registered and non-registered providers across the country, though Birmingham Council[15] estimate that registered providers make up 90% of the exempt accommodation in the city.

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

Regulation by the RSH gives an assurance of economic viability, governance and not-for-profit status. The NHF supports the measures set out in the Social Housing White Paper and believes adding more robust consumer standards and tightening the definition of ‘non-profit’ in relation to the registration of private registered providers will greatly strengthen the ability of the RSH to detect and address poor quality services. The RSH provides an important check in the system and there is potential for more effective collaborative working at a local level with the RSH and local authorities sharing intelligence and expertise on organisational issues. The RSH offers a much more comprehensive framework than that offered by charity regulation or the very light-touch approach for Community Interest Companies.

“Commissioning” is a term that is used to mean that the service is externally funded or in a broader sense to mean the service is part of a local strategic plan and assessment of needs. A service that is not funded by the local authority could still be part of an integrated referral pathway with local checks on quality and standards. Supported housing is part of the local community, with residents dependent on local services, and for transitional housing there should be a clear plan for move on at the end of the stay. If there is no effective commissioning strategy, then this can impact on service quality.

We have already raised the importance of funding for support services in supported housing.  Support services are not eligible for Housing Benefit. Providers need long-term certainty over revenue funding for support in order to be able attract and retain experienced and skilled staff to work in what can be a very challenging environment. Supported housing schemes have closed because of the withdrawal of support funding[16] and some traditional registered providers have moved away from providing supported housing, leaving unscrupulous private providers with problematic governance and financial models to fill the gap in the market. 

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

‘Exempt accommodation’ is not the most useful term as the definition is not clear; it is more useful to consider the most cost effective way to provide quality supported housing and the need for a long term strategy of investment alongside effective regulation.

Services vary in cost according to building and service type, location, client group, levels of security needed and type of support provided. Economies of scale are also important and the size of a scheme should reflect the needs of the people who live there. Supported housing is part of the local community and not an institutional form of care. An extra care scheme usually includes 50-70 flats, so it is possible to achieve some economies of scale, however such a large scheme for older people would not be appropriate for a rural area. So, purpose and local context should also be taken into account in answering ‘what should the service cost’? 

Many housing providers benchmark costs and the Sector Scorecard now includes a specific set of measures for supported housing.[17] Regulated rents in social housing and legislation governing service charges are also important national tools regulating charges.     

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?

Firstly, there is a need to close gaps in the existing system and make sure that local authorities and the RSH have the resources needed for effective enforcement of the rules. Implementation of the Social Housing White Paper will give a much more effective framework and allow the enforcement of consumer regulation for social housing. It will also allow comprehensive targeted action to tackle issues at an organisational level. This is a more effective use of resources than individual action on an individual scheme or Housing Benefit claim basis.

The DLUHC pilots had funding to set up multi-disciplinary teams and look across local authority responsibilities, including safeguarding, environmental health, the Care Act 2014, the Housing Act 2006 as well as the administration of Housing Benefit. There is potential crossover between oversight of properties in the leased and non-RP sector and oversight of private sector landlords. Research from the National Residential Landlords Association[18] suggests that local authorities lack resources to effectively enforce the requirements on private sector landlords, with minimal use of criminal prosecutions. This type of locally led team can save public money in the long term, primarily from the Housing Benefit budget, and consideration could be given to allowing local authorities to make use of these savings locally alongside money from civil penalties for enforcement action against non-registered landlords.

There is a role for locally led accreditation for non-registered providers, which could build on the experience of the DLUHC Pilots on scrutiny for new providers setting up services in an area. 

DWP should look to strengthen the gateway for organisations to access Housing Benefit for supported housing to ensure that only legitimate non-profit providers were able to offer this type of accommodation. NHF membership is only open to not for profit housing providers and we recently tightened our membership criteria and scrutiny to ensure this.[19]

The RSH and Housing Benefit authorities should work together to close gaps where not-for-profit providers contract with for profit agents. However, increased scrutiny of individual Housing Benefit claims is an ineffective and very expensive route to enforce quality control in Supported Housing.  Housing Benefit teams lack the resource, the experience and the remit as Housing Benefit cannot cover the costs of the support service. Checks on organisational probity and service standards could be carried out elsewhere before the claim can be submitted. Tightening the Housing Benefit rules risks legitimate housing related costs not covered by benefits and triggering a further reduction in the supply of quality supported housing by traditional providers. The Housing Benefit system has to be fit for purpose to meet the needs of tenants across a range of schemes and at all points of a person’s progress while staying there: for example support needs should have reduced when someone is ready to move on from a supported scheme. For this reason we think it is not necessary to change the definition of ‘care, support or supervision’ within the Housing Benefit regulations.

Changes to the existing oversight and regulatory system should be focussed on tackling the problematic providers and low-quality provision and should be enacted alongside consideration of how to sustain and adequately fund quality services for people who do not have the means to pay for them. Much of this is most effectively coordinated and targeted at a local level but local authorities need the resources to be able to do it. We are concerned about the unintended consequences and cost of a new national system of additional oversight or a new regulator put in place purely because of the failures of one part of the sector.

January 2022