Written evidence submitted by Bristol City Council [EXA 115]
Contents
What is the quality of exempt housing provision?
How should exempt accommodation be provided and what should the service cost?
Is there sufficient publicly available information about exempt accommodation?
Bristol City Council (BCC) is a unitary authority, its executive function is controlled by a directly elected mayor of Bristol. Bristol has 35 wards, electing a total of 70 councillors.
Bristol is the 10th largest city in the United Kingdom and one of the eleven ‘Core Cities’, with an estimated population of 465,900.
BCC has extensive experience with Supported ‘Exempt’ Accommodation (SEA) having maintained a team of specialist officers to manage Bristol’s caseload since 2010. The team was established in response to significant exploitation of the exemption by several charitable and ‘not-for-profit’ providers delivering properties with high rents and minimal or no support service. Initially this team ‘reviewed’ whether exempt status conditions were met across Bristol’s caseload through assessment of ‘care, support or supervision’ services, either confirming or retracting exempt status on the strength of the support service provided. This team have also closely managed new provision, carefully ensuring that any prospective new entrants meet legislative criteria, and the relevant case law, while also delivering accommodation at a reasonable rent. This careful management has ensured that Bristol’s exempt accommodation caseload now consists of good provision through largely commissioned services. Long term management of the sector also makes it easier going forward to oversee the sector, as resources are focused on proactive case management rather than reactive firefighting. Despite the position that BCC is now in with its exempt accommodation caseload, the vagaries of the legislation, complexities of the caselaw, expertise of consultants and the amount of money available engenders ongoing challenges for BCC in the management of its supported accommodation market and rent levels.
Bristol recently took part in the government’s supported housing ‘quality and oversight’ pilot sharing its specialist knowledge and experiences gained in this area with the other pilot authorities and developing some ‘best practice’ guidance for wider use.
In this response we draw on our experiences in the field highlighting a number of the issues local authorities (LAs) face and propose some mitigations that could enable more robust and efficient regulation of this complex market, while at the same time allowing a continuing supply of high quality and much needed supported accommodation.
Exempt accommodation is supported accommodation, and is intended to provide high quality housing, with support to some of our most vulnerable citizens, allowing them to live in decent homes, enabling individuals to lead fulfilling lives or move on into long term appropriate accommodation.
There was a clear incentive for BCC to act in 2010, because if the accommodation is not provided by a Registered Social Landlord (RSL), central government does not reimburse BCC for the full subsidy for the housing benefit payment.
Historically and before the creation of BCC’s specialist team, policy officers granted SEA status to several providers with a small number of units during the period 2000-2010. Almost indiscernibly these providers grew in number of units, and with incrementally higher rents. The decisions to award SEA status to these providers were correct at the time, because in 2000-2010 the problems in exempt accommodation had not developed to the extent they have now, and therefore were not known. With the benefit of hindsight, we can now see similar patterns developing nationwide, but primarily now through exploitation of legal provisions specific to Registered Social Landlords (RSL) regulated by the Regulator of Social Housing (RSH).
The actions of reviewing existing schemes allowed BCC officers to develop experience and expertise, which has ultimately led to Bristol’s caseload of good quality supported exempt accommodation. Due to this consistent oversight regime, Bristol currently does not experience the same problems as other Local Authorities (LAs) and does not expect to while it maintains a robust assessment team.
Until about 2013-2015, RSLs were almost entirely operating to the standard ‘bricks and mortar’ model and there were no issues relating to this landlord type. Rents were regulated and conformed to the Rent Standard (formula rent). In the middle of the last decade a new type of RSL developed operating on a lease-based model and holding limited or none of its own housing stock. Such a business model is vulnerable as is highly exposed to financial risk and is reliant on housing benefit departments agreeing the full proposed lease costs and eligible rent.
SEA is complex, and caseload management becomes more complex with scale of provision i.e., the number of claims for an LA to assess. Because Bristol currently has its caseload under control, it is significantly easier to manage – we are not firefighting and are therefore able to carefully control and manage each new provider and scheme, often down to individual tenant/claim level. In turn, this acquired reputation for scrutiny and examination naturally discourages certain provider types from establishing, as they know their schemes may not pass Bristol’s high evidence requirements.
There is no straightforward way to achieve this caseload position in the modern era. Bristol’s expertise and processes were built on management of non-RSLs, which present fewer difficulties than RSLs to determine – a ‘not exempt’ decision for a non-RSL results in Local Housing Allowance (LHA) or Universal Credit payment, often hundreds of pounds per week short of the provider’s expectations. The additional complexities raised by lease based RSLs, to which an LHA decision cannot apply, have made the journey much more difficult for LAs, as providers have protection not only through spuriously gained ‘exempt’ status, but also through exploitation of RSLs interplay with housing benefit (HB) and Universal Credit (UC).
The quality of housing provision within SEA varies enormously throughout England from exceptionally high, through to exceptionally low standards. It is important to remember that the ‘exemption’ is specifically from the effects of welfare reforms since 1996 where the landlord is an eligible organisation, and provides care, support, or supervision. There is nothing at all inherently wrong with the housing benefit claim-level classification, and it is understood that that majority of ‘exempt’ cases nationwide are making legitimate and reasonable use of the prescribed legislation.
The exemption was made as a response to deregulation of the housing market in 1996, and the first known wide-scale exploitations were seen in the 2000s. This was driven by a rapidly inflating housing market and cuts to private tenant housing benefit rates, such as the introduction of Local Housing Allowance. ‘Exempt’ claims became seen as an opportunity to derive significantly enhanced returns from portfolio while at the same time being unregulated and often portrayable as social enterprise.
The majority of landlords do provide good quality accommodation and services and utilise the exemption via the classic model, which is to enable the provision of adequate accommodation for their clients without the constraints of LHA or Universal Credit (UC). Typically, rents are formed of aggregate core rent and service charges incurred in the service provision, and these costs are recovered via tenants’ housing benefit claims. The cost-of-service provision is protected via the preserved regulations, and modern exempt accommodation exploitation were reasonably not foreseen when these regulations were preserved in 1996. The preserved regulations that protect eligible rents are powerful, and it is this protection that has enabled a small sector of providers to exploit the ‘exempt’ provisions with relative impunity. The circumstances where LAs can impose rent restriction are very narrow and in many cases it is a practical impossibility to do so.
A small minority of landlords are known to exploit ‘exempt’ provisions by charging the most possible via rent and service charges, and spending as little of this money as possible on the actual accommodation itself, instead diverting high core rent costs to investors and superior landlords producing returns on investment that cannot be achieved in any other housing market. The net consequence of this manner of housing benefit utilisation is poor accommodation standards, as funds are not retained for accommodation repairs and maintenance, or service provision.
Quality of accommodation is typically characterised by whether the service is commissioned, or non-commissioned. A commissioned service will be subject to quality and oversight regulation via the contract between the commissioner, and landlord. Commissioners can stipulate expected accommodation standards and exert some control over rent setting and service charges. Landlords who choose to work with commissioners provide routinely excellent standards of accommodation, and support because oversight missing from the housing benefit regulatory framework is compensated for by commissioners’ framework contracts. Commissioners ensure high standards of accommodation and service through contract management and associated quality assurance.
A non-commissioned service is run entirely independently of the LA or other commissioners and is not subject to any quality or oversight regulation beyond the preserved housing benefit regulations which govern exemption, and occasionally environmental health, planning and building control. However, there is surprisingly little oversight of ‘supported exempt’ accommodation, and any individual is free to set up a company and provide supported accommodation services, regardless of whether they have any background, expertise and understanding of support, or skill at running a company.
Bristol’s experience is that its poor-quality accommodation has been held entirely within the non-commissioned sector, as commissioned services would not be retained on frameworks if they were to provide accommodation of low quality. Through Bristol’s ‘quality and oversight pilot’ we examined our non-commissioned SEA and found that our remaining six providers who are not commissioned to provide services were all largely providing good quality accommodation and support through a variety of different funding models.
There is nothing at all inherently wrong with ‘exempt accommodation’ as when operated on a legitimate basis and without the motivation for profit it offers good value for money (VfM). The issues stem from a small cohort of providers who seek to derive a profit from the exemption. Whether exempt accommodation represents good value for money depends on the context within which the question is being asked. Is it good VfM for central government, local government, or the public purse generally?
VfM is subjective, and we must take various factors into account when considering this such as the buoyancy of the local housing market, the quality of the accommodation and support provision and any funding available outside of housing benefit for the provision of a support service. The classic model for ‘exempt’ accommodation is as follows:
A charity or voluntary organisation wishes to provide support to a cohort aligned with their charitable aims but has no suitable property. To provide supported accommodation to three people it requires a suitable property, and in a suitable location. Acquiring the right property constrained to the Local Housing Allowance (LHA) rate would be difficult, or impossible, so the exemption allows the charity to pay a landlord what is required to secure the appropriate property.
An appropriate property is found on the open market, and the charity negotiates a lease with the property owner. In Bristol property is expensive, and a landlord would reasonably be able to demand £1300 per month (pcm) for a 3-bed property, if not more.
£1300pcm to a superior landlord for the ‘bricks and mortar’ equates to £100 per service user per week – this is more than the current ‘shared accommodation’ Local Housing Allowance rate, which is £90.10. The current LHA rate of £90.10 was uplifted in response to Covid-19, prior to the pandemic it was £71.47 making the delivery of supported accommodation to LHA rates even more constrained.
The LHA rate for shared accommodation is not enough to pay the property rental costs for an appropriate property to a superior landlord on an arms-length basis on the open property market.
However, additional costs are also required to provide accommodation to an acceptable standard. The below rent breakdown is a real-life example of an enhanced SEA rent in Bristol that is inherently reasonable and reflects good value for money, but would not be achievable at the LHA rate.:
Rent element | Actual Cost (all weekly) |
Property Rental Cost | £100 |
Council Tax | £5.21 |
Voids | £15.05 |
Fire Protection | £1.25 |
Insurance | £2.27 |
Maintenance | £9.59 |
Furniture | £5.50 |
Office Costs | £2.73 |
Staffing (Management & Administration) | £56.10 |
Communal Lighting & Heating | £5.92 |
Communal Cleaning | £14.88 |
Total | £218.49 |
The above is an example of a rent in use as SEA in Bristol, and clearly illustrates how the exemption is intended to operate and deliver good quality housing that would otherwise be undeliverable on the Local Housing Allowance/Universal Credit rate.
VfM issues develop where the provider charges rent often higher than this example but does not spend the revenues raised on delivering the accommodation service.
This may be via an inflated ‘core rent’ via a connected superior landlord. In the example above, the £1300pcm payable to the superior landlord was in respect of a good quality and well-maintained property. Exploitation and significantly reduced VfM may be a £1500pcm lease for a poor quality, badly maintained property.
Additionally, inflation of service charges is a common method employed to enhance a rent, and service charges are an element which are very laborious for LAs to examine – it is an evidence-based process. Service charges can be exploited by charging more than the services cost to provide, but at a level which makes it difficult for the LA to challenge.
The net effect of appropriate rent and service charges Vs inflated rent and service charges is that a property that costs significantly more via HB can be significantly lower quality, while being very difficult for LAs to challenge via protected core rent elements and service charges.
In Bristol we have worked hard to ensure that our exempt accommodation market reflects the actual property market as closely as possible in respect of rental charges and have achieved this through a well-resourced team of SEA specialists.
However, it remains possible for landlords to exploit the market and to charge a significantly higher ‘core property’ cost than is used in the above illustration because ‘exempt’ rents are very strongly protected from restriction. To restrict an exempt rent the Local Authority must prove that:
If a landlord proposed a core property cost twice as high e.g. £200 per week per tenant (£2,600 per month), it would theoretically be possible to restrict this rent to a lower level, although LA success would not be guaranteed because the regulations that protect rents in an exempt context are powerful and a significant amount of work would be required to defend the restriction, were it to be challenged via appeal tribunal.
If alternatively, the core rent was proposed as £1,900pcm (£146 per person per week), it would be very difficult to secure a restriction. An appeal tribunal is likely to accept it is reasonable to expect a client to move for £200 v £100 per week but is less likely to agree this action is reasonable for £146 v £100 per week.
Landlords across the country have engineered raised core rents through a ‘rent escalator’, where each rent used in an exempt claim agreed by a LA sets a new comparator benchmark against which future claims will be judged. If this amount is raised incrementally, it creates an artificially high ‘exempt’ rental market setting new acceptable benchmarks and driving rents up throughout the entire LA. SEA providers have been known to submit Freedom of Information (FOI) requests to LAs requesting data on the actual levels of exempt rents in payment, so they can judge whether it is worth entering the market by determining the maximum rent they will be able to charge without being concerned the LA will seek to impose a restriction.
If an LA has good oversight of its exempt accommodation market as does BCC, the market will likely appear good value for money from central government’s perspective. It is also likely to appear good value for money from BCC’s perspective too, but the housing benefit ‘subsidy’ system affects how value for money is perceived and this differs significantly between Registered Social Landlords (RSLs), and services provided by organisations that are not regulated or registered with the Regulator of Social Housing (RSH).
Considering VfM in its most basic principle, it is preferable for an LA to pay a £300 per week rent to a provider providing a very expensive but excellent supported housing service rather than £200 per week to a provider delivering poor accommodation with a minimal to no support provision, as the value derived from supported accommodation is a blend of housing, support to the individual and the wider social impact of the scheme. Well-managed and appropriately delivered supported accommodation has a positive wider impact on society, whereas poorly-managed supported accommodation can have negative impacts – such as Birmingham City Council is currently experiencing, which are clear but difficult to quantify.
Aside from the headline level of rent charged, the amount of subsidy the LA is able to recover in respect of housing benefit paid out will to an extent influence whether a LA perceives a scheme to be good VfM.
Supported accommodation provided by an RSL is 100% subsidised by central government. This is because the landlords are regulated by the RSH and it would be contradictory for the Regulator to say a landlord meets requirements for financial and governance viability, but not to refund LAs the full rent paid by way of HB.
Supported Accommodation not provided by RSLs is not fully subsidised, and this is because the government does not know whether the rent charged represents good value, as the landlord organisations are independent, and do not answer to any regulatory bodies.
Such cases are ‘referred’ to the Rent Officer (RO) (Valuation Office Agency) which decides as to the level of rent which is acceptable according to ‘old scheme’ rules. Prior to the introduction of LHA, all private tenant cases were referred to the RO for a valuation, and the valuation is typically the 50th percentile of rents in a given area, rather than the 30th percentile employed by the LHA calculation.
Any rent charged by the provider above this RO determination is either met in full by the LA if the claimant is classed as not ‘vulnerable’, which is subject to precise legal definition, or the government funds 60% of the additional amount if the claimant is classed as vulnerable, leaving the LA to fund the remaining 40%. This is illustrated in the table:
Example | Eligible rent | Rent Officer Decision (ROD) | Difference between Rent and ROD | Loss if Vulnerable
| Loss if not Vulnerable
|
A | £130 | £80 | £50 | £20 | £50 |
B | £200 | £80 | £120 | £48 | £120 |
From this table we can see that an LA loses less money (£48) in respect of a vulnerable client in an expensive rent than a non-vulnerable client in a significantly cheaper rent (£50).
Vulnerability is determined by income type (disability incomes typically infer vulnerability) and status (pensioners and parents are vulnerable, single claimants of working age are not).
Typically, in a commissioned scheme, many clients will meet vulnerability criteria meaning the Council receives the RO’s valuation plus 60% of the excess back from central government. Non-commissioned providers seeking to exploit the scheme will typically house anyone, regardless of whether they require support or meet vulnerability criteria, which puts LAs in the worst possible scenario:
BCC commissions many of its supported accommodation services, and a number of these high-quality housing services are provided by charitable landlords not registered with the RSH. This leads to the perverse situation where BCC commissions high quality services at reasonable rents but only receives a proportion of the housing benefit expenditure back from central government. Continuing with the above real-life rent breakdown, we can illustrate how BCC must fund a £43.20 per unit per week shortfall between the RO valuation, and the reasonable rent charged for the high quality and well managed accommodation.
Example | Eligible rent | Rent Officer Decision (ROD) | Difference between Rent and ROD | Loss if Vulnerable (40%)
| Loss if not Vulnerable
|
A | £218 | £110 | £108 | £43.20 | £108 |
This provider operates 110 supported mental health units in Bristol. Assuming all claims result in the £43.20 vulnerable claimant loss, this would equate to £247k financial budget pressure to BCC per annum, money that BCC must find from its own budgets rather than receiving via government subsidy.
In sharp contrast, 23,000 units of RSL provided lease-based ‘supported accommodation’ are provided in Birmingham with rents exceeding £250 per week for what is effectively a room in a shared house with minimal or no support, but because the accommodation is provided by an RSL Birmingham City Council are returned 100% of the housing benefit paid out.
Solving this disparity between different provider statuses is crucial – it is not reasonable that a LA must fund RO shortfalls in good quality commissioned services to such an extent, where non-commissioned schemes provided by exploitative providers are fully funded at no direct cost to the LA, regardless of the quality of accommodation or support.
A simple way to remedy this issue would be to allow full housing benefit subsidy on commissioned schemes, and schemes locally approved by the LA.
BCC has managed its caseload robustly for the last 11 years, but prior to this long-term project had a significant amount of poor quality and expensive exempt accommodation. Without this management, Bristol would very likely be in a similar position to other LAs in respect of their complex and difficult to manage caseloads.
SEA can be exploited most easily in cheaper housing markets – Bristol’s is highly competitive, and properties are expensive and do not represent such immediate good value for investors. Pilot localities such as Hull, Blackburn, Blackpool, and Birmingham have more inexpensive housing which can develop excellent financial returns vial exploiting SEA legislation.
Bristol has 19 RSL providers of SEA, and 19 non-RSL providers. Bristol has approximately 2,424 SEA claims in payment at any one time. Approximate analysis suggests that of these, 1,860 are provided by RSLs and 564 are provided by non-RSL provider types. RSLs are currently the most appropriate vehicle through which to provide specialised accommodation services. Given the ratio of provision in Bristol is largely RSL provision would suggest the appropriate balance is struck.
Bristol has 2,424 exempt claims in payment at any one time. Approximate analysis suggests that of these, 2223 are commissioned dwellings, and 201 are non-commissioned dwellings. Given most services are commissioned by BCC, it would suggest that the appropriate balance has been struck in this locality.
| Commissioned | Non-commissioned | Totals |
RSL | 1725 | 135 | 1860 |
Non-RSL | 498 | 66 | 564 |
Total | 2223 | 201 | 2424 |
This table illustrates that 91.7% of Bristol’s SEA is commissioned. Part of BCC’s long-standing success against exploitation of the exempt provisions is extensive service commissioning, ensuring that services are available for those that need them and reducing the opportunities to enter the SEA market.
Provider status should not affect the quality of provision, as under SEA rules providers are able to charge the cost of providing adequate accommodation services to housing benefit. So long as costs are reasonable, no deductions will be made or even considered. However, outside of commissioned services there are questions as to how providers fund their support, as the cost of support is not eligible for housing benefit. There are concerns that some providers will fund support by inflating other elements of the rent and service charge. To do this, they must seek to ensure that their rent is not restricted, which results in lower standards of accommodation, as providers spend money ‘designated’ for accommodation services on the support service.
As set out in legislation the classic model is where the eligible landlord organisation also provides the client with care, support, or supervision – or has care, support or supervision provided to the client on their behalf. So, the simplest mechanism is where a RSL or charitable landlord provides the client with both accommodation and a support service.
The legislation itself defines none of its constituent parts, and consequently the regulation has been ‘defined’ over the years via a vast body of case law so complex that it renders itself more of a hinderance than a help. The case law has developed through a series of Upper Tribunal (UT) decisions where providers have argued they provide a support service against the LAs contention that they do not. The result of this case law is that there is now a myriad of ‘defined’ ways that support can be provided leading to the bar being set very low essentially meaning that in practice there is no ‘support’ threshold to meet.
‘Support’ can be delivered through traditional 1-2-1 weekly sessions where a client will receive several hours’ support per week, which should be documented in a support file. The legacy of case law also states that support can be provided via a more ‘intensive’ than normal housing management burden, or the landlord taking any actions that render the client more likely to maintain their tenancy – ‘making a real difference’.
The case law however in practice clarifies little, and simply leads to more ‘grey areas’ as consultants seek to engineer circumstances so their provider clients deliver similar services, which UT judges have ruled acceptable in highly specific cases. This makes it possible for providers to meet the SEA criteria by delivering little in the way of traditional support services, and there are essentially three ways that this can be achieved, providers often exploiting a blend of the three to achieve SEA status.
It is difficult and personally invasive for housing benefit officers to assess personal support delivered to a client, as any support required will relate to often very personal circumstances. However, the approach developed and refined by Bristol over the years is to interview the tenant via a questionnaire about support received, and to cross reference this with the tenants’ support files.
This technique works well when reviewing established providers at relatively short notice – we can request several months’ support file records and interview the tenant – if the landlord isn’t providing support this will often be clear. In Bristol’s early days of reviewing providers, we found that either very little support was provided, or good support was provided, which makes the decision-making process relatively straightforward. This technique is less effective with new providers and new tenants as there is nothing to ‘review’. Instead, we advise the provider that we’ll review the support service once there is evidence to review, generally after a few months. Because the provider is setting up the scheme and knows the files will be reviewed, and the tenants interviewed, they are highly incentivised to ensure that they evidence that support is provided, even if it will not be once the status has been granted. This is unfair on the tenant who may be pressurised by the landlord to ‘perform’ under interview.
We know that when landlords seek to exploit the exemption, one of the key challenges is to provide ‘support’, which cannot be funded by HB. As this can only really be assessed by recording what the tenant says, it is important that the tenant articulates the support service they receive.
Landlords can claim to provide IHM, which case law has stated can be analogous to support. So, it is perfectly possible for a landlord to provide ‘supported’ accommodation without providing any traditional support at all, but to evidence a high housing management burden. This is really very challenging for LAs to assess, although Bristol has developed a technique which works well, but is ultimately time consuming.
All landlords need to provide Ordinary Housing Management (OHM) e.g., repairs, maintenance, gas safety, tenant sign up etc. These are fundamental elements of being a landlord and sit firmly within ordinary expectations when renting a property. To assess whether an IHM service is provided we ask the landlord to provide comprehensive evidence of all HM tasks (O and I) over a given period. We then assess whether landlord interaction with the tenant/property is Ordinary or Intensive i.e., extraordinary, or higher than normal. We then make a judgement as to whether sufficient IHM is provided to suggest its provision is analogous to support. If a landlord provides for example 10 items of housing management in three months, 8 are ordinary and two are beyond what a general needs landlord would provide, we will likely decide the threshold has not been met. If alternatively, the landlord provides 20 items of housing management in three months, and 12 are IHM, we may decide that the threshold has been met. Landlords that house a chaotic clientele have argued that ‘keeping good order’ is IHM and analogous to support.
There are further questions as to whether IHM can be an eligible service charge if its provision is analogous to support, as the cost of providing a support service is not eligible for housing benefit funding but the provision of housing management services is. Is it reasonable for a landlord to gain exemption via IHM and charge the cost of doing so to housing benefit?
We have seen instances of where being a tenant of a provider within an organisation’s ethos can be viewed as a supportive environment, for example a landlord providing abstinent dry-house drug and alcohol recovery, accommodation, and support services.
House or organisation rules and intra-tenant holistic organisation-wide day-to-day support can be viewed as contributory towards support for SEA purposes – the scheme rules make it more likely that a tenant will not relapse and more likely that they will sustain their tenancy or licence agreement.
The reality of SEA is often a complex blend of support, IHM and organisational ethos. When challenging a landlord on provision of ‘more than minimal’ support, it is important to not only focus on classic support services, but on other ways that the landlord may construe that they provide support to the tenant. It may be that on either of these three measures alone the case would be deemed ‘not exempt’ but on the basis of a combination of all three, the outcome may be different.
For landlords that exploit SEA HB there is so much money to be made that it is almost always cost effective to employ expensive consultants and even barristers to argue that support is provided at a level which is ‘more than minimal’, especially as if successful, legal costs can simply be recovered through the eligible rent.
SEA should ideally be provided to the ‘classic model’ where support services are clearly met without relying on complex case law interpretations. Exempt schemes should be endorsed by the Local Authority, and rents and service charges should conform to local market conditions – a superior landlord should not be able to make significantly more money by leasing property to a charity for use as supported accommodation that they could via the private rented sector.
Providers can set up exempt accommodation by delivering accommodation through a ‘not-for-profit’ legal entity, often ‘shell companies’ or ‘brass plate’ organisations and facilitating loosely defined support as described here previously. There are no quality or oversight regimes beyond scrutiny by housing benefit officers, and some mandatory Environmental Health and Building Control inspections, in certain cases. As such there is effectively no regulatory oversight of the sector.
Many providers seeking to exploit exempt provisions are RSLs, and the RSH does not proactively regulate, and focuses its attention on providers with more than 1000 units with most lease-based providers having fewer than 1000 units.
As previously stated, in BCC’s experience, RSLs and their interactions with housing benefit were simple and reasonable until around 2014-15. Prior to this point, scrutiny of RSLs claims was minimal as practically every dwelling was provided via ‘bricks and mortar’ large, mainstream RSL providers to the Rent Standard, or ‘formula rent’, heavily regulated by the RSH. Claims for housing benefit consisted of the ‘formula rent’ and a modest service charge for the provision of communal services.
RSL have traditionally provided general needs, and some supported accommodation, though both types of letting are subject to the same Formula Rent. But aside from these types of let, RSLs can provide every type of lettable accommodation that exists including non-social, although this fact is little known as most mainstream RSLs have chosen not to provide anything beyond social housing.
There are various exemptions from the rent standard that RSLs can utilise for legitimate purposes, and these exemptions mean that RSLs can provide properties where the rent is not regulated by the Rent Standard. These exemptions exist to enable the delivery of more expensive property than the Rent Standard allows through the RSL vehicle the policy intention being to enable provision of typically specialised accommodation services that can cost more money to provide. RSLs delivering properties through these exemptions is entirely legitimate, though again open to potential exploitation. However, the exemptions do generally require involvement of the LA or CCG in terms of agreement of scheme and rent, or Part 7 homelessness duty to realise the ‘exemption’, though there are no safeguards aside from ordinary HB ones to ensure that RSL landlords meet these criteria.
As well as specific exemptions, it is possible for RSLs to provide ‘non-social’ rented accommodation, essentially the same as a high-street letting agent, and these properties are not regulated by the RSH at all. In theory there is no reason why a RSL shouldn’t be able to provide ‘non-social’ as part of its housing stock e.g., it might decide to develop a block of flats, and as part of the portfolio a number of units for ‘non-social’ renters, to help the development fund itself.
However, this ability to provide ‘non-social’ while clearly well-intended by the RSH has led to unintended consequences where RSLs are able to charge rents that exceed the rent standard and bypass any regulatory attention by claiming it to be ‘non-social’ and therefore not regulated. Because the housing benefit regulations and RSL regulations are not connected, HB treats ‘non-social’ as any other RSL case, whereas the HB regs should treat non-social as any other private tenant case and subject the claim to UC or LHA.
The lease-based model has come under scrutiny by the RSH due to the impact the model is having on several local authorities, and the direct impact on the Treasury via high levels of housing benefit payment, but the RSH have had limited impact on managing this sector through the existing regulatory framework.
In terms of regulatory amendments to the legislation we suggest:
There is very little understanding about what exempt accommodation is in the public domain, and BCC have experience of the difficulties in conveying why particularly poor-quality supported accommodation is funded, which is often publicly not understood. Local Authorities including Bristol have received criticism for paying exempt accommodation scheme rents which are perceived as poor quality.
Public understanding of complex funding models should not typically be required, especially where services provided are of high quality and at a reasonable cost. The requirement to provide significant additional information to the public in respect of what exempt accommodation is, could be mitigated by resolving the issues addressed by this inquiry, which would draw unnecessary attention away from schemes that are perceived to be of low social and economic value.
There is also not enough statistical information and data publicly available about exempt accommodation, and this weakness in the evidence base results in central and local government being able to form a firm understanding of the scale and cost of SEA services in Great Britain. We do not know how much expenditure on exempt accommodation nationally is spent in respect of different types of providers, via different subsidy models and in different Local Authorities. It is difficult or impossible to make direct and meaningful comparisons between caseloads. It would be useful for Local Authorities to work closely with central government to improve reporting mechanisms, and centrally held government statistics on the sector.
February 2022