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The Problems with Exempt Accommodation

This influx of the uninvited has led to significant pressure on local authorities and enhanced Housing Benefit. Alleged supported housing providers, whether connected to dubiously motivated private capital or not, have popped up all over the place, usually in the form of a CIC, and demanded enhanced Housing Benefit for alleged supported housing services that no one asked them to provide.

Background

Back in 2005 the primary revenue funding stream for supported housing was “Supporting People funding”, a £1.8 billion UK wide funding pot that had been rolled out two years earlier but was already retrenching markedly. Supported housing providers were struggling to cope with revenue reductions after having been encouraged to grow their services by the government of the day, which then immediately set about restricting the Supporting People revenue upon which those schemes depended.

It was at that time that I and a few others identified a means of offsetting some of that revenue loss. We identified the existence of the Exempt Accommodation rules, an arcane set of regulations that entitled agencies that complied with them to claim enhanced levels of Housing Benefit for providing certain housing related services to people with additional needs. I reinvented the term “intensive housing management” to describe those services and set about promoting the Exempt Accommodation rules, enhanced Housing Benefit, and intensive housing management to the supported housing sector. Over 15 years later, enhanced Housing Benefit has become the primary funding stream for supported housing totalling around £1 billion per year.

Problems?

I hope you’ll forgive me for taking pride in having been instrumental in creating that £1 billion revenue pot. However, in addition to a sense of pride I also have a sense of intense anger at the fact that the Exempt Accommodation rules have been roundly abused by organisations and individuals that have made massive amounts of money, and still do, through the wholesale financial abuse of people with additional needs.

Housing Benefit, whether enhanced or not, is a personal benefit. This personal benefit is being diverted into the pockets of dubiously motivated people on an industrial scale.

To qualify your tenants for enhanced Housing Benefit you must be an “exempt landlord”: put simply; a “housing association”, a charity or voluntary organisation.

The Exempt Accommodation rules were devised in 1996 to prevent ill motivated private landlords from robbing the Housing Benefit system by providing poor quality bed-and-breakfast accommodation to homeless people and charging the local authority a fortune for it. The government of the day introduced the Exempt Accommodation rules to restrict private landlords to Local Reference Rent levels (now known as Local Housing Allowance). Certain landlords, identified above, were exempt from those rent levels, so exempt landlords could claim enhanced levels of Housing Benefit.

What has happened since enhanced Housing Benefit became a major revenue stream is that certain individuals have abused the system by setting up allegedly exempt landlord structures, which are nothing more than badly motivated private businesses masquerading as exempt accommodation compliant supported housing providers.

These businesses are exploiting the Exempt Accommodation rules to use them for the very opposite purpose for which they were intended, which was to prevent, not enable, the abuse of peoples’ Housing Benefit entitlements.

But it’s not just dubious supported housing providers, which milk the system and provide poor quality accommodation and minimal or non-existent services that are the problem. Commercial greed has affected the entire supported housing ecosystem.

Private Capital

Don’t get me wrong here; I absolutely believe that private capital is essential for the development of new supported housing schemes. Whether you fund supported housing, commission supported housing, deliver it, or measure its quality you need to do so according to a set of principles. A few years ago, I devised “Value Generation” as this set of principles:

  • Outcomes for people (qualitatively measured)
  • Cost benefit to the public purse (quantitatively measured)
  • Wider social and community benefit (qualitatively and quantitatively measured)

So, if you don’t generate value you shouldn’t be involved in supported housing.

Just as many supported housing providers do a brilliant job for people with additional needs, some private capital providers do the same thing. To get an idea of what I mean you could do worse than to book onto our free virtual supported housing conference 2022. One of the sessions will be led by Assetz Exchange, which acquires and leases property for supported housing and whose investors can expect a yield of in the region of 5%, which is entirely reasonable and is an exercise in Value Generation.

By comparison, I’m aware of other private capital providers who think that 9%, 10%, 12% or 15% yields are reasonable and some of which would think nothing of using dubious valuation methodologies as a means of inflating the property lease cost for enhanced Housing Benefit claim purposes. Often the only value being generated in such examples is financial value to investors and shareholders at the expense of services for people with additional needs, who are supposed to be the point of and the priority for supported housing.

The Invasion of the Supported Housing Ecosystem & the Response to it

Many of the money motivated private capital providers have made common cause with equally money motivated registered providers, which in turn work with supported housing provider agencies that take on the identity of CICs and other allegedly non-profit structures.

This has led to an invasion of the supported housing ecosystem by people and organisations who know how to play the system for financial gain.

This influx of the uninvited has led to significant pressure on local authorities and enhanced Housing Benefit. Alleged supported housing providers, whether connected to dubiously motivated private capital or not, have popped up all over the place, usually in the form of a CIC, and demanded enhanced Housing Benefit for alleged supported housing services that no one asked them to provide.

One of the consequences of this is the National Statement of Expectations for Supported Housing, published by the UK government (England only) in October 2020, which tells local authorities to restrict the number of new supported housing “market entrants”, to restrict the payment of enhanced Housing Benefit (without actually using those words) and exhorts commissioners and revenues and benefits teams to work together in the administration of enhanced Housing Benefit.

“Inside Housing” magazine continues to run an information campaign on the uncontrolled growth of exempt accommodation. Thea Raisbeck on behalf of Commonweal Housing and Spring Housing published “Exempt From Responsibility?“, which focuses in particular on Birmingham; an outlier in exempt accommodation abuse with 22,000 exempt accommodation bed spaces. Many of these are in poor quality housing within which negligible or no services are provided, but which attract high levels of enhanced Housing Benefit. Where does that money go, I wonder?

But it’s not just Birmingham, bad though the situation is there. The MHCLG (now the DLUHC) set up five exempt accommodation pilots in Birmingham, Hull, Bristol, Blackburn and Blackpool all of which are exempt accommodation “hotspots”. Those pilots recently reported.

The “Supported Housing Oversight Pilots” evaluation report is heavily qualified methodologically and contains a plea for more funding for further evaluation. This wish appears to have been partially met by the UK government’s recent announcement of £20m towards a Supported Housing Improvement Programme.

The report recommends that “care, support and supervision” (an Exempt Accommodation rule criterion) should be defined and that regulations around rent levels and subsidy rules should be reviewed. The temptation to use this as a means of exercising cost control rather than Value Generation must be resisted. It might sound a bit “old hat” of me to say that investment in preventative services such as supported housing saves a fortune in otherwise avoidable statutory interventions, but it’s still true. The point should be to deny revenue to dodgy operators, not restrict revenue to good ones.

The report also reflects the National Statement of Expectations for Supported Housing in saying that local authorities should be able to intervene to stop new supported housing supply where it is unnecessary or of poor quality. Many local authorities have set up “gateway” arrangements which prospective supported housing providers have to go through, rather than just setting up and applying for enhanced Housing Benefit.

Rather confusingly, the report claims that “local authorities’ oversight of support is currently limited by existing regulation….”. It seems to me that there is a distinct difference between regulation on the one hand (and the supported housing sector has several regulators) and oversight on the other, which pretty much doesn’t exist. In my view, ALL supported housing providers should be subject to local accreditation as they were during the Supporting People initiative. No accreditation should mean no funding.

Oversight should be based on an independently developed and implemented oversight system based on Value Generation principles.

Given the prominence of some registered providers in what has become the exempt accommodation industry, the Regulator of Social Housing (RSH) in England has sanctioned several exempt accommodation registered providers. The modus operandi of some of those registered providers is to use associated private companies to charge large amounts of money often for unspecified services to supported housing providers (both good and bad) that work as their agents. Let’s do the maths here; if for example, a registered provider has 5000 agency managed bed spaces and an associated private company charges 10% of the rent roll to those agencies (for unspecified services that may not be provided), given an average weekly enhanced Housing Benefit charge of, say, £200 a week, it’s making £5.2 million per year. Where is this money going?

Thus far the RSH has claimed it has no control over third party organisations associated with registered providers, even in circumstances of apparent “disguised profit”. However, that is about to change as a consequence of legislative changes to sections 107, 108, 203 and 208 of the Housing and Regeneration Act 2008, which will give the RSH “look through” powers to demand that registered providers explain where money that has left the regulated sector has gone, and not before time.

The UK government DLUHC is currently conducting an Inquiry into Exempt Accommodation. You can see my submission to that enquiry here. The thrust of my submission is that Exempt Accommodation as a concept should be abolished, that enhanced Housing Benefit should be abolished and replaced with “Supported Housing Rent“, which is an uncapped housing component of Universal Credit, that all supported housing providers should be accredited at local level (as they were under “Supporting People”) and that there should be an independent oversight system for Supported Housing  based on Value Generation principles.

At time of writing the Inquiry is ongoing, but we will be updating you on any progress it makes at our supported housing conference 2022 which, I repeat, is a free event. At time of writing, we have 800 bookings across the six separate components of the conference.

The Exempt Accommodation Project.

One of the serious implications of the abuse of the Exempt Accommodation rules and enhanced Housing Benefit is that local authorities have, in many cases, implemented quite stringent interpretations of the National Statement of Expectations for Supported Housing by making it much harder for supported housing providers to claim enhanced Housing Benefit. I can quite understand their position, but it affects genuine supported housing providers as well as their dubious counterparts.

In addition to making it harder to claim enhanced Housing Benefit, some local authorities have told supported housing providers to register as registered providers. This is because where a registered provider is the landlord a local authority can recover from the DWP all the enhanced Housing Benefit it pays. Where a charity or voluntary organisations the landlord in an exempt accommodation/enhanced Housing Benefit claim, the local authority can only recover 60% of the difference between the Local Housing Allowance rate and the amount of the claim, so the local authority will lose a lot of money if it pays the claim.

However, the RSH has an effective embargo on registering new supported housing registered providers, again due to the conduct of those wrongly motivated supported housing registered providers, many of which have been sanctioned by the RSH.

Our solution to this is the Exempt Accommodation Project, which brokers relationships between reputable supported housing providers and reputable registered providers to enable local authorities to pay reasonable, well-founded enhanced Housing Benefit claims without loss of subsidy.

Talk To Us

If you represent a reputable supported housing provider struggling to claim enhanced Housing Benefit, or a reputable registered provider willing to take a short-term lease on a supported housing provider’s property for a good revenue stream please contact us.

Finally, if you’re looking for values driven professional consultancy advice and support in supported housing, please get in touch.

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