This year we have partnered with the Orwell Prize to offer the Orwell Prize for Reporting Homelessness. Over the past 6 months, we asked for entries from people experiencing homelessness and from journalists who shine a light on the problem and its potential solutions. In this blog, we share one of the pieces from Jack Simpson, which has been shortlisted by the judges. This article was published by Inside Housing in November 2022.

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The true cost of exempt accommodation

“It’s a complete mess,” thundered Clive Betts, chair of the Levelling Up, Housing and Communities Select Committee, on publishing its report looking into the state of the country’s exempt accommodation (EA) sector.

After nearly a year of investigating the sub-sector of supported housing, the committee published its 67-page report, and it pulled no punches.

“I think this is the worst example of poor provision that I’ve seen and it is all paid for by the taxpayer,” Mr Betts told Inside Housing on the morning the report was published.

Given the name because the element of support involved means it is exempt from housing benefit caps, EA allows landlords to claim sky-high rents. These rents are supposed to cover the intensive housing management this sort of housing involves. And in the majority of scenarios it does require this, with EA providing crucial housing and support for those hardest to house.

But there is a growing element of providers taking advantage of the housing benefit rules to bolster their own income. This is at the expense of residents forced to live in substandard housing with no support.

The committee described it as a “gold mine” and in some cases a “licence to print money”.

So, with so much public money being pumped through the exempt sector, you would expect the government to be monitoring this. Or at least understand just how much is being spent. It does not.

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Data gap

One major criticism by the report was the lack of data and absence of any systematic way of collecting it, with the government accused of being “caught sleeping”.

Inside Housing has tried to fill that hole. By sending Freedom of Information requests to local authorities, we have been able to paint the most comprehensive picture yet of EA spend across the country.  

Receiving expenditure figures from 174 of England’s 333 local authorities, we can reveal that £883.5m was spent on EA last year. This still tells only part of the story, with nearly 100 councils – including large cities such as Liverpool and Sheffield, where we know there is a high level of this accommodation – unable to provide figures. The non-responses tell us as much about the problems assessing the scale and cost of national EA data as the responses do.

An additional 73 responded but did not provide figures, with the majority using the FOI time limit exemption, explaining that extracting the data would involve having to individually check each housing benefit claim for the year.

The data we were able to obtain, though, shows a steep increase in spend on accommodation across the majority of local authority areas over the past four years. Much of this will come directly from the Department for Work and Pensions (DWP), which covers the vast majority of the exempt bill, but an increasing amount
is having to come from councils’ own funding pots.

Out of the 47 councils where yearly data was available for the past four years, 36 showed an increase in spend during that period. Of those, 19 saw spend increase by 50% or more, with 13 of those councils doubling expenditure over that period.

Some of the biggest increases include Hammersmith & Fulham, which saw exempt expenditure increase from £34,286 in 2018-19 to £12.7m last year; Doncaster, which leapt from £2.5m to £11m; and Southampton, which rose from £1.1m in 2018-19 to its current spend of £5.3m. These figures show that EA is clearly on the rise, but why?

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What is exempt accommodation?

EA is a form of supported housing not widely known about or understood.

Provided by housing associations, often through managing agents, charities or community interest companies, it is offered to people with few other housing options, such as migrants, those fleeing domestic abuse, prison leavers and recovering addicts.

If a provider gives a small element of care, support and supervision, it is ‘exempt’ from usual rules which limit the amount of housing benefit tenants can claim. The rules around how much care is simply defined as “more than minimal”.

The additional rent is supposed to cover the ‘intensive housing management’ and an additional ‘service charge’ usually needed to cover the support. If you are a housing association, the DWP pays rents in full, whereas if you are a non-registered provider – for example, a charity – the council picks up 40% of the bill.

EA rents can be sky-high when compared to equivalent general needs accommodation.

Take Charnwood Borough Council. The average weekly rent claimed for EA in the East Midlands authority is £320 per week, nearly five times higher than the £78-per-week Local Housing Allowance limit in the area for a single room for an adult.

It is a similar story in other councils. In many cases these costs are justified, but it is easy to see why it might be attractive to those looking to cash in.

The ‘EA’ definition was first used in 1996, but it was the removal of the ringfence of the £1.6bn Supporting People programme in the late 2000s which set the wheels in motion for the growth we have seen in recent years. The removal of the ringfence saw austerity-hit councils begin to spend this money on other services. This had a huge impact on the amount of money available for commissioned supported housing and threatened many organisations that provided this.

To ensure these services could continue, many turned to the EA rules to begin to claim the higher housing benefit, to plug the funding gap and keep their services going. One person working in council housing at the time told Inside Housing that while the outcomes were initially beneficial, others began to see how it could be potentially manipulated, and more and more providers were attracted to the sector, including some unscrupulous providers.

The country’s severe lack of social and supported housing has helped drive numbers, with EA being used as a means of housing those presenting as homeless but who are low down in terms of priority need.

Yet while Inside Housing’s research shows clear evidence that the numbers are on the increase, there should still be some caution regarding the figures.

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Specified accommodation

In our FOI request, Inside Housing asked for a figure on EA as defined by 2014 guidance. This is a shorter-term, transitional type of housing where the provider, or a body acting on its behalf, provides the claimant with care, support or supervision.

However, Inside Housing’s checks with some councils showed that in some cases they were providing their expenditure for ‘specified accommodation’.

Specified accommodation includes EA, which is the most prevalent housing type, but also other types of supported accommodation such as longer-term specialised supported housing, domestic abuse refuges and some hostel accommodation. The reason often given was that, historically, councils have not been asked to differentiate between the categories, while others said they did not have the IT systems to split out these claims.

The government is now trying to correct this with new guidance for council benefit teams to differentiate and support implementing new software to assist councils.

But while there are clearly data issues, the figures we do have are, in some cases, huge. This is particularly the case in urban areas. Manchester saw £25.3m spent last year, Lambeth £26.3m and Coventry £19.9m.

But there is one city that far outstrips the others, and that is Birmingham, in the West Midlands – the country’s capital of EA. In data given by the council, Inside Housing can confirm that at least £192m was spent on EA provision in Birmingham last year, more than seven times higher than the next highest. But it was not always like this. Go back to 2014, and Birmingham, with its 3,679 EA claimants, had a similar amount to other cities. Since then, the sector has boomed. In April 2022, there were just under 22,000 claims.

There are a number of reasons for the spike. Birmingham has a severe shortage of social housing, while also having big houses in multiple occupation (HMO)-style properties, ideal for EA, which are comparatively cheap to acquire. Some also argue that there has been a less hostile approach to EA in Birmingham’s housing benefit approach when compared to other councils. This is denied by the council, which says it has always applied government legislation strictly.

The sheer number of exempt properties has also made Birmingham a go-to place for other councils and prisons to send those hard to house, further driving up the numbers.

Rapid growth in Birmingham has meant some providers are receiving unprecedented amounts of money. Data supplied by Birmingham City Council shows that last year alone, at least £192.8m was handed to the main EA providers in the city. Over the past four years, these providers received £547m. This figure is likely to be higher, but Birmingham’s data cannot separate supported and general needs receipts for providers.

Not all of this money will remain with these providers. The main exempt model used in Birmingham sees these providers employ managing agents, which manage the properties and care. The managing agents will recoup most of the housing benefit money, while the registered providers take a management fee.

The three biggest providers – Reliance, Concept and Ash Shahada – received £159.2m last year, with Ash Shahada getting £27.5m, Concept £41.6m and Reliance £90m. All three have been deemed non-compliant by the Regulator of Social Housing (RSH) with regards to its governance standards. In all three regulatory notices, the RSH said that the boards of the organisations failed to ensure that arrangements they entered did not inappropriately advance the interests of third parties.

To put Reliance’s figure into perspective, it received more than three times more exempt housing benefit than the whole of Manchester.

This rapid increase is all the more incredible when you bear in mind that it only purchased its first supported housing in 2018. Reliance said it does not spend all of its money on exempt accommodation and is growing its social housing portfolio, having acquired assets in excess of £2.5m in 2022. Concept said it works closely with local authority partners, including Birmingham City Council, to help meet the growing housing demand among often very vulnerable people, and provide good-quality accommodation and support through regular inspections and audits. Ash Shahada has been contacted for comment.

The council said the payments are another symptom of the broken system, under which the council is obliged legally to pay these providers knowing that the service they provide often lets down the most vulnerable people. It called for legislation to give local authorities the ability to control the growth.

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Country-wide issue

But EA growth is not just a Birmingham issue. Inside Housing’s figures reveal that exempt spend is on the increase across the country.

One area that has seen particular growth is Lancashire. Both Blackpool and Blackburn have seen particular growth, with the seaside town seeing spend rise from £7m to £9.5m since 2018-19. Blackburn saw growth from £5.9m to £9.4m across the same period. Nearby Bolton and Calderdale have also seen significant jumps.

While it was unable to provide figures, Preston pointed to the cheap and available property as a reason for its growth. Its evidence to the select committee said: “In Preston, there is a surplus of either large ex-student HMOs available to buy, or ex-local authority properties now privately owned and available at low prices to convert. These properties are particularly attractive to the operators of EA.”

But similar leaps are being replicated in all corners of the country. Cornwall, in the South West, has seen expenditure increase from £12.9m in 2018-19 to £22.6m in 2021-22, while spend in Sunderland, in the North East, has increased from £6.5m to £9.6m across the same period.

Matt Downie, chief executive of homelessness charity Crisis, says the organisation is seeing an increase in demand. “Our Birmingham services continue to be the most impacted, but we are also seeing enquires for our services in Newcastle, South Yorkshire, Croydon and Merseyside,” he says.

Even in London, a place that has been largely shielded from the increase in EA that others have seen as a result of property prices and availability of stock, there has been movement.

Enfield is probably the biggest example of this. The north London borough has seen the money it has spent on EA increase from £6.8m in 2018-19 to £14.5m last year. The council said this was reflective of the high housing need in the area.

And EA is sucking crucial funds from other areas of spend for the council. This is because of the difference in how EA is paid for, depending on the type of provider. If the provider is registered with the RSH, 100% of the funding comes directly from the DWP. However, when the provider is not registered – ie is a charity or a community interest group – the DWP covers 60% of the costs, with the remaining 40% coming from council housing benefit pots. This decreases to 0% when the person is not classed as vulnerable.

This is giving councils financial headaches as they have to make up the gap through their general funds.

Charnwood is a particularly stark example. It forecasts that it will lose nearly £2m next year through this subsidy gap. This equates to 25% of its total council tax revenue.

The Local Government Association identified 23 local authorities that had lost more than £1m because of this in 2020-21. Leeds had the biggest gap, with £3.7m lost in 2020-21. This was expected to hit £4.7m in 2021-22.

Councils are having to deal with these financial costs, alongside the social impact that poor-quality EA is having on people and communities.

It is important to say that most EA is of good quality, provided by conscientious landlords, which ensures high levels of support. This was a point stressed in the majority of the 118 evidence submissions to the select committee.

But, as Mr Downie says, while there are many good providers, there has been an increase in rogue providers entering the market.

“The worst providers are cashing in on human misery and undermining the important role EA can play in helping people move on from homelessness,” he says.

You do not have to look too far to find strong evidence of poor-quality housing, with many councils decrying provision in their areas.

In Hull, for example, a city-wide inspection programme of exempt properties revealed widespread substandard accommodation. An inspection of 345 EA homes threw up 1,192 significant housing hazards, including 323 Category One hazards. These are hazards that pose a ‘serious and immediate’ risk to a person’s health and safety. In total, 62% of the homes failed the Decent Homes Standard.

A number of councils also focused on the inadequate level of support provided. Examples put forward by Nottingham City Council were particularly shocking. These included residents being forced to sleep in kitchens, illegal evictions of tenants and financial coercion by support workers.

It also highlighted the issue of ‘risky mixes’, where little thought is put into the make-up of who is being placed in a property, with men and women being mixed, as well as drug and alcohol abusers. It reported one instance where a survivor of domestic abuse was housed in the same accommodation as the perpetrator.

This lack of oversight can lead to tragic outcomes. The Domestic Abuse Commissioner’s submission to the select committee highlighted that “potentially preventable homicides take place in EA”. She pointed to a murder in Northampton where a flatmate stabbed another after not being risk-assessed, and the case of Phoenix Netts, who was killed by her housemate in a Birmingham exempt property.

EA is having devastating impacts on communities, too. Communities in Birmingham living in areas of high EA described having rubbish piling up on the streets, regular instances of anti-social behaviour and often examples of drug-taking, littering, public urination and, in one area, prostitution.

An 18-month crackdown on exempt properties by police in Birmingham resulted in 453 investigations into a myriad of criminal activities, from anti-social behaviour and cannabis farm cultivation, to firearm possession and housing benefit fraud.

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The response

With the social and financial costs being brought more sharply into focus in recent years, there has been a greater move to fix the situation. The select committee report has further ratcheted up pressure for action, not least on spending data, and it has called for a full report outlining spend within a year.

Many groups that want EA reform are pinning their hopes on a private members’ bill being put forward by long-serving select committee MP Bob Blackman.

The Supported Housing (Regulatory Oversight) Bill includes a number of proposals that match those put forward by the committee, including giving powers to councils to ban underperforming providers.

To help control the spiralling costs, the bill will introduce a licensing scheme for all exempt providers, where they must adhere to national standards of care and support to be eligible for exempt rates.

It successfully passed its second reading in parliament on Friday. It seems to have some government buy-in, too. Michael Gove has pledged £20m to toughen up inspections of bad providers, with those exploiting the system facing bans or a £30,000 fine. He also stated that he would work closely with Mr Blackman on his bill to address poor-quality social housing.

However, some have warned that any new legislation should not inadvertently drive out those good providers, which are in the majority, from the sector – particularly those providing longer-term supported housing.

“It is imperative that any future regulation does not have unintended consequences for housing associations providing long-term, lifetime supported housing for groups such as people with a learning disability and autistic people,” says John Verge, chief executive of Golden Lane Housing and chair of the Learning Disability and Autism Housing Network.

“We need to see proportionate oversight that deals with the rogue providers, but supports current good provision and does not create further barriers for long-standing housing associations.”

But while Mr Verge is wary that the regulation does not drive out good providers, he is also aware that there is an undercurrent of rogue providers that proportionate regulation needs to deal with.

As the evidence shows, poor EA is a national problem, affecting every corner of the country, and growing in a large number of areas. Thousands of people, some of society’s most vulnerable, are having to endure terrible housing conditions without getting the crucial support they need, while some unscrupulous landlords cash in – and this is being paid for by the taxpayer.

While Inside Housing’s research shows that the annual cost of EA is up in the hundreds of millions – if not billions – of pounds, the most shocking revelation is that the government or many local authorities do not know exactly how much or, more alarmingly, where exactly that money is going.

Getting a grasp on that seems to be the first step to getting a grasp on the growing problem of substandard EA.

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