Third Report - Exempt Accommodation

An unknown but significant number of residents’ experiences of exempt accommodation are beyond disgraceful. Taxpayers’ money is being spent on uncapped housing benefit on the understanding that residents, who are usually vulnerable, receive some care, support, or supervision—yet it is clear that some people’s situations actually deteriorate as a result of the shocking conditions in which they live. We heard of squalid environments, vermin, drug-taking, crime and abuse. We heard of people with a history of substance misuse being housed with drug dealers, and of survivors of domestic abuse being housed with perpetrators of such abuse. The support on offer is sometimes little more than a loaf of bread left on a table or a support worker shouting at the bottom of the stairs to check on residents.

Since areas with high concentrations of exempt accommodation can attract anti- social behaviour, crime, rubbish, and vermin, neighbours and communities are affected negatively as well as residents. These impacts risk undermining local support for supported housing.

It is egregious that organisations with no expertise are able to target survivors of domestic abuse and their children and provide neither specialist support nor an appropriate or safe environment. Where a prospective resident of exempt accommodation is a survivor of domestic abuse, there must be a requirement that housing benefit is only paid to providers that have recognised expertise and meet the standards in Part 4 of the Domestic Abuse Act 2021. This must be implemented alongside increased supply of specialist services: the Government’s Supported Housing Improvement Programme offers an opportunity to develop an evidence-based, survivor-led model of exempt accommodation for survivors of domestic abuse and their children.

Due to the scarcity of data on exempt accommodation, our inquiry was unable to establish how widespread the very worst experiences are either among residents or among local communities. Where the very worst experiences are occurring, this points to a complete breakdown of the system which calls for immediate action from Government. Implementing our recommendations in this report will go some way to improving the quality of provision for residents and managing the impact on communities. (Paragraph 34) Improving and overseeing the quality of provision

It was clear from our evidence that the quality of provision of exempt accommodation varies greatly and that the poor quality provision puts already vulnerable residents at serious risk. The Government fears “unintended consequences” from further regulation and points to councils that have turned things around within the funding envelope and powers available to them. Yet we received compelling evidence that there need to be national standards for referrals, support, and accommodation and that local authorities are best placed to enforce them. For all the efforts and best 46 Exempt Accommodation practice that Birmingham council has implemented, we still met residents of exempt accommodation in Birmingham living in utterly appalling circumstances, nine months after the Government’s pilots concluded. Two years after the Government published its National Statement of Expectations on the quality of the housing element of exempt accommodation, there are still landlords providing unacceptably poor housing. We welcome the Government’s exploration with councils of referral pathways and its commitment to improving the definition of “care, support or supervision” and setting minimum standards. It is imperative that these standards are not optional.

Within twelve months of the publication of this report, the Government should publish national standards, and give local authorities the power and resources to enforce these standards, in the following areas: • The referral process, which should include an assessment of the prospective resident’s support needs and if there are any considerations about with whom they should or should not be housed; • Care, support, or supervision, which should include helping the resident progress towards independence and employment; • The quality of housing; and • Information the provider must give to the resident, including on their rights, particularly their right to work and right to complain.

Consideration should be given to an accreditation scheme for providers, implemented on a graded basis, so that councils can assess the quality of provision in their area and so that poorer quality providers can improve.

The Government should provide new burdens funding to local authorities to ensure that they can carry out these duties to the best of their ability, recognising that improving the overall standard of exempt accommodation and making it more consistent is likely to save resources in the long-term. The Government should also carry out an impact assessment to identify and mitigate any unintended consequences.

The patchwork regulation of exempt accommodation has too many holes. We recognise that the exempt accommodation sector is complex with different types of providers, therefore requiring the involvement of multiple regulators. But some providers do not fall under the remit of any regulator, and no regulator has complete oversight of the different elements of exempt accommodation. Later in this report we recommend that all providers be registered, which would mean their oversight of economic and consumer standards was undertaken by the Regulator of Social Housing. We are particularly concerned about the fact that the “care, support, or supervision” element is unregulated except in the specific and limited circumstances where it falls within the Care Quality Commission’s remit. We welcome the Government’s commitment to exploring the regulatory regime to identify whether there are any gaps—but evidence to us expressed total unanimity as to the fact that gaps exist. (Paragraph 58) Exempt Accommodation 47

The different regulators have oversight for different aspects of exempt accommodation, and this means it is not simple to include oversight of exempt accommodation under a single regulator. However, the existing regulators are experts in their own areas and may be able to improve oversight of exempt accommodation if they worked more closely together in a more structured way. We therefore welcome the comment from the Department for Levelling Up, Housing and Communities (DLUHC) that a national oversight body was being considered.

We recommend that a National Oversight Committee be urgently established to address the oversight issues relating to exempt accommodation. Among its functions we expect that it would coordinate awareness of emerging issues, inform the development of policy in this area and develop proposals for reform of the regulatory system. The composition of the committee should include the existing regulators— the Care Quality Commission, Regulator of Social Housing, Charity Commission, Financial Conduct Authority and the Office of the Regulator of Community Interest Companies—officials from DLUHC, the Local Government Association, and any other organisation it was thought would make a valuable contribution to improving oversight. One of the committee’s first tasks should be to input into the development of the national standards we have recommended. (Paragraph 60) Data and costs

The dearth of data on exempt accommodation shows how successive Governments have been caught sleeping. The Government does not know how much exempt accommodation there is or how many people live in exempt accommodation. The Government claims that poor providers are a minority but has no data to back this up. The Government does not know how many providers are regulated and by which regulators. We know there have been acute problems in Birmingham, for example, which the then Minister for Welfare Delivery said were not happening across the country. Without data, however, it has been very difficult to ascertain the extent of these problems across the country. We welcome the data review commissioned by the Government, but it will only provide a snapshot in time. We also welcome the steps the Department for Work and Pensions (DWP) is taking to improve data collection, but since this will apply only to new claimants it will take time for a reliable national picture to emerge.

Within twelve months of publication of this report, the Government must organise the collection, collation and publication of annual statistics at a local authority level on the following: • The number of exempt accommodation claimants; • The number of exempt accommodation providers; • The number of housing units used for exempt accommodation; • The number of exempt accommodation housing units per provider; • The number of exempt accommodation claimants per provider; 48 Exempt Accommodation • The number of exempt accommodation providers registered with different regulators, and commissioned to provide accommodation or support; • The number of providers meeting and failing to meet the national standards we set out; and • The amount of money paid by both the DWP and the local authority in exempt accommodation housing benefit.

The Government has no idea how much taxpayer money is spent on exempt accommodation, nor what this money is spent on. It cannot know whether the current system is delivering value for money. Millions of pounds are being poured into exempt housing benefit with no guarantee that vulnerable residents will get the support they need. In some cases, vulnerable residents who are likely to have low incomes have to pay for support out of their own pockets. It is quite possible that the Government does not need to spend more on exempt accommodation but to spend more wisely.

The Government should conduct a review of exempt housing benefit claims to determine how much is being spent and on what. Rent should be capped at a reasonable level that meets the higher costs of managing exempt accommodation. Funding for support should be provided separately.

Providers of exempt accommodation are supposed to be not-for-profit, and there are many responsible providers, some of whom gave evidence to us. However, we also heard that the current system offers a licence to print money to those who wish to exploit it. We do not agree with the former Minister that using Freedom of Information requests to determine potential rent levels is a viable business model. Instead it gives the impression of a cartel pushing up rent levels and pocketing the excess at the expense of vulnerable residents and the taxpayer. The bar for local authorities to challenge rent levels is too high and appeals have rarely found in the council’s favour. Eligibility for funding for exempt accommodation must be based on an open-book, transparent breakdown of the accommodation and the support costs incurred to the provider. The Government should consider how to give councils greater control over rents for exempt accommodation to ensure value for money.

The Government was unable to provide a satisfactory justification, let alone an explanation, as to why DWP reimburses councils for 100% of housing benefit if the provider is registered but only 60% if it is not registered, leaving the council to pick up the rest of the tab. The same 100% subsidy should be paid by DWP whether or not the provider is registered. Later in this report we recommend that all providers be registered. While this will result in increased costs for DWP, this is likely to be offset by savings resulting from implementing our recommendations to drive out unscrupulous, profit-driven providers. (Paragraph 87) Planning and licensing

The former Minister was reluctant to consider changes to the planning system, arguing that some councils are having successes with the planning tools available Exempt Accommodation 49 to them, and that raising the overall quality will reduce the negative impacts on communities and in turn reduce the need to control the spread of exempt accommodation. However, our evidence pointed out that there is a limit to what local strategies for exempt accommodation can achieve without planning reforms. Councils need the ability to manage supply in line with locally assessed need. They need to be able to balance the provision of much needed family housing. They also need the ability to control the density of exempt accommodation because areas of high concentration can attract those with malicious intent to exploit vulnerable residents.

The Government, in its written ministerial statement in March and in evidence to us, said it intends to take forward measures that will include new powers for local authorities to better manage their local supported housing market. We recommend that these measures include planning reforms that would assist councils to implement local strategies for exempt accommodation based on an assessment of need.

Specifically, we recommend that the Government end the existing exemptions that registered providers have from HMO licensing and the Article 4 direction. Furthermore, we recommend that the loophole relating to non-registered providers with properties containing six or fewer residents also be addressed so that they are brought within the planning regime. This action would prevent there being a change of use without planning permission, which would be a much-needed tool to enable local authorities to balance the provision of exempt accommodation with other housing need and to control the density of exempt accommodation in an area.

Demand for exempt accommodation is driven in part by a shortage of affordable homes. To solve the issues found in exempt accommodation the Government must solve the wider housing crisis. We reiterate the recommendations from our 2020 report, “Building more social housing”—in particular, our call on the Government to build 90,000 social rent homes a year. (Paragraph 100) Models of exempt accommodation

The multitude of models of exempt accommodation produces a complex landscape with no guarantee of quality. We have heard concerns about the quality of non- commissioned exempt accommodation, but have also been provided with good examples of specialist non-commissioned providers. Likewise, in the absence of data, it has not been possible to demonstrate whether registered or non-registered providers offer a higher quality of provision. Therefore, the implementation of our recommendations on standards, oversight and costs should be implemented across all models to ensure overall quality is improved and value for money is delivered across the piece. The improved data collection that we recommend should be monitored and analysed to determine whether models of exempt accommodation should be streamlined in the future.

We also recommend that action be taken to address this complex landscape, by making it compulsory for all providers to be registered. A mechanism is required to ensure that there is better quality provision and that standards are maintained. Good providers will have nothing to fear from registration, while the bad providers can have their 50 Exempt Accommodation registration removed. We heard some concerns that the cost and additional reporting requirements of being registered may impact on smaller providers, particularly those reliant on charitable and grant funding. We do not see why this is the case, or why it should continue to be so. Registering should not be unnecessarily onerous or expensive, and if it is that should change. Therefore, we call upon the Regulator of Social Housing to take action to make it easier for smaller providers of exempt accommodation to register with them.

The lease-based model has its place in exempt accommodation, by enabling access to properties for decent providers who would otherwise not be able to purchase properties outright. However, it can be exploited by those whose primary objective is to make huge profits at the expense of the taxpayer: we received examples of profits in the millions of pounds. The Government must set out how it will clamp down on those exploiting the lease-based model for profit and prohibit lease-based profit-making schemes from being set up. This should include how it will ensure that there is full transparency over ownership structures and how income from housing benefit is being used. (Paragraph 109) Exempt Accommodation 51