Seventy-Seventh Report - Supported housing

Exempt accommodation—an expanding sub-sector of short-term supported housing that can be of poor quality—has little regulation or oversight so leaving vulnerable people unprotected from unscrupulous providers. We echo the strength of feeling and view of the Levelling Up, Housing and Communities Committee in their report on exempt accommodation (mostly short-term supported housing that is exempt from locally set Housing Benefit caps), which described this part of the supported housing sector as a “complete mess”, and a “goldrush” for unscrupulous landlords. The Local Government Association has told us of an increase in vulnerable people being housed in poor-quality houses of multiple occupancy, with unsuitable or no additional support provided. It feels that this has had a significant, detrimental impact on vulnerable people. DLUHC recognised that the sector “is not working as well as it should” and that the Supported Housing (Regulatory Oversight) Bill (which has since received Royal Assent) would bring in important reforms. The Act focuses on exempt accommodation and includes a range of measures that aim to drive out rogue providers and improve the quality of supported housing. But we are concerned about local authorities’ capacity to deal with the new responsibilities under the Act. We understand that DLUHC will assess whether local authorities need new burdens funding to help with costs. However, local authorities continue to be under severe financial pressure and, as a result, may struggle to take on new duties. Recommendation 2: Alongside its Treasury Minute response, DLUHC should write to the Committee outlining progress with its consultation with local authorities and set out its early thinking on how it intends to support them to implement the Act effectively, improve short-term supported housing and protect vulnerable residents. 6 Supported housing

DLUHC and DWP cannot assess and therefore resolve the problems with supported housing as they have no reliable data about the sector. The data on the sector held by DLUHC and DWP is incomplete and out of date despite the department and its predecessor departments being aware of the issues for many years. They intend to improve their understanding of the sector through the snapshot which will include data on the size and composition of the sector, costs, current and future supply and demand. This will update the last snapshot which was done in 2016. To keep its understanding relevant in the future, DLUHC is relying on the new duties that the Bill imposes to get local authorities to provide it with annual data. These duties include local authorities’ strategic reviews of supported housing which DLUHC expects will help local authorities assess demand and supply. It also expects that local authorities will extract information through the new licensing schemes they can set up for providers of supported housing. There is currently no timetable for the local housing strategies to be completed and as the licensing schemes are not mandatory, there is a risk that DLUHC’s data will remain inconsistent and incomplete. DWP is also working with local authorities to get a better picture of housing benefit claims for specified housing (a type of supported housing which is paid for with housing benefit). It has given local authorities £4.79 million to review all their existing Housing Benefit claims to identify and record if claims are for specified accommodation and, if so, what type. Recommendation 3: In the Treasury Minute response to this report, DLUHC and DWP should summarise what they are currently doing, along with plans for future work, to radically improve and keep up to date, their data on demand, supply, and costs of supported housing while minimising the burden on local authorities.

The Supported Housing (Regulatory Oversight) Act 2023 gives local authorities more powers over providers of supported housing but there is a risk of unintended consequences, including discouraging good quality providers. The Act gives powers to local authorities to set up licensing schemes for supported housing providers to join and adhere to the framework of standards locally. DLUHC intends to assess if new burdens funding is needed to help local authorities set up licensing schemes but expects local authorities will then cover ongoing running costs by charging fees to housing providers to join the scheme. Local authorities will need to achieve a difficult balance of charging fees to housing providers that are enough to cover local authorities’ costs, but not so much that they deter good quality landlords. DLUHC stresses that it is mindful of unintended consequences, in particular, the potential to create uncertainty and anxiety among providers which in turn, risks some people’s needs not being met. It acknowledges the need for a licensing regime that is robust enough to ensures that standards are being upheld, while not pushing good providers out of the market unnecessarily. However, DLUHC has not convinced us that it is on top of this problem as it has not assessed the potential costs to landlords. Recommendation 4: DLUHC should assess how local authorities can set up licensing schemes with appropriate levels of fees that will deter poor providers and encourage good quality supported housing.

Local authorities have limited capacity to deal with fraud in Housing Benefit claims for supported housing. In other recent reports we have highlighted the Supported housing 7 limited capacity of local authorities to tackle fraud and stressed the need for central government to provide better support. We are disappointed to see that the problem of fraud is going largely unaddressed in supported housing. DWP acknowledges that there is unscrupulous behaviour in the sector and there are gaps in how it is dealt with. However, it is unable to identify how many of Housing Benefit claims for supported housing are fraudulent. Local authorities are responsible for managing Housing Benefit claims in their areas and while some have the resources to check individual claims for fraud, many do not. Furthermore, DWP samples just 60 housing benefit claims per local authority for fraud and supported housing benefit claims will only be a small portion of this sample. DWP tells us that it is working closely with DLUHC to help all local authorities to act on fraud. Recommendation 5: Within six months, DWP should inform the Committee about how it intends to identify the level of fraud in Housing Benefit for supported housing and how it will better support local authorities, including funding, to tackle this fraud.

Some local authorities face increasing gaps in their budgets because of the way DWP Housing Benefit regulations work. Local authorities pay housing benefit directly to providers and ‘subsidy loss’ is the gap between how much rent a housing provider charges to a local authority and how much of it the local authority can claim back from DWP under Housing Benefit rules. In some cases, local authorities cannot claim the full amount of rent back and must cover the remaining costs from their own budgets. Subsidy loss varies across different local authorities, but overall, the problem is increasing, while local authorities already face financial pressures. Local authorities in England experienced a subsidy loss of £108 million (cash terms) in 2021–22 compared with £53.8 million in 2017–18. Successful bids from local authorities for the Supported Housing Improvement Programme have included work to reduce subsidy loss in local areas. DWP says that local authorities can reduce subsidy loss by more scrutiny of Housing Benefit claims, but this alone is very unlikely to bridge the gap in funding that local authorities are experiencing. The Supported Housing (Regulatory Oversight) Act 2023 does not have any measures to deal with subsidy loss, so we are pleased that DWP has told us it will look at other solutions. Recommendation 6: As part of the consultation with local authorities on the Supported Housing (Regulatory Oversight) Act 2023, DWP should consider how to reduce subsidy loss, and then implement solutions. 8 Supported housing 1 Challenges in supported housing

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Levelling Up, Housing & Communities (DLUHC) and the Department for Work & Pensions (DWP) about supported housing.1

Progress to improve the supply of supported housing is poor. While DLUHC uses the Affordable Homes Programme to support development of more supported housing, it reported it is only forecast to achieve 5% of supported housing from the 2021–2026 iteration of the Affordable Homes Programme against a target of 10% (between 15,700 and 16,000 new housing units in England, including London).10 DLUHC described how it has tried to increase the supply of supported housing through other programmes and funding for specific groups of vulnerable people such as victims of domestic abuse and rough sleepers.11

The need for different types of supported housing varies locally due to different demographics in local authority areas. DLUHC told us there is not the right supply of supported housing for the right people in the right places and that as a result, supported housing does not offer the right support or accommodation to vulnerable people that ‘would actually benefit them and would be value for money’.12 Poor quality short-term supported housing: the exempt accommodation sector

The Levelling Up, Housing and Communities Committee focused on exempt accommodation, a subset of supported housing, during its inquiry in 2022. It described the sector as a “complete mess”, and a “goldrush” for unscrupulous landlords.13 The Committee took evidence from several residents living in such supported housing, local authorities and other stakeholders. The Committee concluded that some residents’ experiences of exempt accommodation were “beyond disgraceful” and noted the lack of regulation and governance of providers, and “the exploitation of the system by people seeking to make profit from it”.14

Exempt accommodation can provide much-needed homes and support including for people recovering from drug or alcohol dependence; at risk of or transitioning to or from homelessness; or on release from the criminal justice system. However, the NAO found that some areas, such as Birmingham, have seen increasing numbers of landlords who circumvent the regulations, enabling them to profit by providing costly sub- standard housing with little or no support, supervision or care.15 Regulation of exempt accommodation is patchy and there are gaps meaning that some providers of supported housing have less scrutiny. In written evidence submitted to this Committee, the Local Government Association (LGA) told us of an increase in vulnerable people being housed in poor-quality houses of multiple occupancy, with unsuitable or no additional support 8 Q67 9 Q 3 10 Q33 and C&AG’s Report, The Affordable Homes Programme since 2015, Session 2022–23, HC 652, 8 September 2022 11 Q 28 12 Q 55 13 Levelling Up, Housing & Communities Committee Report, Exempt Accommodation, Third Report of Session 2022–23, HC 21, 27 October 2022 14 Levelling Up, Housing & Communities Committee Report, Exempt Accommodation, Third Report of Session 2022–23, HC 21, 27 October 2022 15 C&AG’s Report, para 2.11 10 Supported housing provided.16 It feels that this has had a significant, detrimental impact on vulnerable people. The Chartered Institute of Housing (CIH) told us that “the impact of poor-quality provision is felt most directly by residents within the schemes, and often also by local communities around them”.17

DLUHC told us that the sector “is not working as well as it should” and that the Supported Housing (Regulatory Oversight) Bill, as it then was, would bring in important reforms.18 The Bill focused on exempt accommodation (mostly short-term supported housing that is exempt from locally set Housing Benefit caps) and include a range of measures that aim to drive out rogue providers and improve the quality of supported housing.19 Key stakeholders welcomed the intention of the Bill to raise standards in supported housing.20 The Bill received Royal Assent in June 2023 to become an Act of Parliament.

The Act will introduce several new measures that will increase powers for local authorities to have more control over supported housing in their areas. During the DLUHC funded pilot schemes for the Supported Housing Improvement Programme, local authorities were able to test ideas to improve supported housing in their areas, thereby allowing them to use and pass on the learning from the pilots when the Act is brought into force.21 Alongside developing national supported housing standards, the Act will require new duties of local authorities that will include developing supported housing strategies and an option to introduce licensing schemes for providers.22 The Act places significant new burdens on local authorities—who are already struggling with resources and capacity —to undertake these new duties. DLUHC has committed to a wide consultation to assess how it will best support local authorities to fund these new powers and responsibilities, including assessing whether local authorities will need new burdens funding to help with costs.23 Lack of reliable data

DLUHC and DWP have no reliable data about supported housing and as a result cannot assess and resolve the problems within the sector. The NAO investigation found that DLUHC and DWP do not routinely collect national data on the numbers of people living in supported housing or the numbers of units of supported housing. The most comprehensive national picture of supported housing is from DWP and DLUHC’s (then the Department for Communities and Local Government, or DCLG) joint review in 2016 for which they surveyed local authorities. However, not even half (197 of the 407 local authorities surveyed across England, Wales and Scotland) actually provided responses.24 DLUHC and DWP have acknowledged that the data is not as it should be.25 16 DSH0007 17 DSH0006 18 Q 2 19 See Parliamentary debate on the Bill 11.01.23, Felicity Buchan opening statement: Supported Housing (Regulatory Oversight) Bill – Hansard – UK Parliament 20 DSH0001, DSH0007 21 Q 26 22 C&AG’s Report, para 3.6, Figure 5 23 Q 4 24 C&AG’s Report, para 2.19 25 Q 3 Supported housing 11

While DWP collects data from local authorities, this does not include people living in supported housing who are not in receipt of Housing Benefit.26 Before April 2022, DWP could not differentiate whether Housing Benefit claims were for supported housing. Since April 2022, DWP has made attempts to improve the data by requiring local authorities to improve the way they identified and reported each new Housing Benefit claim when it relates to specified accommodation (when accommodation is paid through Housing Benefit), and if so, what type. DWP accepts that this will not immediately improve data quality, as it only applies to new claims. In March 2023, DWP provided local authorities with £4.79 million of funding to review their existing Housing Benefit claims to identify and record if claims are for specified accommodation and, if so, what type.27

Both DLUHC and DWP have committed to improving data.28 DLUHC has commissioned research to provide an up-to-date understanding of the supported housing sector in England, with funding from DWP to extend it to Scotland and Wales. DLUHC intends that the snapshot of data focuses on the size and composition of the sector, costs, current and future supply and demand, the interaction between commissioners and housing providers, and how to improve monitoring.29 DLUHC told us that it will use this research to understand the gaps in supported housing and feed into the design of the quality standards and licensing scheme.30 DLUHC has assured us that the research will be published, and the aim is for it to be completed by the end of 2023.31

DLUHC and DWP are taking steps to better understand supported housing with the publication of the new snapshot of data. To ensure its understanding is relevant in the future, DLUHC is relying on the new duties that the Act imposes to get local authorities to provide it with annual data. The Act requires local authorities to produce new local housing strategies as part of a licensing scheme for supported housing in their areas.32 DLUHC expects local authorities will draw on the strategies and licensing schemes to provide information, including on supply and demand. There is currently no timetable for the local housing strategies to be completed and the licensing schemes are not mandatory.33 26 C&AG’s Report, para 15 27 Q 81; C&AG’s Report, para 2.21 28 Q 13 29 C&AG’s Report, para 2.22 30 Qq 67–69 31 Q 67 32 Qq 32, 60 33 C&AG’s Report, Figure 5 12 Supported housing 2 Burdens on local authorities Supported housing local licencing schemes, and possible unintended consequences

The Act intends to improve the quality of supported housing and give local authorities more control of supported housing in local areas. It does this through giving local authorities powers to create licensing schemes for providers of exempt accommodation, including provisions to restrict or remove Housing Benefit.34 The licensing scheme will not be mandatory for local authorities to implement but those that do will be able to ensure higher quality standards by holding housing providers to specific licensing conditions.35

However, there is a risk of unintended consequences from the licensing scheme, including discouraging good quality supported housing providers. The NAO reported that some concerns had been raised by stakeholders, including from local authorities, that small or specialist non-commissioned supported housing providers may leave the sector or that it may force unscrupulous landlords to a different housing sector.36 DLUHC stressed to us that it is mindful of unintended consequences, in particular, the potential to create uncertainty and anxiety among providers which in turn, risks some people’s needs not being met. It acknowledged the need for a licensing regime that is robust enough to ensures that standards are being upheld, while not pushing good providers out of the market unnecessarily.

DLUHC has committed to assessing if local authorities will need new burdens funding to help them to set up the schemes. It told us that it expects local authorities to fund the licensing schemes’ running costs through the fees they will charge participating providers.37 However, DLUHC has noted the difficulty that local authorities will face when trying to find a balance between a sufficiently robust licensing scheme and setting the fee at the right level to be able to appropriately recover costs without making it difficult for providers to access.38 Fraud

The problem of fraud is going largely unaddressed in supported housing. The NAO investigation found that DLUHC and DWP do not know how much fraud is made possible by gaps in oversight and regulation of supported housing. DWP has calculated that £540 million of Housing Benefit claims in Great Britain in 2021–22 were fraudulent. However, it cannot assess how many Housing Benefit claims for supported housing are fraudulent as it does not know how many Housing Benefit claims are for supported housing.39 DWP acknowledged that there is unscrupulous behaviour in the supported housing sector and there are gaps in how it is dealt with.40 34 C&AG’s Report, Figure 5 35 Qq 7, 8 36 C&AG’s Report, Figure 5 37 Q 26 38 Q 38 39 C&AG’s Report, para 2.6 40 Qq 41, 46 Supported housing 13

Local authorities are responsible for managing Housing Benefit claims in their areas and while some have the resources to check individual claims for fraud, many do not. DWP told us that while some local authorities are taking action on fraud, it is concerned that there are local authorities that are not able to, or have not been doing so.41 We have highlighted in other recent reports the limited capacity of local authorities to tackle fraud and stressed the need for central government to provide better support.42 The LGA reported to us that whilst local authorities can use powers under the Housing Benefit regulations to restrict unreasonable exempt accommodation rent increases in limited circumstances, the significant practical difficulties with doing so means that this rarely happens.43

DWP does some limited checks for fraud at a local level. It noted that it samples just 60 housing benefit claims per local authority for fraud and that supported housing benefit claims will only be a small portion of this sample.44 Some local authorities in the Supported Housing Improvement Programme pilots have seen improvement in challenging fraudulent Housing Benefit claims but progress in this area is slow.45

DWP told us that it is working closely with DLUHC to help all local authorities to act on fraud. In addition, it set out how the Bill will provide opportunities for local authorities to challenge fraudulent claims by giving more clarity on quality standards and a definition of “care, support and supervision”, which will be linked to Housing Benefit policy.46 DWP also told us it has strengthened Housing Benefit guidance to empower local authorities to challenge service charges that do not look right.47 Funding gap

The NAO investigation found that some local authorities face increasing gaps in funding for supported housing because of the way the DWP’s Housing Benefit regulations work. “Subsidy loss” is the gap in funding between how much rent a housing provider charges to a local authority and how much of it the local authority can claim back from DWP, in line with Housing Benefit rules which are set out in legislation. In some cases, local authorities cannot claim the full amount of rent back and must cover the remaining costs from their own budgets.48

The scale of subsidy loss varies between local authorities and some local authorities experience a high subsidy loss. The amount of subsidy loss is increasing overall with local authorities in England experiencing a subsidy loss of £108 million (in cash terms) in 2021–22 compared with £53.8 million in 2017–18.49 The LGA told us that subsidy loss is a “further budget pressure on already stretched council budgets”.50 41 Q 46 42 Committee of Public Accounts, Tackling fraud and corruption against government, 69th Report of Session 2022–23, HC 1230, 8 September 2023; Committee of Public Accounts, Local authority administered COVID support schemes in England, 68th Report of Session 2022–23, HC 1234, 6 month 2023 43 Written evidence submitted to committee – DSH0007 44 Qq 44, 45 45 Q 30 46 Qq 46, 47 47 Q 47 48 C&AG’s Report, para 2.17 49 C&AG’s Report, para 2.18 50 DSH0007 14 Supported housing

Successful bids from local authorities for the Supported Housing Improvement Programme have included work to reduce subsidy loss in local areas. DWP told us that local authorities can reduce subsidy loss by scrutinising Housing Benefit claims more by overseeing providers and asking for breakdowns of bills that come through on service charges.51 However, whilst this may reduce some subsidy loss in some areas, this may not go far enough to bridge the gap in funding that local authorities are experiencing.52 When we challenged DWP on this, it told us that subsidy loss is set out in Housing Benefit regulations, although DWP has committed to explore solutions to subsidy loss through the implementation of the new measures in the Act.53 The Act aims to improve quality standards in supported housing and give local authorities more power to control supported housing in their local areas. However, the Act will not reform Housing Benefit regulations or deal with problems caused by subsidy loss.54 51 Q 56 52 Q 57 53 Qq 58, 59 54 C&AG’s Report, para 3.6 Supported housing 15