This Committee and its predecessors have held dozens of inquiries into a wide range of issues over the years which have highlighted important and urgent issues. Therefore, it was surprising to have undertaken a piece of work that has shocked and alarmed us as much as this inquiry has. In short, we would describe the system of exempt accommodation as a complete mess. There are many good providers, but in the worst instances the system involves the exploitation of vulnerable people who should be receiving support, while unscrupulous providers make excessive profits by capitalising on loopholes. This gold-rush is all paid for by taxpayers through housing benefit.
Exempt accommodation—that is, accommodation exempt from locally set caps on housing benefit—is an important component of supported housing. Where exempt accommodation works well, residents are provided with suitable accommodation and support to which they may not have otherwise had access. Recently, however, notwithstanding positive developments in government policy in this area, increasing concern has been raised about the quality of provision of such accommodation, its very significant growth in some areas with an attendant impact upon local communities, its lack of regulation and governance of providers, and the exploitation of the system by people seeking to make profit from it—all of which led us to undertake the inquiry on which this Report is based.
It is clear from our inquiry that some residents’ experiences of exempt accommodation are beyond disgraceful, and that some people’s situations actually deteriorate as a result of the shocking conditions in which they live. Where the very worst experiences are occurring, this points to a complete breakdown of the system which calls for immediate action from Government. Areas with high concentrations of exempt accommodation can also attract anti-social behaviour, crime—including the involvement of organised criminal gangs—rubbish, and vermin, while neighbours and communities can be affected negatively as well as residents. These impacts risk undermining local support for supported housing.
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, but it is imperative that these standards are not optional.
During our inquiry 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. 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 therefore call on the Government, within twelve months of the publication of this Report, to publish national standards, with powers for local authorities to enforce them, in these following areas:
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.
We also found 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. We recommend that, 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 relevant specialist services.
The exempt accommodation sector comprises different types of providers, and as such it requires the involvement of multiple regulators. However, some providers do not fall under the remit of any regulator, and no regulator has complete oversight of the different elements of exempt accommodation. As a result, we have found that the patchwork regulation of exempt accommodation has too many holes.
Better oversight of exempt accommodation is urgently required now to get a grip on the dire issues that have been described to us. As such we recommend that a National Oversight Committee be urgently established to address the oversight issues relating to exempt accommodation. This should comprise the existing regulators, who are experts in their own areas. If they worked more closely together in a more structured way, we believe they may be able to improve oversight of 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 dearth of data on exempt accommodation shows how successive Governments have been caught sleeping. Due to this scarcity of data on exempt accommodation, our inquiry was, for example, unable to establish how widespread the very worst experiences are either among residents or among local communities nor how many exempt accommodation claimants and providers there are.
While we welcome some recent steps the Government has taken in the area of data, these will not by themselves provide the quality and amount of data required to enable effective policy development. We therefore call on the Government, within twelve months of publication of this Report, to organise the collection, collation and publication of annual statistics at a local authority level under a number of key headings, including the number of exempt accommodation claimants, the number of exempt accommodation providers and the amount of money paid by both the Department for Work and Pensions and the local authority in exempt accommodation housing benefit.
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.
We call on the Government to 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.
We also heard that the current system offers a licence to print money to those who wish to exploit the system. We have seen examples of this particularly in relation to the lease-based model. We believe that 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 also consider how to give councils greater control over rents for exempt accommodation to ensure value for money.
It is quite possible that the Government does not need to spend more money on exempt accommodation but rather needs to spend it more wisely.
Evidence to our inquiry made clear 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. We recommend that the measures announced by the Government in March 2022 to allow local authorities better to manage their local supported housing market include planning reforms that would enable those authorities to implement local strategies for exempt accommodation based on an assessment of need.
We also recommend that the Government end the existing exemptions that registered providers have from HMO licensing and the Article 4 directive and 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.
Throughout our inquiry we sought to establish whether an appropriate balance was being struck across the different models of exempt accommodation and whether they affected the quality of provision. While it was possible to find good and bad providers, regardless of whether they were registered or commissioned or neither, it was clear that the multitude of models of exempt accommodation produces a complex landscape with no guarantee of quality. Therefore, we recommend that action be taken to address this complex landscape, by making it compulsory for all providers to be registered. There needs to be a mechanism 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 registration removed. We heard some concerns that the cost and additional reporting requirements of being registered may impact on smaller providers, but 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, which raised most concerns among those contributing to our inquiry, 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 ask the Government to 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.