A long and complex legal investigation, over three-years, has been carried out into the current housing benefit regulations and poor practice locally from third party providers. At the forefront of the investigation, surprisingly, is a small council in rural Devon, who has been successful in helping to bring about national reforms to the supported housing sector.
West Devon is a small borough council in South Devon with a population of around 57,000 residents, which includes a large proportion of Dartmoor National Park.
As part of a two-tier authority, West Devon Borough is responsible for the administration of housing benefit, with Devon County Council being responsible for social care services. Over recent years, the Council has seen a worrying rise in housing benefit claims relating to Exempt Accommodation.
Exempt Accommodation is residential accommodation for vulnerable adults, including individuals with learning disabilities, physical disabilities, or mental health conditions. Under the current benefit regulations Exempt Accommodation is treated more favourably than other accommodation so higher levels of housing benefit can be claimed to offset the higher rents charged by the housing provider.
The West Devon Schemes
A number of new schemes have entered the market the past few years, claiming to provide Exempt Accommodation. These schemes involved an investment fund owning supported housing property and a small registered housing association acting as the landlord, with the primary aim to providing significant financial returns to the fund by maximising the amount of housing benefit that could be claimed.
A portfolio of 12 supported living properties had for several years, been owned and run by a private landlord. Those occupants were entitled to receive housing benefit payments towards their rent were receiving local housing allowance. However, following a series of complex back-to-back legal transactions, the properties were sold, and then taken over by a registered housing association.
Sold for around £5.7m, the properties were transferred to an offshore investment company for approximately £18m the very same day. The investment company then proceeded to lease the properties, with no improvements or increased levels of care for the tenants, to the registered housing association at significantly higher market rents that was to be recovered by the housing association through the housing benefit payable to the tenants.
Following the take-over, the housing association attempted to get all tenants to sign new agreements with vastly increased rent figures, submitting those new rent figures to the Council to claim housing benefit. Since the new landlord was a registered provider, they met the criteria to claim Exempt Accommodation, therefore removing the cap on the amount of housing benefit that could be paid.
This resulted in our vulnerable residents’ rents rising to, in excess of £300 per week, for a small room within a shared house. An example of exploitation of the system and one that the Borough Council was not willing to accept.
Value of the Exempt Housing Rents
If paid, the housing benefit for these 12 properties alone could have cost the tax payer around £1,690,313.04 annually in comparison to the previous year’s claim by the private landlord of around £754,000.00. A staggering difference of £963,313.04.
The council’s view was that the rent levels claimed, should be a true and reasonable reflection of the actual cost of the landlord providing the accommodation. Many other authorities’ share this view and the issues were discussed with the Local Government Association and Department for Work and Pensions policy teams, however existing regulations meant that the Council would have been liable to meet some or all of the increased housing benefit if an appeal hearing failed to agree with the Councils decision.
Although, everyone they spoke to agreed that these schemes are clearly morally wrong, a change to the regulations is needed to allow local authorities to prevent this exploitation.
Making a Difference
Cllr Neil Jory, Leader of the Borough Council, presented evidence to the Levelling Up, Housing and Communities Committee in March. Along with the support of local MPs, this small rural Borough Council used their voice on both the national stage, and locally across the county, calling for essential change.
Following on from leading the charge on this campaigning, with other councils also experiencing the same issues, West Devon Borough Council is now proud to announce they have been granted funding of over £300,000 to help supported accommodation as part of a new Government pilot, Supported Housing Improvement Programme. One of only two district authorities, with the rest awarded to unitary councils.
Cllr Neil Jory, Leader of West Devon Borough Council, said: “I am delighted that our campaign to prevent the provision of supported housing, for some of the most vulnerable people within society being used to generate unjustified profits for investors, has been recognised. It is additionally pleasing that West Devon has been given the opportunity to take part in this pilot scheme to help shape the future of this type of provision.”
The funding, part of £20m awarded by the Department of Levelling Up, Housing and Communities, and will be spent over three financial years (2022 to 2025). Devon County Council and South Hams District Council are both joint partners on the funding bid.
Cllr Judy Pearce, Leader of South Hams District Council, said: “I really commend the Leader of West Devon Council for bringing this problem to national prominence and hope now that the government will take reform of this dreadful situation very seriously. This is an excellent example of our partner Borough Council punching well above its weight. Well done to them.”
The funding awarded will pay for a task force whose entire focus will be to scrutinise housing benefit claims in greater depth. They will also develop an inspection regime to make sure properties are of the highest possible standards. There will also be increased regulation to ensure that providers who focus on taking advantage of the system, are discouraged from coming to West Devon and the surrounding areas.
At the forefront of this change and with the funding available, the Council can now be part of the solution to improve accommodation for some of their most vulnerable tenants.
Councillor James McInnes, Devon County Council‘s Cabinet Member with responsibility for adult social care said: “For too long, a loophole in the benefits system has allowed landlords of supported living accommodation, homes to some of our most vulnerable adults, to claim uncapped levels of housing benefit towards rental costs. Until now, this practice has continued with insufficient checks and balances to ensure an appropriate standard of accommodation, and some landlords – thankfully the minority – have charged higher than market value rents knowing that it would be claimed through housing benefit. In short, some landlords have taken advantage at the expense of tenants and taxpayers.
It is anticipated that recent experiences in West Devon will benefit learning, not just across Devon, but also across the country, resulting in reforms to the supported housing sector. A Private Members bill is currently at second reading stage in parliament which if passed, could mean better regulation of this sector will become enshrined in law, further persuading poor providers that for them time’s up.
Read the LGIU Members’ only briefing: Local authority regulation to improve supported and specialist ‘exempt’ housing