Exempt accommodation provider sees surplus increase by more than 3,000% in a year

Exempt accommodation is often used to house people who have very few options, such as prison leavers, rough sleepers, refugees and migrants, and those experiencing substance abuse issues. Since such landlords provide loosely defined care and support services, their tenants can be exempt from housing benefit caps and associations can charge much higher rents than regular landlords.

In many cases, registered providers employ managing agents to provide the accommodation and support services by entering into short-term lease arrangements with these companies. However, CHA’s model is slightly different, as the association does not use managing agents and leases properties directly from landlords.

The more properties an organisation manages, the more housing benefit it will receive, which means that many of Birmingham’s biggest exempt providers are receiving millions every year in income largely through housing benefit from the government. The majority of CHA’s £15m income this year will be from housing benefit.

CHA was registered as a social landlord in 2013 under its previous name ‘Proffitts – Investing in Communities’.

In recent years, CHA, like many other exempt accommodation providers, has rapidly increased the amount homes it manages, which has led to the number of exempt accommodation bedspaces across Birmingham increasing from 11,000 homes in 2018 to 22,000 as of March this year. In April 2014, there were just 3,679 exempt accommodation properties.

Responding to how CHA has funded the increase in its managed properties, chief executive David Fensome said: “At CHA, we prudently manage our housing portfolio and lease commitments with providers to ensure we can meet our housing commitments to local authorities, tenants and licensees.

“We do this while maintaining effective and efficient financial controls, generating an operating margin of 3% for the year.”

The increase in exempt properties in Birmingham has led to greater scrutiny by the Regulator of Social Housing (RSH) of its main providers. CHA was placed on the gradings under review list in February, with the RSH now investigating the landlord for issues that may impact its compliance with the Governance and Financial Viability Standard.

According to the accounts, an internal audit review commissioned by the landlord found that CHA was non-compliant with the regulator’s Governance and Financial Viability Standard. A subsequent self-assessment by the board identified a number of areas of non-compliance.

Mr Fensome said these are now being addressed through a detailed action plan and that it is now working with the regulator to move to compliance as quickly as is practicable.

The audit also found that it was not compliant with the RSH’s Rent Standard. But CHA pointed out that this was only in relation to four properties it owns in Bacup, Lancashire. These four properties are the only ones owned by CHA and are let at social rent and have nothing to do with the exempt housing it manages.

The accounts stated that CHA had an aim to manage 7,000 exempt homes by 2025, but as a result of its engagement with the RSH, it has decided to slow down its growth plans and consolidate its portfolio to ensure its governance is “appropriate to its size and governance in the future”.

Inside Housing revealed in March that CHA had written to its landlords saying that it would not be entering any new leases in Birmingham as a necessary step to preserve the long-term future of the organisation.

The decision came as a number of the city’s biggest exempt accommodation providers have either opted out of providing exempt accommodation or been barred from providing this type of housing.

In November, Green Park was stripped of its exempt accommodation status by Birmingham City Council. It was subsequently de-registered as a provider of social housing after it had to give up the homes it managed.

Prospect Housing, an exempt provider that managed 2,000 homes across the city, confirmed earlier this year that it would be closing down after being unable to meet the RSH’s Rent Standard.

Last week, Inside Housing revealed that non-complaint provider New Roots has decided to move away from providing exempt accommodation and warned that that the model is “intrinsically unsafe”.

Commenting on CHA’s accounts, Mr Fensome said: “We exist to support the housing and support needs of some very vulnerable people. Private landlords frequently turn such vulnerable people away and, without us, often there is no other choice but to sleep on the street. We don’t think this is an acceptable situation in the modern world and so are doing all we can to provide a better option.

“We have grown quickly in the past two years in response to the urgent need in across the country for suitable accommodation for often very vulnerable people. We work closely with local authorities and local communities to ensure that the homes and support services we provide to our tenants are high-quality and help pave the way to independent living.

“Over the past 12 months, the board has focused on strengthening its arrangements in relation to governance, risk management and internal controls. Our aim remains to grow our housing stock to provide high-quality accommodation and services to more people who are in the greatest housing need.”