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Non-compliant housing association to be closed down this summer
An exempt accommodation provider that manages nearly 2,000 properties in the West Midlands is set to close down this summer as part of what it is calling a “solvent closure”.
Prospect Housing, which provides exempt accommodation, has confirmed that it has begun the process of shutting down after informing staff earlier today.
The association, which was given a non-complaint G4 governance grading from the English regulator last year, said that its decision came after an appraisal of the business found that “it would be unable to provide the standard of accommodation and support we and the regulator expect, whilst being financially viable and compliant in the long term”.
The closing down of a registered provider is rare. The Regulator of Social Housing (RSH) said that while associations had been closed in the past this was the first managed shutdown of this size.
According to Prospect, it had explored a number of options to try to secure its long-term future, including a merger with another registered provider and the adoption of several different funding and structure models.
The news was revealed to staff and managing agents with which Prospect has leases in a series of meetings this morning.
The organisation is currently in agreements with 23 managing agents and employs 40 staff, including frontline support.
It will now engage in a consultation period with staff and residents, with the aim of ending operations fully by the end of July. It said it would be offering all its residents one-on-one personal appointments across the next few weeks to assess their housing and support needs to ensure these are addressed by their existing managing agents.
The decision comes after a number of turbulent years at the association. Last May the Regulator of Social Housing gave it a non-compliant G3/V3 rating, the second lowest that can be achieved, after identifying serious regulatory concerns. A new management team was brought in at that point to try to improve the situation.
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But Prospect was downgraded further in October, given the lowest possible G4 governance grading.
The report said that following the non-compliant grading in May, Prospect appointed a new chair, an interim chief executive and a number of other senior managers. However, as a result of the work undertaken by the new board and the leadership team, further serious issues were uncovered.
This included reviews into two serious safeguarding incidents, which identified weaknesses in procedures and controls of the landlord over services provided by third-party managing agents.
Prospect operates exclusively in the exempt accommodation space. This is a subset of supported housing that is funded directly by the Department of Work and Pensions.
Because 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 normal landlords. Prospect received nearly £16m in housing benefit in 2019.
Exempt accommodation is often used as a means of housing those with very few other housing options, such as prison leavers, rough sleepers, refugees and migrants, and those experiencing substance abuse issues.
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.
Exempt accommodation providers are slightly different from specialised supported housing lease-based providers, which are required to provide a high level of specialised support with their homes to receive uncapped benefit, while the bar for support in exempt accommodation is far lower.
In the investigation into the association last year, the RSH said it did not have assurance that Prospect has effective systems in place to give it sufficient oversight of the arrangements it has entered into with multiple third parties, which deliver landlord services on its behalf and to whom ongoing payments are made.
The regulator also forced the association to implement an improvement action plan to address “conflicts of interest” identified.
Vicky McDermott, who took over as interim chief executive of Prospect in March 2020, said that while a lot of time had been invested in improving the organisation, its contractual arrangements meant that driving the necessary improvements in the quality of accommodation and support provided by some managing agents was hampered, despite the obvious care and commitment of staff on the frontline.
Prospect also said that its existing commercial restraints meant that the rent standard could not be met, which was further hampered by the over-inflated houses of multiple occupation market in Birmingham.
In September, the RSH used its statutory appointment powers to bring on to its board Chan Kataria, chief executive of EMH Group; John Ghader, chief executive of Prima Group; and Paul Dolan, chief executive of Accent.
A spokesperson for the RSH said: “As an independent registered provider, Prospect has concluded it is not possible to provide all tenants with the quality of accommodation and services they require within the existing commercial constraints in their lease agreements.
“The regulator has been working with Prospect over the last few months, including having made three statutory appointments to its board to assist it to explore a full range of options to tackle the governance and viability issues at the organisation. We will continue to work with Prospect over the coming months and will communicate as appropriate during this period. There are over 1,500 registered providers of social housing and it remains the case that the vast majority are meeting the regulatory standards.”
“We have previously raised concerns that the terms of some of the lease-based contracts that Prospect and others operate may import risks that operators of this model have not been able to manage effectively, and have judged 13 providers all using similar models to be currently non-compliant with our governance and viability standards.
“Our regulatory standards are in place to protect tenants and ensure the social housing sector is able to deliver homes that meet a range of needs. We expect all registered providers to comply with regulatory standards, regardless of the financing model they choose.”
What the Prospect management said
Vicky McDermott, chief executive, said: “As a board and wider team we’ve invested a lot of energy, passion and time into improving health and safety and enforcing contractual terms with our managing agents to deliver the Prospect offer.
“However, although significant progress was made, the contractual arrangements in place at Prospect meant that driving the needed improvements in the quality of accommodation and support providing by some managing agents, was hampered, despite the obvious care and commitment of staff on the frontline.
“Although driven from a place of helping the most vulnerable and tackling an already complex issue, the lease-based model has inherent flaws.
Owen Ingram, chair of Prospect Housing, said: “Under the current model sadly it is not possible to provide all residents with the quality of accommodation they require and run a financially viable organisation in the long term. The existing commercial constraints in the lease agreements mean the rent standard cannot be met, and this is further hampered by the over-inflated HMO market in Birmingham.
“Our commitment now is to ensure a well-managed outcome for residents, our employees and our partners. Our priority is to work with our local authority partners and the housing regulator to achieve this outcome, whilst putting residents’ welfare at the heart of our engagement and consultation work, providing them with personalised support and working to understand their needs now and in the future.
“We have extended the normal consultation and notice periods and have been transparent in our actions to enable both residents and managing agents to make the best decisions they can regarding their future. Our focus is to create a stable solution for each and every individual we house.
“Our decision in no way reflects the commitment, professionalism and passion of our front-line staff who continue working hard to make a significant difference in the lives of our residents.”
“By being open about our challenges created by the flaws of the lease-based model, we hope other associations with similar operating models can learn from us. In this way we can all better the future of housing and ensure the support needed by many vulnerable people.
“Although our doors may close, sadly vulnerable residents across the UK remain at risk of exploitation and poor-quality unregulated accommodation and care. The current model sadly, for the reasons explored above, would leave society judged harshly and falling short. Policy and practice changes that offer more progressive support to enable residents to move to independence are needed.”
