As I skimmed the Government's suite of proposed legislative changes (badged as its means of embedding the regulatory changes to social housing trailed in last year's Social Housing White Paper ) earlier I was pleased to see that the exempt accommodation niche has not been overlooked.
The social housing white paper promised the Regulator of Social Housing a ‘look-through’ power enabling it to "follow money paid to bodies outside of the regulated sector and who are therefore not directly regulated. The power would, for example, enable the regulator to investigate potential fraud by examining the financial accounts of organisations thought to be financially benefiting from a registered provider. We will consider further the checks and safeguards needed so that there is no misuse of the power on organisations or individuals that are not part of the regulated sector."
As I explained in my previous blog, an absence of effective scrutiny and regulation on a number of fronts in the exempt accommodation sector has allowed a toxic model to flourish. This sees public funding earmarked to support some of the most vulnerable members of our society leaching into private pockets, some of which, it is suggested, have criminal links. The figures are eyewatering - an evidence-based report by Prospect Housing published in October 2021 estimated that some £816m of public funding passed through the exempt accommodation sector during the preceding 12 months alone. To be clear there's no suggestion all of this has leaked out of the sector - there are many exempt accommodation providers doing a very fine job in hugely challenging circumstances. This is however a case of more than a few rotten apples spoiling the barrel.
The Government is proposing legislative changes to sections 107, 108, 203 and 208 of the Housing and Regeneration Act 2008 which will allow the Regulator to follow funds or assets once they have left the ‘regulated sector’ by requiring third parties to provide documents and information. It will become an offence for anyone to knowingly or recklessly provide false or misleading information to the Regulator in this respect.
This is a potential game-changer, throwing a spotlight on the behaviour of the shadowy cohort of organisations (landlords and managing agents predominantly) that exploit the exempt accommodation model for their personal gain. It will enable the Regulator to extend its gaze and its reach to start to address the myriad challenges this area of the social housing sector suffers from.
As we know from the Prospect Report and from the Government report into the outcomes of the exempt accommodation pilots leaked in early March, this is a problem whose causes and effects are deeply interwoven. A much more sustained and empowered effort on a wide range of fronts is needed to tackle it effectively.
However, this is a very pleasing start in the hands of a soon-to-be newly empowered Regulator and I will be very pleased to see it pass on to our statute books as soon as it can.
the power would enable the regulator to follow money paid to bodies outside of the social housing sector and investigate potential fraud by examining the financial accounts of organisations thought to be financially deriving profits from the activities of a registered provider.