Thirteen registered providers of social housing are using this financialised lease-based model in Greater Manchester. Five have regulatory judgements against them.
Wigan is the borough with the highest amount of this type of housing which is fueling substantial dividend payments to shareholders, all derived from public money paid to house people with disabilities.
Social housing providers such as housing associations are widely thought of as non-profit enterprises that plough all money made back into repairing houses, building more homes and paying wages. But a new and lucrative financial model, involving companies leasing housing to registered providers of social housing who then rent it to vulnerable tenants, is seeing huge incomes being funnelled to the companies owning the freeholds to this leased housing. Incomes derived from the uncapped levels of housing benefit payable to tenants in specialist supported housing (SSH).
This type of housing caters for people who have learning disabilities or who are autistic and need high levels of support and specialised services, the Regulator of Social Housing says it allows the tenants to “live independently as an alternative to a care home”. There has been an increasing need for it as people have been moved out of care homes and institutionalised settings in the wake of scandals like Winterbourne View, where the abuse of patients with learning difficulties by the staff led to six of the abusers being imprisoned.
There is no doubt that this housing is needed and the failure of the state to provide councils or housing associations with sufficient resources to build this type of housing has led to the private sector stepping in and pocketing increasingly large amounts of public money. The lease-based financial model used to provide SSH has strong similarities to the private finance initiative (PFI), which is now thoroughly discredited due to the onerous costs of the leases on the infrastructure provided by private firms to public bodies, such as hospitals and councils.
The Bureau of Investigative Journalism(TBIJ) have compiled and analysed data on the companies involved in this lease-based social housing model in England, and their findings show that there is strong and growing presence of this model in Greater Manchester, which is extracting millions every year in lease payments from the registered providers, AKA housing associations, involved.
Triple Point and Civitas Social Housing
Two of the major players in this lease-based SSH model, with a huge footprint in GM boroughs are Triple Point Social Housing and Civitas Social Housing. Despite the words “social housing” featuring in their names these are not registered providers of social housing but Public Registered Companies, with huge financial clout, that are buying up properties rapidly to lease out to registered providers of social housing across the UK. Evidence collected by TBIJ show that across England up to 79p in every pound, collected as rent from SSH tenants’ housing benefit, can be paid out in lease payments by the registered providers involved to companies such as Civitas and Triple Point.
The entire revenue for Civitas is made up of housing benefit payments that pay the leases on the houses leased to registered providers of social housing. With their government-backed lease payments guaranteed, they have not suffered the rising unpaid rents many landlords have during the pandemic. Civitas states, “rents have been collected as normal and unaffected by Covid-19.”
For the year ending March 2020 Civitas recorded a pre-tax profit of £37.7m. From that profit £33m was paid out to shareholders. For such huge pay-outs they house a relatively small number of people. Accommodating 4,216 people across 613 properties they collected £45.9m in lease payments, meaning they collected £75,000 per property just for owning the freehold of the property leased. Civitas values its property portfolio at £878m, it is present in 164 local authorities and leases to 15 housing associations.
Triple Point Social Housing is the smaller of the two companies and collected £25.4m for its leases last year, which all ultimately came from housing benefit payments to vulnerable tenants. Of that income £23.7m was profit and it paid out dividends to its shareholders of £17.8m in 2019.
Lease-based model is big in Wigan
The dataset compiled by the TBIJ details 34 lease-based providers (LBPs) of social housing across England, that have been flagged by the Regulator of Social Housing (RSH) as using the lease-based model. The RSH has highlighted concerns about this model, namely the high rents present in the SSH sector and the risk to health and safety due to the large amounts of money being extracted from them, saying in a report:
“We have identified cases where the tight margin between rental income and lease commitment has led to reduced expenditure on maintenance and statutory health and safety compliance. This can never be acceptable.”
Supported housing units owned by lease-based providers across Greater Manchester
This graphic (and the one below) was derived from the Regulator of Social Housing data collated by the TBIJ and does not include any Land Registry data that was included in the dataset.
As can be seen in the graphic above, Wigan, with 402, has the highest number of lease-based supported housing units in the Greater Manchester region. Wigan has 819 supported housing units in total (lease-based and those owned directly by housing associations or the council) which means it also has the highest dependence on lease-based supported housing at 49%.
From the 34 lease-based providers investigated, 13 have housing in GM boroughs. The graphic below shows where these LBPs are situated across the region and how many homes they have in each borough. In Wigan the three major LBPs are Hilldale Housing Association (131 units), My Space Housing Solutions (126 units) and Bespoke Supportive Tenancies Ltd (BeST) with 103 units.
Lease-based providers of social housing in Greater Manchester
Regulatory judgements against lease-based providers
Out of the 13 LBPs listed in GM, five have regulatory judgements listed against them (hyperlinked in list below) by the Regulator of Social Housing, where the regulator found they had breached the set standards:
- Bespoke Supportive Tenancies Limited
- Encircle Housing
- First Priority Housing Association Limited
- Inclusion Housing Community Interest Company
- Trinity Housing Association Limited
Bespoke Supportive Tenancies (BeST) has 103 units in Wigan and four in Trafford. This excerpt from the regulatory notice given to BeST in August 2019 proves particularly grim:
“Through our ongoing regulatory engagement with BeST, the regulator has learned that a number of statutory checks and risk assessments are overdue across a range of health and safety areas, including gas, fire, electric, asbestos and Legionella. Also, for a significant number of its properties, BeST has been unable to provide assurance that statutory checks have been carried out by the property owners, and it has also been unable to provide assurance that where risks have been identified, appropriate action has been taken. Therefore, BeST lacks assurance that the homes where its tenants live are safe.”
Rather than concentrating on getting their houses in order BeST had expanded their portfolio of housing by 26%, in the year up to September 2019, bringing their owned units of accommodation across England to 1,706. In 2019 their turnover from social housing lettings was £19.7m, all of it from supported housing.
Despite their poor health and safety record with the homes they provide to vulnerable tenants the firm has looked after the health, safety and security of its top directors with three receiving salaries of between £150k to £200k, according to their Charity Commission listing.
The charitable status of BeST means it is a non-profit organisation, as are the majority of private providers of social housing on the RSH register, and all the lease-based providers identified in Greater Manchester. Although legal, the transfer of large amounts of income from the LBPs to companies such as Civitas, strains the definition of their non-profit status.
Dr Richard Goulding is an independent housing researcher from Manchester who specialises in housing association finance and is currently conducting research into Real Estate Investment Trusts (REITs), which Civitas and Triple Point are.
Goulding describes the entry of REITS into the social housing arena as the result of up to four decades of successive governments withdrawing public money and promoting private finance as a way of delivering social and affordable housing. Goulding says this model provides a conflict for the housing associations involved:
“REITs and similar real estate funds have been promoted as a means of combining ethical investment with long-term, safe returns arising from social and supported housing’s perceived low-risk, state-backed nature.
“But social housing needs subsidy and treating it as an investment vehicle is inherently likely to come into conflict with providing secure, safe and sustainable housing that meets people’s shared needs.”
The leases involved in this social housing model have built in annual increases, similar to previous PFI contracts, which allows a continuous ramping up of the profits. Goulding also draws parallels with the discredited PFI system and this lease-based social housing system, saying:
“Social housing has undergone privatisation and outsourcing since the 1980s. But whereas policies such as PFI still included substantial government grant, the entry of REITs and other investment vehicles has made provision even more reliant on social landlords providing a direct return for investors, extending financialisation as a dynamic within the welfare state.
“On the surface, many lease-based deals appear cheap…In practice however, weakened regulatory protections and incentives for speculative expansion among at least some providers create the potential for hidden risks, the costs of which if they occur are ultimately borne by tenants.”
Estimated lease payments from Greater Manchester
Specialist supported housing
is a subset of the wider “supported housing” field which provides for a broad
range of people: those escaping homelessness; the elderly; people with poor
mental health; and those with disabilities.
The average rent in the North West for all supported housing is £118.07/week according to the RSH, this figure is an average that includes both specialist and ordinary supported housing.
The average weekly rents charged by the LBPs in GM presents considerable variability, but all
of them were way above the regional average which will be partly due to their
specialising in SSH. Due to their uncapped nature,
they come under the category of Exempt Rent and
are open to negotiation between the LBP and the the local council and
the DWP on the amount of housing benefit they
Not all LBPs in Greater Manchester had an average local weekly rent stated for them. From the ones listed the lowest stated was £173.98 from Reside Housing Association in Rochdale, the highest was £416.68 from Trinity Housing Association in Rochdale. A whopping £243 a week difference in the same borough, the Trinity Housing rate in Rochdale is 3.5 times the regional North West average.
To give a ball park figure of the amount of money being extracted from boroughs in the region, The Meteor calculated an estimate of the amount paid out in leases for three of the main LBPs who have over 100 units of housing in the region. The estimated yearly amount paid in leases by these three LBPs that own 57% of the lease-based stock in GM is £5.7m.
Not all of this money will be going to the Civitas and Triple Point REITs. Civitas leases property to seven of the LBPs found in GM and Triple Point leases to five of them. The three providers included in the calculation above all lease property from both Civitas and Triple Point. Of the 1,339 supported housing units owned or managed by BeST across England, 526 (11%) are leased from Civitas and 226 (7.5%) are leased from Triple Point. There are other REITs involved in this that are not included in this investigation.
What’s the alternative?
Ben Clay is a leading organiser with the Greater Manchester Tenants Union and a Labour councillor in Burnage, Manchester, and has long campaigned for the building of more social housing and better conditions for tenants of all housing tenures across GM. Clay said of this lease-based model:
“The rise of financialised social housing is a worrying trend, where wealth extractors are able to siphon off significant sums of public money, that could be invested in building and maintaining high quality social housing for our communities, and providing the invaluable wrap around services that are desperately needed, by the vulnerable people housed in supported accommodation, and the whole of society.
“It represents an abandonment of the values of the social housing sector, and a failure of ambition by the housing associations, and local authorities, to remain focussed on the benefit of those they are housing… The result is an obscene transfer of wealth, away from the tax payer, and from supporting those in the most need, into the pockets of rent seekers, milking the system, for three or four times the average amount in the sector. These vulture capitalists are the true benefits scroungers.”
Civitas Social Housing (CSH), who own 21 % of the lease based supported housing in England, responded to the finding of the TBIJ report, a spokesman said:
“CSH is a responsible social-impact investor which delivers positive social benefits alongside a financial return. CSH is proud of what it does and is confident that its bespoke, adapted properties help lead to better physical, mental, emotional and social outcomes for the vulnerable adults who live in them.”
Clay questions the whole financialised model that underpins Civitas, other REITs and this growing trend of lease-based social housing extracting huge profits funded by public money, and believes that to maximise the benefits for residents and society:
“All monies which are accrued for providing these forms of accommodation should be invested in these homes, and the support services their residents need. One of my greatest concerns, is that the levels of support, and the quality of service provided to vulnerable people, at extortionate prices, will fall short of what most people would deem appropriate.
“This needs further investigation. These sorts of accommodations and services should only really be provided by the public sector, NHS, social services, housing associations with true social purpose, charities, co-operatives or other non-profit organisations that are accountable.”
Lease-based model growing
Latest NHS Digital figures show that more than 2,000 adults and children are in Assessment and Treatment Unit institutional settings, and pressure is mounting to move them to living in their own homes. People with autism and learning disabilities are also living longer and need lifetime housing solutions that offer support and independence. Civitas plans to expand its housing portfolio across the UK to meet this demand. Without government support to provide the resources for councils and housing associations to provide social housing fit for specialist needs, it is likely that Civitas will continue to cash in on public money that could be used to efficiently fund the social housing we need.
By Conrad Bower
This article is part of the ‘Raising the Roof on Housing‘ series. The housing investigation theme for this series was voted as the winner of a shortlist by Meteor Community Members. To find out more about becoming a member – click here
This story is part of an ongoing investigation by The Bureau of investigative Journalism and collaborating partners. You can catch other stories in this investigation by using this hashtag: #WhoBenefits
Feature image: composite image created from TBIJ images and Google Maps images