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Council Leads Call To Tackle Exploitation

9 March 2022

Key hanging in keyhole of brown wooden door which is partially open. Blurred green trees in background.

West Devon Borough Council takes action to stop residents and the housing benefit system being exploited by some landlords.

At West Devon Borough Council's Hub meeting on 8 March, councillors heard how the Council is leading the fight to stop investors who take advantage of a benefits' loophole.

In recent years, West Devon and other parts of the UK have seen a rise in housing benefit claims relating to Exempt Accommodation. Exempt Accommodation is where the accommodation is provided by a landlord in the social or voluntary sector. A tenant in Exempt Accommodation is someone who is provided with care, support or supervision by the landlord or by someone acting on the landlord's behalf. This is paid for through the housing benefit system.

Whilst the Council recognises the need for additional funding where tenants require additional support to live in the community, we have concerns that the present system can be open to abuse. Some of the new schemes setting up this type of accommodation involve an investment fund. The schemes are set up to maximise the amount of housing benefit that can be claimed by ensuring that it falls outside the usual caps placed on housing benefit claims. 

The Council believes this issue needs to be investigated fully as a matter of urgency with a view to introducing amended regulations to prevent this exploitation. It has been working closely with Devon County Council, the Regulator of Social Housing, the Department of Work and Pensions (DWP) and the Local Government Association (LGA) and District Councils Network (DCN) regarding this issue. The Council is also actively lobbying government via the local MP's and the Local Government Association (LGA). It has submitted a report on the issue to the policy unit at Downing Street. The Department for Levelling Up & Communities (DLUC) has convened an MP Select Committee Enquiry for Exempt Accommodation. The Council has contributed to partner submissions and made its own direct submission.

Without the called-for changes, the system could become overrun by these schemes. As a result, reputable providers who are financially unable to compete would be pushed out of the market. This will result in the whole sector of supported accommodation failing those who need it the most.

Cllr Neil Jory, Leader of West Devon Borough Council said: "It's not right that a few people are making money at the expense of vulnerable residents and the public purse because of this loophole. That's why we will continue to engage and lobby at a local, regional and national level to ensure the current regulations are amended to stop this manipulation. Legally, this is a complicated battle to fight.  However, we must not lose sight of the fact that this is morally wrong and we need a change to enable us to protect our residents and tax-payers' money."

The exemption to rent caps applies to registered housing associations and not for profit organisations. It is intended to enable those types of landlord to provide very specialist accommodation and support that is tailored to individual tenants needs. It is accepted that this type of accommodation may cost more than the Local Housing Allowance rents, which is why the cap does not apply. It is also anticipated that because the cap is only removed in respect of non-profit making landlords, that it would not be possible for the removal of the cap to be exploited.

A number of schemes have found a way around this by utilising small registered housing associations as a 'front'.  Leases are then put into place that require that housing association to pay a large rent to another party, who is able to make a profit.

The housing benefit regulations do not explicitly prevent this exploitation, most likely because when making them, it was not considered that it would be possible for such advantage to be taken.

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