More than half a billion pounds in public money paid to rogue housing providers in just one city

Exclusive: In Birmingham, £555m has been paid out in housing benefit in just four years to providers subject to watchdog action

Road to ruin: Living with the supported housing scandal

More than half a billion pounds in public money has been paid to rogue housing providers in the country’s largest local authority in the space of just four years, it can be revealed.

An investigation by The Independent and openDemocracy has found that, since 2018-19, £555.1m in housing benefit has been handed out in Birmingham to 18 providers of “exempt accommodation” that have been named and shamed by the regulator.

Concerns have been raised that, while the providers are not-for-profit, bosses are able to exploit a loophole in regulations in order to cash in.

In Birmingham, the biggest provider, Reliance Social Housing – which is chaired by a former junior-school headteacher and was paid nearly £90.1m in 2021-22 – was warned by the Regulator of Social Housing that it had not received assurances that the arrangements entered into by the community interest company were “not inappropriately advancing the interests of third parties”.

The figures, obtained from Birmingham City Council, include funds paid to providers who were subject to judgements or notices by the Regulator of Social Housing, for “general needs” as well as for supported exempt accommodation. The council did not provide a breakdown of what proportion of the funds was paid for each.

The exemption means that the supported accommodation – which houses women fleeing domestic violence, care leavers, homeless people, those with substance abuse issues and prison leavers – does not have to abide by a cap on housing benefit, allowing providers to pocket higher rates.

Reliance Social Housing has been paid £161.1m in housing benefit in Birmingham in just four years. In 2018-19, it received £2.3m, rising to nearly £90.1m in 2021-22.

The company – which is chaired by Mohammed Sajjid Sarwar, whose facebook page shows him posing with a BMW motorcycle – was subject to a regulatory notice by the social housing watchdog, published in October last year, which detailed how the provider “transfers a very significant amount of the rent and service charge income it receives to third-party managing agents on an ongoing basis”.

It added: “Evidence we have received from Reliance demonstrates a weak contracting environment, and the regulator does not have assurance Reliance has effective systems in place to give it sufficient oversight of these payments.” In a withering assessment, the watchdog judged that Reliance “does not adequately reconcile and monitor the payments made to third parties with evidence that the services are being provided to its tenants”, adding: “As a result, there is a risk of third-party managing agents not providing the services being claimed, or that services and housing management practices are inappropriate.”

The notice warned: “The regulator has not received sufficient assurance that the arrangements entered into by Reliance are not inappropriately advancing the interests of third parties, or that taxpayers’ interests and the reputation of the sector are being safeguarded.”

Reliance Social Housing said: “Reliance Social Housing has implemented a robust action plan to ensure it is fulfilling strategic objectives and regulatory compliance to the satisfaction of the Regulator for Social Housing.

“We are actively engaging with the regulator and working in an open and transparent dialogue dating back to November last year. During this period, we have provided them with evidence detailing our governance, procedures and operations.

“We are also working with Birmingham City Council’s exempt accommodation team, which includes West Midlands Police, to ensure the quality of service and support is meeting the required standards.

“We will continue to work with the regulator and Birmingham City Council to ensure they are fully aware of the high standards we hold ourselves to.”

Another provider, Sustain (UK) Ltd, was handed a regulatory judgement in 2019 which stated: “The regulator has concluded on the basis of reactive engagement that Sustain does not meet our governance requirements.” Since 2018-19, it has received £87.5m in housing benefit in Birmingham. Sustain did not provide a statement.

Birmingham City Council said in a statement that “the amount paid out in housing benefit (HB) reflects the size of the sector in Birmingham and the rules and caveats under which we have to operate as a local authority. The rules around awarding HB are separate from those of the Regulator of Social Housing in terms of making payments to landlords on behalf of their tenants.

“A housing provider may be under investigation or sanction from the regulator, but whilst it remains a registered social landlord, HB can continue to be awarded providing the tenant is entitled to benefit. Individual housing benefit claims are paid on behalf of the Department of Work and Pensions under housing benefit legislation. In most cases the payments are made directly by the council to the landlord on behalf of the citizen.

“These cover housing related costs only. The citizens are entitled to these payments through legislation. They are payments to individuals on low incomes in need of care and support, the landlord receiving the housing benefit on the tenant’s behalf.”

A government spokesperson said: “It is appalling that rogue landlords are exploiting the supported housing system to profit from housing vulnerable people who need help to live independently.

“That’s why we recently announced our intention to bring forward new laws as soon as possible, to crack down on rogue landlords, protect vulnerable residents, and give councils stronger powers to intervene.”

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