Dark Money Investigations: Investigation

Exclusive: Substandard landlords bank £132m to house vulnerable residents

Specialist providers pocket huge sums in housing benefit, despite criticism from Regulator of Social Housing

profile2.jpg Jenna Corderoy
Martin Williams Jenna Corderoy
29 June 2022, 12.00pm
'Exempt accommodation' is meant to provide a safe haven for vulnerable people.

Paula Solloway / Alamy Stock Photo

Substandard landlords have been handed £132m of public cash since 2018 to house some of Britain’s most vulnerable people, a joint investigation by openDemocracy and The Independent today reveals.

Providers of so-called “exempt accommodation” are supposed to give a safe haven for those with nowhere to go – including rough sleepers, people with mental health issues and victims of domestic violence. But millions of pounds in housing benefit have been handed to organisations that have been rapped for poor behaviour by the Regulator of Social Housing (RSH).

Despite running “non-profit” organisations, our investigation found that some bosses were cashing in thanks to a legal loophole, while vulnerable people living in their properties were subjected to often “horrific” conditions.

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In one case, a domestic abuse survivor told us she was housed with a man who had been convicted of sexual assault. “People would be released from prison and brought straight to the house – no vetting, nothing,” said Emma*.

She had faced five years of abuse at the hands of her husband, who had pushed her into thousands of pounds of debt. She eventually fled after he dragged her down the stairs by her hair.

But rather than being given a safe sanctuary, Emma spent three “terrifying” years in shared accommodation, where a fellow resident repeatedly demanded that she give him money to feed his drug addiction.

“I worry about the people still there,” she said. “Two girls I knew took fatal overdoses. They weren’t getting the help they needed. People are being failed. People are dying.”

But even when providers are criticised by the official housing regulator, they often continue to rake in huge sums from local councils.

Figures obtained from 95 English local authorities show that some of the biggest providers of exempt accommodation have been subject to official judgments or notices from the housing regulator since 2018.

It is appalling that rogue landlords are exploiting the supported housing system to profit.

UK government spokesperson

The watchdog is meant to ensure that housing providers are “properly managed”, preventing the misuse of public funds. But it has been criticised for being “toothless”, with little power to take action.

At least £132m has been handed to substandard providers of exempt accommodation since 2018 – in some cases being paid millions even after they were criticised by the regulator. But the figure, which was obtained from English councils under the Freedom of Information Act, is likely to be an underestimate as most authorities did not comply with our requests for transparency.

It follows separate research by Crisis, the housing charity, showing how exempt accommodation is a booming industry. Across the UK, the number of ‘exempt’ households rose by 65% between 2016 and 2021, with nearly 157,000 homes now controlled by the council-funded providers.

Sailing and fast cars

Providers of exempt accommodation are supposed to be “not-for-profit” organisations, such as housing associations or charities. But our investigation found cases where providers have made large payments to private firms linked to their own directors or founders.

Pivotal Housing Association, for instance, has received more than £1m of housing benefit for exempt accommodation since 2019. But it has paid hundreds of thousands of pounds to private firms linked to its founders, husband and wife Denis and Fiona Dixon.

This includes almost £226,000 of “costs” paid to a company called Pivotal Support Group Ltd in the year ending March 2021. That firm, in turn, is owned by Pivotal Group Holdings, of which Denis Dixon is the co-owner.

Another firm that Dixon co-owns – Charles Terence Estates – was paid more than £400,000 by Pivotal Housing Association for “rentals”. The firm has paid out almost £13m in dividends since 2018, according to the company’s accounts.

Last March, the social housing regulator criticised Pivotal Housing Association for a series of failures, including that it was “unable to provide adequate assurance” that its accommodation met the government’s social housing requirements. It added that rents and service fees may be “overcharged”.

Meanwhile, the Dixons have enjoyed a glamorous lifestyle in the Algarve, on Portugal’s south coast. Their social media accounts boast pictures of sailing, fast cars and skydiving. In the UK, they own a four-bed home in Poole, Dorset, estimated to be worth in excess of £1.1m.

The couple did not respond to requests for comment, while Pivotal said only six of its 523 properties leased were currently owned by its co-founders, at a rent “no higher than any other property in our portfolio”. A spokesperson said the housing association did not accept “any suggestion that we have sought to exploit the housing benefits system in relation to exempt accommodation”.

In another case, Birmingham-based provider Sustain (UK) Ltd was handed a regulatory judgement in 2019,saying it “does not meet our governance requirements,” with issues of “serious regulatory concern”.

The regulator said: “Inherent conflicts of interest had arisen as a result of related party transactions to companies owned by Sustain’s executives,” adding that there was a “lack of assurance” that the issue was being addressed properly.

Despite this, Sustain went on to pay £2.3m to private firms linked to two directors – Adam Barwell and founder and ex-CEO Pauline Hughes – in 2020 and 2021.

Hughes owns a gated property in Birmingham, estimated to be worth more than £1m. Another six-bedroom house, on two acres of land, was bought in 2015 for £900,000 and is owned via one of her firms, Topcare West Midlands Ltd.

The high salaries earned by Hughes and Barwell were highlighted by Inside Housing in 2020, with the pair banking £215,000 in the year ending March 2019. They have both since resigned and did not respond to requests for comment.

Hughes’ daughter was also hired as Sustain’s “director of training and development” in 2014, at the age of just 20, before resigning in 2019. Sustain did not respond to a request for comment.

Birmingham City Council refused to say how much it had paid Sustain for exempt accommodation. But it said it had given more than £87m in housing benefit to the provider since 2018/19 for a variety of housing services, including “general needs” accommodation. This figure is therefore not comparable with the national total figure of £132m.

‘Raped by the landlord’

In parliament, an ongoing inquiry by MPs into exempt accommodation has exposed repeated concerns about resident safety and the suitability of some providers.

Written evidence by West Midlands Police says that issues include “fighting, begging, anti-social behaviour, prostitution, drug use, drug dealing, alcohol abuse, harassment, intimidation, theft, damage to property including fire and threatening behaviour”.

In one case, the force said it had intelligence to suggest a resident had been “raped by the landlord under threat of eviction”.

In another case, a “very high risk” perpetrator of domestic abuse was placed at a shared property with four single women before police had to be deployed to remove him.

“West Midlands Police is especially concerned with the concentration of vulnerable persons, many with complex needs,” the force said. “The opportunity for them to be exploited, to exploit others or for their vulnerabilities to be otherwise taken advantage of or exposed.”

Responding to the investigation by openDemocracy and The Independent, 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.”

The Regulator of Social Housing said that it had “significant concerns about the provision of non-commissioned exempt accommodation”, but claimed regulatory notices had an impact, with cases of providers cancelling expansion plans or ceasing trading.

(*) Emma's name has been changed.

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