The long anticipated announcement on the future arrangements for funding supported housing was made last week (15 September). Whilst Crisis isn’t a provider of supported housing we work with, and rely upon, partners across England, Scotland and Wales who do. They provide vital accommodation for our clients, who would otherwise be left on the streets or reliant upon insecure and unsafe arrangements such as squatting, sofa surfing or face overcrowding and exploitation in unregulated private rented properties.

The best that can be said about the announcement last week is that it’s a mixed bag. The worst – is that it’s another nail in the coffin of supported housing provision for some of the most vulnerable people in our communities.

There are some positives in the statement, which shows ministers and officials can listen and respond. These include:

• The recognition of supported housing being key to unlocking better outcomes for people and acting as a stepping stone to independent living;
• The government’s commitment to encouraging further development to meet future demand;
• The decision not to apply the shared accommodation rate to supported housing residents aged under 35 years of age;
• Extending the exemption for specialised supported housing, including refuges (but not hostels for homeless and vulnerable people, which will include people homeless because of violence and abuse);
• Recognition that under the Welfare Reform and Work Act 2016, social landlords may seek exemption from the rent cuts if complying would result in serious financial difficulty or jeopardise their financial viability; where they do not have the capacity to offset the decrease through efficiencies or from elsewhere in their business.

However, despite these positives, the minister’s stated intention to encourage further development to meet future demand is very unlikely to be realised.

For investors (whether banks that lend capital, or housing associations that use their reserves to build new accommodation) being confident that you will have the income to repay loans, mortgages or re-build reserves is absolutely essential.

The new funding arrangements will not come into place until 2019/20. Whilst this provides time to engage and consult the sector (and the people who live in supported housing, whose voices should be heard) it does extend the period of uncertainty for a further two and half years.

The new proposals also look set to fragment funding for supported housing:

• Core rent will come from DWP’s Universal Credit;
• Additional housing management costs will be devolved (on a ring fenced but cash limited basis) to local authority housing departments;
• Funding to support people living in supported housing need will come from commissioners who are increasingly likely to sit within adult social care – which means a totally different organisation in two-tier (county) authorities.

Whilst this may drive improved integrated and joined up commissioning in local areas, it is going to need new arrangements and governance, which took considerable time and resources to set up and maintain last time we faced a major change in funding for supported housing – the set up of Supporting People in 2002/3. The loss of the Supporting People ring fence has seen these very commissioning structures dismantled in many local authority areas in the last few years. And a resultant loss of funding for supported housing – which, designed to meet the needs of people below statutory thresholds, is easy to de-prioritise and divert elsewhere as soon as specific ring fences are relaxed.

For many of us who remember the development of, and have seen the demise of, Supporting People, there is a real sense of de j’a vu and, to be honest, pessimism.

By devolving the additional costs of providing supported housing to local authorities, we move from the current situation whereby people living in supported housing have their housing costs met “by right” through their rents, to one where they will rely upon the discretion of local authorities.

This mirrors the changes in 2002/2003 when Transitional Housing Benefit (a demand led/ entitlement based benefit) was revised and the element for “support costs” transferred into the then ring fenced Supporting People Grant. This was commissioned by local authorities – usually on a three year cycle (sometimes less!); making it difficult for providers to budget on a longer term basis.

Each commissioning cycle generally saw a reduction in contract prices, eating into the Compact with the Voluntary Sector which stated that contracts should provide for full cost recovery plus 2 – 3 per cent for investment. Most providers now see that as aspirational rather than a basic expectation for support contracts.

Once the ring fence came off, provision for client groups for whom local authorities have no statutory obligation to offer services has been further depleted; with cuts in supported housing beds for people who are homeless at a time of obvious rising demand and need.

These proposals will increase the uncertainty and instability of funding for supported housing.

And one of the few areas of certainty in the announcement is very unwelcome:

The decision to implement the 1 per cent rent reduction to supported housing will push currently financially viable providers to the brink of deficit. As a Board member for one such organisation, Evolve Housing and Support, I am particularly concerned about this. Evolve is a very efficient and effective provider of supported housing – with (low) levels of arrears and bad debts that many similar providers aspire to (and I say this as someone who has worked in several supported housing organisations over the years!)

A 1 per cent reduction doesn’t sound too bad, until you recognise that budgets have been set for the years ahead on the assumption that we will be able to increase rents at CPI + 1%. This means that the 1 per cent reduction is equivalent to more than a 2 per cent reduction against budgeted income and planned activity – exactly the margin that the Compact with the Voluntary Sector recommends for sustainable provision.

So, Evolve will face a crippling loss of rental income for the next three years, and an increasingly uncertain funding regime for supported housing – exposing providers further to the costs and cuts associated with discretionary and fragmented commissioning cycles.

Unless the forthcoming consultation with the sector delivers a robust long term funding mechanism that reflects increasing demands and guarantees income stability, investment in new supported housing is likely to be halted for many; and current provision may well be lost. And that will have dire consequences for futures of some of the most vulnerable members of our communities.