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Housing association set for closure uncovers £1.2m in housing benefit overpayments

An exempt accommodation provider set to close later this year has uncovered that it incorrectly paid more than £1.2m in housing benefit to its managing agents.

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Prospect Housing said all overpayments have now been recovered (picture: Getty)
Prospect Housing said all overpayments have now been recovered (picture: Getty)
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Housing association overpaid agents more than £1.2m in housing benefit #UKhousing

Prospect Housing, which announced in February that it would be ceasing operations in the summer, revealed in its latest accounts that it had made £1.26m in overpayments of housing benefit over the past two years to its managing agents.

The organisation is an exempt accommodation provider, a subset of supported housing that is funded directly by the Department for Work and Pensions. Prospect manages around 2,000 homes.

Exempt accommodation is often used as a means of housing those with very few other housing options, such as prison leavers, rough sleepers, refugees and migrants, and those experiencing substance abuse issues.

In many cases, registered providers employ managing agents to provide the accommodation and support services by entering into short-term arrangements with these organisations.

Housing associations receive the housing benefit directly from the council, before paying the managing agents the majority of the money received and keeping a management fee.


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Because such landlords provide loosely defined care and support services, their tenants can be exempt from housing benefit caps and as a result receive much higher rents than normal landlords.

Prospect received £17m in housing benefit in 2019/20 for its claimants.

The issue was first identified by the housing association in April last year following a management overhaul at the organisation. In July, Prospect underwent a “full reconciliation” of residents, which involved visiting all residents and an audit by accountancy firm Beevers and Struthers which recalculated the housing benefit received.

The audit found that large amounts of money had been wrongly given to managing agents. Prospect stated that this related to residents making claims that weren’t in line with housing benefit regulations or failing to notify the local authority of changes in circumstances.

The association said that in some cases this saw non-communication or incorrect communication when a claimant had left the accommodation, which resulted in continued receipt of housing benefit. In other cases, couples were wrongly claiming as single claimants.

Prospect said all overpayments have now been recovered and paid back to Birmingham Council and that tighter processes have been put in place to significantly reduce the risk.

Commenting on what was found, Vicky McDermott, interim chief executive of Prospect, said: “We are calling for a real detailed look at the policy and practice that has enabled such incidents reported in our accounts to occur."

The issue of housing benefit overpayments is a recurring theme among exempt accommodation providers in Birmingham, with other instances being uncovered. Last month, Inside Housing revealed that New Roots had seen £1.4m of housing benefit paid out to the managing agents incorrectly, with some of the funds yet to be recovered.

In its own review last year, Birmingham Council had identified nearly £1m in overpayments of housing benefit to some exempt providers.

Prospect’s accounts published last month will be its last accounts before it completes the “solvent closure” in the summer. The accounts outlined the association’s reasoning for their decision, which the Regulator of Social Housing said at the time would be the "first managed shutdown of its size in the social housing sector".

Among the reasons listed for its closure included a failure to comply with the RSH’s Rent Standard within its current lease terms. It added it would require a number of properties to be agreed at lease terms well below the market rate, which would not be realistic.

Prospect also said the English regulator would not allow it to be non-compliant indefinitely, as the standards of its accommodation did not consistently meet the organisation’s expectations and it failed to demonstrate compliance with health and safety standards.

In October last year, Prospect received a G4 rating for governance, the lowest an association can receive. Speaking to Inside Housing in March, Ms McDermott explained that this grading came after the association referred itself to the regulator following the murder of one of its tenants.

Commenting on the results, Ms McDermott said: “We welcome the scrutiny of our accounts and opportunity to give more detail.

“The transparency of our commentary within the accounts shows our board’s commitment to sharing lessons learned to ensure vulnerable residents in Birmingham and beyond are protected within the exempt sector.

“The overpayments are clearly are clearly unacceptable, and when we discovered the issue last summer, we undertook a 100% audit. This included visiting each property to ensure the correct claimant was occupying the property as described. We also did 100% reconciliation back to April 2019 of the residents in occupation against the housing benefit claimed.

“It is the self-reporting of identified issues, such as the above, which led to our downgrade and ultimately the board’s decision for a managed solvent closure. That process continues to go well and our latest journey will continue to be openly shared to ensure we capture the lessons learned.”

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