RSH warns standards are not being met by lease-based providers

This can lead to poor outcomes for tenants and landlords incorrectly claiming rent exemptions to meet their lease payments.

There is also an imbalance of risk and reward between the social landlord that leases the property and the freeholder that owns it. 

This model works with social landlords leasing properties on a long-term basis, to provide specialised housing for people with complex support needs.

The ongoing level of support should be similar to that provided in a care home, while enabling people to live independently in the community.

However, there have been a number of high-profile instances in the sector of late where the model has run into some of the issues identified in the RSH’s latest report.

Just last month, a non-compliant lease-based supported housing provider successfully entered a company voluntary arrangement (CVA) with its creditors, saving it from liquidation.

The CVA came two years after the RSH issued an enforcement notice to My Space Housing Solutions, saying it needed to commission insolvency advice.

In October 2022, the Charity Commission opened a statutory inquiry into the provider after it found that payments of more than £1m were made to nine of its own trustees over a period of seven years.

In December the same year, the English regulator downgraded My Space to the lowest possible governance and financial viability grades after its failure to provide evidence was branded “unacceptable”.

In February this year, another provider entered administration. Phi Capital Investments described this as a “tax credit misfiling”, but said it was “not as a result of the underlying operational business”.

Plus, at the start of this year, under-pressure investment trust Home REIT agreed to surrender the properties of another charity client as it struggled to cope with debts and tackling ongoing legal challenges.

The London-based firm, which is currently being wound down, has been beset by problems in recent years and has been selling off properties in an attempt to pay off its debts.

It posted a pre-tax loss of £475m in its delayed financial accounts for the financial year ending 31 August 2022, which it published in October 2024.

The organisation has struggled to collect rents from some of its tenants, with multiple charity clients entering voluntary liquidation over the past 12 months.

In its latest report, the RSH concluded that there is generally not enough flexibility in current lease terms for landlords to manage risks effectively. 

For the model to be sustainable and to protect tenants’ homes, landlords are going to have to address the issues raised in this report, and this may require further negotiations with the freeholders.

The RSH said it will continue to tackle the issues that fall within its remit. It has taken action to improve the governance and decision-making of some landlords. The RSH has also made landlords address severe conflicts of interest, which had resulted in some taking on unfavourable lease terms and unsuitable homes from freeholders. 

Jonathan Walters, deputy chief executive of the RSH, said: “Some landlords that provide specialised supported housing are exposed to a significant number of risks as a result of long-term and inflexible lease structures. The burden of risk often lies with the social landlord rather than the freeholder, and this can lead to viability issues and poor outcomes for tenants.

“We will continue to engage actively with the landlords who are failing to deliver the outcomes in our standards, and we will keep a range of regulatory interventions under review.”

This latest report on this part of the sector builds on earlier work by the English regulator published in 2019.