Date of decision: 08 Jun 2025
Summary
The complaint concerned the Council’s treatment of an organisation providing independent living support for adults. The director, Mr X, alleged the Council undermined the new accommodation by relaying false information to prospective tenants, suspending housing benefit, and damaging the provider’s reputation, impacting jobs and residents. The investigation was closed after initial enquiries resulted in a finding of no fault.
What happened
The director of the organisation accused the Council of failing to support a new supported living scheme, instead providing inaccurate details to the Care Quality Commission and other authorities, and halting benefit payments for tenants’ rent.
He complained that the Council:
- provided false information to the Care Quality Commission (CQC) that the accommodation was providing personal care, [the point being that this would have triggered registration as a care agency, or if there was no separation between the personal care and accommodation arrangements, due to the structure of the tenancy and the arrangement under which ‘support’ was being provided, or its validity as a tenancy if the tenants lacked capacity and had no authorised signatories, then registration as a care home];
- provided false information about the accommodation to other Local Authorities, [which would be defamation unless any inaccuracy was excused by the doctrine of qualified privilege – which is assumed to exist amongst all commissioners for safeguarding purposes but which network and comms go appreciably wider than that, in fact, in practice];
- stopped paying housing benefit for tenants at the accommodation (existing tenants – who would all have had a right of appeal).
He claimed the Council acted to force a reduction in accommodation capacity and sought reinstatement of housing benefit and an end to alleged ‘discrimination’. The Council replied that it inspected the site, raised concerns regarding property quality, capacity, and location, and questioned whether landlord arrangements met requirements for specialist supported housing.
In its complaint response, the Council said it had visited the new accommodation because it had concerns around:
- the quality of the accommodation and furnishings,
- the number of people the Organisation intended to house within the accommodation, and
- the location where the Organisation has set up the accommodation.
It noted the organisation operated as a private landlord, resulting in a housing benefit shortfall, and suspended payments until landlord status confirmation was received. The Council also stated concerns were shared in line with its Quality Assurance process and information-sharing agreements with CQC.
What was found
The Ombudsman found the Council acted according to its duties and established processes, including the sharing of quality and compliance information with partner agencies. There was insufficient evidence to suggest maladministration or that the Council’s actions amounted to statutory breach or injustice.
The Ombudsman noted the resolution rested on the organisation clarifying its landlord status to resume payments, and any claim of reputational damage was a matter for the courts. No award or compensation was made; no statutory fault was identified.
Points to note for councils, professionals, people using services and their carers, advocacy groups and members of the public
Whether a person wants to live in a property is a decision for them in the supported living sector. It is not a placement, if rent has to be paid, because a placement is the direct placing of someone in need into accommodation for the purpose of their care needs being met, in return for a fee; supported living, on the other hand, is the person’s own housing, for which they are paying rent. The council sector known as adult socila care only buys the care for the person in the place where they are living, not care together with accommodation.
The question of the standard of the accommodation, the space for tenants and the location are all business decisions on the part of a private sector business, initially, at least, until one of those stances comes up against regulation or something that prevents market forces from determining whether the business decision was a good one or not, that is. That might be planning law, CQC, competition, or the stance of commissioners that they are not interested in buying services from within the housing on offer, or the stance of the benefits team with regard to housing benefit and how MUCH rent to pay for – because of the rules about exempt accommodation being the only form of accommodation in which the local housing allowance is ignored as a restriction.
Where public officers of any kind make decisions, they are subject to judicial review, so they have to be acting properly, for the intended statutory purpose, and they have to act rationally and fairly.
We think that the investigator’s report therefore needed to locate the functions in play, within local government law, in order to make any consideration about the complaint make sense.
The report does not say in what capacity, this inspection was made.
It would have potentially been conducted with regard to considering whether the council wished to commission services related to the individuals already living there or who might wish to live there – but if people had already moved in, well, that would have been where they were living, and if they were eligible for care, then that setting would have been where the care needed to be bought.
Or it might have been planning officers, or rental benefits officers, but we are at a loss to know in what capacity they would have been acting. This lack of focus makes the report inaccessible for lay readers.
The position about housing benefit in supported living
Private sector landlords generally cannot qualify as exempt accommodation providers (meaning that their tenants cannot qualify for unrestricted housing benefit above the local housing allowance rate (the LHA) unless they are structured as, or work through, not-for-profit organisations such as housing associations, registered charities, or voluntary bodies.
For most private renters not covered by exemptions, the LHA amount payable is based on a flat rate determined by location and household size, or the rent charged, whichever is lower.
Tenants generally receive the full LHA rate (subject to means testing and deductions) but may still be responsible for any “top-up” if their rent is above the LHA amount. That top up can be turned around into a claim for Housing Costs, and thus reduce social care charging for those in the know – not as DRE, but as mandatory Housing Costs. The amount is irrelevant, and does not depend on receipt of PIP or UC for one’s disability related needs.
However, behind the scenes, housing authorities receive full (100%) subsidy up to the eligible rent set by the rent officer where the landlord is a specific type of housing provider – a registered housing association. Other forms, such as ordinary voluntary organisations, only attract 60% subsidy for councils’ coffers. And if councils choose to pay more than the eligible rent, for whatever reason, such as preventing homelessness, etc, central government only reimburses the council at a lower rate on the excess over the eligible rent set by the rent officer (either 60% of the excess, or no part of the difference), thus making the council the one that suffers if it does not scrutinise claims for exempt landlord status carefully, or does not bother to court the registered housing association sector.
The tenant (who is the claimant, even when the HB is paid direct to the landlord) retains the right of appeal if there is a dispute—such as over whether the accommodation is ‘exempt’ or if the eligible rent or benefit amount is restricted. Of course, if a council paying for social care wants a tenant out, then putting the tenant into debt is one way to do that, but not a proper way at all, in terms of public law. That improper purpose also tends to mean that nobody would be found to help the tenant appeal, which is wrong too, in terms of promotion of wellbeing and ethics.
The 60% rate stems from central government rules designed to discourage councils from routinely topping up HB above market (or Rent Officer) levels except in exceptional circumstances. It is designed to make councils very suspicious about claims to be an exempt landlord, but it makes getting a person in to supported accommodation with proper assurances about their rent being covered, almost impossiblly complicated.
If subsidy is restricted, the tenant (claimant) retains the right of appeal if their HB is also restricted in due course or there is a dispute—not the local authority thus deprived of the subsidy. HB subsidy is an administrative issue between government and the local authority rather than a benefit entitlement issue and a council would have to bring judicial review proceedings if in dispute with the DWP.
The assumption is that the rent will then be restricted which will put the tenant into difficulties, and that will make them want to appeal – or surrender their tenancy, which will mean a Care Act review because they will need care in a different setting – or be homeless.
[Under Universal Credit, to which housing benefit is migrating for SOME tenants, there is no local authority subsidy structure: all payments (including housing costs) are managed and paid directly by the Department for Work and Pensions (DWP).
There is no 60% excess subsidy rule in UC—the tenant simply receives a housing element up to their LHA or rent (whichever is lower), and if their rent is higher they are responsible for the shortfall.]
Where a private land owner (this could be a company) leases premises to a voluntary organisation, and the voluntary organisation becomes the direct landlord of the tenants, the voluntary organisation is eligible to be treated as an exempt accommodation provider if it meets certain conditions:
- The voluntary organisation must be a not-for-profit landlord with a direct tenancy or licence relationship with the residents. The legal liability for the tenants’ rent must be owed to the voluntary organisation, not the private landlord or any managing agent.
- If the care and support provider (even if for-profit and the original landlord or a separate body) is commissioned by the council, but delivers services as a result of a contractual arrangement with the voluntary organisation (the landlord), and not directly with the council or another third party, then the provision of support is regarded as being provided “on behalf of the landlord” and this is required as part of qualifying for exempt accommodation status.
- This structure falls within the definition of exempt accommodation, because the tenants’ rent liability is to the voluntary sector landlord, and the care/support is deemed to be delivered on the landlord’s behalf via a formal arrangement—even if the support provider is for-profit.
- The private landlord, so long as it only receives income as a leaseholder (not as the direct landlord), is outside the exempt accommodation scheme for regulatory purposes and only receives a commercial lease return.
- The setup is legitimate and commonly used, with the voluntary organisation as the public-facing “provider” for HB purposes, and the care/support element qualifying as being on their behalf as long as proper contracts are in place.
However, LAs (implicitly, Housing Benefit Officers) can investigate the relationship between the claimant’s landlord and the owner of the property to establish whether there is a commercial relationship or if there is a concern that the scheme may have been arranged to take advantage of the HB scheme.
The LA can look at information on the Companies House website to compare the directors and interests of the two organisations to help form a view as to whether the scheme may have been set up to take advantage of the HB scheme.
Where the organisation operating a scheme has Persons of Significant Control listed at Companies House if those individuals have a beneficial interest in property utilised by the scheme, the LA may wish to seek assurances as to how any conflict of interest are appropriately managed.
LAs can also interrogate the lease conditions to establish whether the property owner exerts excessive influence on the landlord.
Where the landlord does not have freedom to undertake a landlord’s usual duties, for example setting their own rents, they may be more akin to a managing agent and can be treated as such for HB purposes. Where the LA decides that the claimant’s landlord is a managing agent, the property owner should be treated as the landlord and where they are a profit-making body, the accommodation cannot be specified accommodation.
- The arrangement will not qualify if the “voluntary organisation” is a mere managing agent or a shell for a private for-profit entity. The voluntary organisation must have genuine control, liabilities, and responsibilities as the landlord.
- The structure and contracts involved must not simply disguise a private arrangement to circumvent Housing Benefit rules; LAs scrutinise “lease and manage” models for compliance with the substance of the law.
So this very sparse dismissal of what was an unfortunately unschooled complaint from a business person obscures a huge set of issues which are raging all over the country, to the detriment of vulnerable adults, who rely on benefits advice from councils, especially where the social services team is working with Housing and the Housing Benefit team. In that situation, for those who are getting social services as adults, the advice and information duty under the Care Act would seem not to be being discharged properly, with regard to the plight of the tenants whose tenancies were hereby jeopardised. But they were not the complainant!
Please use the following link if you want to read the original Local Government and Social Care Ombudsman’s Bury Metropolitan Borough Council (24 021 716) report.
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