More than £130m in public money handed to housing providers named and shamed by regulator

More than £132m in taxpayers’ money for housing the country’s most vulnerable people has been handed to providers that have been named and shamed by the regulator, it can be revealed.

An investigation by The Independent and openDemocracy has found that huge sums in housing benefit for “exempt accommodation” have been given to organisations since 2018 despite judgments or notices from the Regulator of Social Housing (RSH).

The figures, obtained under the Freedom of Information Act, cover 95 of more than 300 English local authorities, meaning the true figure is likely to be far higher.

Some bosses of non-profit organisations have even exploited a loophole in regulations in order to cash in themselves, our investigation revealed.

Exempt accommodation is supported housing available to women fleeing domestic violence, those with substance abuse issues and people leaving care, for which providers can claim higher rates of housing benefit. Providers can also charge residents service fees on top of this, which are designed to cover support in the properties.

It is a booming industry – the number of households in exempt accommodation in Britain rose from 95,149 in 2016 to 156,868 as of May 2021, according to figures uncovered by housing charity Crisis.

But it is also beset by problems, with concerns raised by charities, police and government about the quality of support available to those in exempt accommodation, as well as cases of violence and sex work within properties.

Under regulations, providers of exempt accommodation must be not-for-profit entities such as housing associations or registered charities providing “care, support or supervision”. However, our investigation has uncovered examples of these non-profit companies making large payments to private firms linked to their own directors or founders.

Pivotal Homes Group was set up by husband and wife Denis and Fiona Dixon in 1999. One part of the group, Pivotal Housing Association, received more than £1m from councils in the southwest from 2019 to this year for exempt accommodation. But the housing association’s most recent accounts show £225,598 in “costs” paid to Pivotal Support Group Ltd in the year to March 2021. That firm is in turn owned by Pivotal Group Holdings, of which Denis Dixon is the co-owner. His wife was a director of Pivotal Support Group from March 2005 to December 2017.

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Meanwhile, another firm for which Denis Dixon is director and co-owner – Charles Terence Estates Ltd – was paid more than £400,000 in “rentals” for hostels occupied by the association in 2020 and 2021. A further £390,107 from the association was recharged to Charles Terence Estates for the year to March 2021, accounts show.

Charles Terence Estates, meanwhile, has paid dividends totalling £12.95m since 2018 on its overall revenue, according to the company’s accounts.

In March last year, the RSH reported a series of failings at Pivotal Housing Association, including that it was “unable to provide adequate assurance” that its accommodation met the government’s social housing requirements.

Noting that the housing association managed units across five local authorities, the regulator said: “Rents and service charges for Pivotal’s tenants may have been, and may continue to be, overcharged. As some of the cost of these rents has been met through housing benefit and universal credit, there may also be implications for the public purse.”

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The Dixons live in the Algarve on Portugal’s south coast, and social media offers a window into their luxury lifestyle of sailing, fast cars and skydiving. Denis Dixon’s Facebook page shows pictures of the couple’s yacht, the Navigo, as well as Bentleys he described as “early birthday presents” in both 2015 and 2018. On his 2015 post, he added: “Happy birthday to me!”

In the UK, they own a four-bed home in Poole, Dorset, estimated to be worth in excess of £1.1m.

Denis and Fiona’s daughter Chloe, a 28-year-old surveyor, is one of two people with “significant control” of Pivotal Housing Association, while Fiona Dixon resigned as a director on 11 May 2018. Denis Dixon stopped being a “person of significant control” of Pivotal Support Group in April 2019.

Denis and Fiona Dixon 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”.

There is a similar story at Sustain (UK) Ltd, a Birmingham-based provider. Its website says its vision is that “vulnerable/homeless people deserve the opportunity to live in housing of a decent standard.”

The not-for-profit company was handed a regulatory judgment in 2019 about “inherent conflicts of interest” related to transactions with firms linked to its directors. Nevertheless, £2.3m was paid to private firms linked to two directors – Adam Barwell and founder and ex-CEO Pauline Hughes – in 2020 and 2021.

But despite these concerns, since 2018-19 Sustain has received £87.5m in housing benefit for supported exempt accommodation and other “general needs” housing in Birmingham, separate figures show.

Hughes owns a gated property in Birmingham worth in excess of £1m while a six-bedroom house on two acres of land, bought for £900,000 in 2015, is owned through one of her firms, Topcare West Midlands Ltd. A sales brochure described the property as a “prominent and very handsome country house” that “offers complete peace and tranquillity”.

Hughes’ and Barwell’s high salaries at Sustain were highlighted by Inside Housing in 2020, with the pair paid £215,000 each in the year to 31 March 2019. Hughes’ daughter was at one stage also employed by Sustain as director of training and development, and was appointed a director in 2014, aged just 20, before resigning in July 2019. Sustain did not provide a statement. Hughes stepped down as director last July while Barwell left in January. Neither responded to requests for comment.

Falcon Housing Association (FHA) – subject to a regulatory notice in November last year – has been paid £8.2m in housing benefit for exempt accommodation by councils from 2018 to 2021-22. Among failings, the regulator concluded: “FHA has failed to ensure that any arrangements it enters into do not inappropriately advance the interests of third parties or are arrangements which the regulator could reasonably assume were for such purposes.”

Falcon’s accounts show that in the year to 31 March 2021, the firm used the services of companies related to two directors, Faisal Lalani and Jamil Mawji, in which “sales of £510,466 and purchases of £90,061 occurred”, adding: “As at the year-end these companies owe £142,684 to Falcon Housing.” Mr Lalani resigned as a director on 4 October 2021, followed by Mawji a week later on 11 October.

The pair – finalists in EY’s entrepreneur of the year award and said to “see themselves as disruptive innovators” – were also involved with another rogue provider. Auckland Home Solutions has been paid £3.6m by councils in housing benefit for exempt accommodation since 2018. Mr Lalani was director of Auckland from October 2017 until October 2021, as was Mr Mawji from September 2017 to October 2021.

In its regulatory notice last August against Auckland the watchdog stated: “Our investigations also identified that some of the lease transaction arrangements Auckland has entered into have involved companies linked to directors of Auckland, and its shareholder. For these transactions, on more than one occasion, Auckland sought and received shareholder approval to authorise the reported conflict of interests and disapply the provisions in its articles relating to them. The transactions were material and on-going and in doing so, Auckland has layered long-term risks onto the business, for which we lack assurance that they can be adequately managed under the current terms.”

Auckland, Falcon, Mr Lalani and Mr Mawji did not provide comment.

The RSH has powers to take enforcement action against providers, stating on its website that it will do so if consumer standards are breached “and there is a significant risk of serious detriment to tenants or potential tenants”. However, none of the providers above have faced any such action to date.

In March, housing minister Eddie Hughes set out plans to introduce minimum standards of support provided to residents and changes to housing benefit regulations to “seek to define care, support and supervision”.

He also unveiled the government’s intention to hand local authorities in England new powers to “better manage their local supported housing market and ensure that rogue landlords cannot exploit the system to the detriment of vulnerable residents and at the expense of taxpayers”. But, he added, “any measures requiring legislation” will be introduced “when parliamentary time allows”.

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 RSH 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.