Regulator of Social Housing raps council after £2.5m overcharge to tenants, string of overdue risk assessments

An investigation by the Regulator of Social Housing has found East Suffolk Council overcharged tenants by more than £2.5m and converted more than 1,000 properties from social housing to affordable housing without the requisite permissions.

According to the regulatory notice issued to the council, the local authority was also in breach of the Home Standard as a result of hundreds of overdue council home inspections for fire risks, electrical safety, lift safety, and asbestos.

In a regulatory notice published last week (25 May), the regulator concluded that:

The council breached part 1.2 of the Home Standard, and as a consequence of this breach, there was the potential for serious detriment to the council's tenants.

The council was not compliant with the legislative requirements of the Welfare Reform and Work Act 2016 (the Act). Since 2016, it charged inaccurate rents as a result of incorrectly applying additional charges to the majority of its stock, which should have been included in the rent. It did not apply the 1% rent reduction to these additional rental charges also in contravention of the Act.

The council converted more than 1,000 properties to Affordable Rent without the requisite permissions, in contravention of both the Act and the Rent Standard.

The case came to the regulator's attention after the council made a self-referral in February 2022.

The regulator learned that almost 100 fire risk assessments were overdue, alongside more than 200 overdue communal electrical inspection certificate records and in excess of 150 overdue domestic electrical EICRs. 

It is likely that many EICRs have not been completed for more than ten years, according to the notice.

In addition, the council reported that all of its lift inspections (almost 100) are overdue.

Concerning the Rent Standard, the council told the regulator that in 2015, it had entered into a consortium under the Affordable Homes Programme and made an agreement with the Homes and Communities Agency (HCA), which allowed for up to 260 conversions from social to affordable rent.

"The council believes it has actually converted more than 1,000 additional tenancies from social to affordable rent outside of the terms of the agreement with the HCA," the regulator noted.

"East Suffolk Council identified the issue in early 2020 and acknowledges that it should have referred the matter to the regulator at the time."

The regulator also heard the findings of a review which identified that in 2018 additional charges had been added to multiple rent accounts, which were defined as 'de-pooled rental charges' as they did not qualify as service charges.

The council told the regulator it had identified that they were not reduced by 1% during the period of the Act.

According to the council's figures, the total overcharge to tenants is in the region of £2.58 million as a result of the affordable rent conversion. It also reported a £380k overcharge in relation to the de-pooled rental issue.

Referring to the overdue risk assessments, the regulator said: "Taking into account the seriousness and breadth of the issues, the durations for which tenants were potentially exposed to risk, and the number of tenants potentially affected it is proportionate to find that East Suffolk Council has breached the Home Standard and that there was a risk of serious detriment to tenants during this period."

Turning to the Rent Standard, the regulator concluded that the "scale and seriousness" of the breach of rent requirements reported by the council is "significant and has been compounded by the fact the council continued to charge incorrect rents for a period of almost two years while knowing this may not be permissible".

Taking these factors into account, it found a breach of both the Act and the Rent Standard.

The regulator acknowledged that since the council re-identified the issues in early 2022, it has reimbursed those that have been overcharged, engaged appropriate external advice on the nature of the errors, developed new rent policies, commissioned an examination of its stock, and improved audit and validation of rent setting and annal rent charges.

"The council has accepted the regulatory findings and is engaging positively with us, with support from external advisers, to take all steps necessary to resolve these issues," the regulator added.

Cllr Steve Gallant, Leader of East Suffolk Council, said he pursued an immediate review earlier this year after reading a report.

Cllr Gallant said: "I am pleased that a wide-ranging programme of remedial work is now underway both in relation to the issue of rent setting and health and safety.

"The regulatory notices which have now been published are fair, and essentially present what we already knew, incorporating a range of issues which we are working hard to resolve. The work will continue and it will be completed as soon as possible."

The council said it has been engaging with tenants on the matters for several months, writing to each personally. It has also set up a web page with essential information.

Adam Carey