Topics
Introduction
1. In its latest focus report, the Regulator of Social Housing (RSH) has raised serious concerns about the resilience and sustainability of lease-based models in the provision of Specialised Supported Housing (SSH).1‘RSH Warns of Risks with Lease-Based Provision of Specialised Supported Housing’ (GOV.UK) | accessed 10 April 2025 While these arrangements offer a route to delivering homes for people with complex support needs, the regulator has identified significant systemic risks that call into question the long-term viability of many schemes.
Risk Imbalance
2. At the heart of the problem is a mismatch between responsibility and control. Registered Providers (RPs), who lease properties from private freeholders, bear the brunt of financial and operational risks. Despite their pivotal role in maintaining homes and supporting tenants, RPs often have little or no ability to renegotiate the lease terms that underpin their business models. This lack of flexibility leaves providers exposed to cost inflation, void periods, and unforeseen events that they are contractually obliged to absorb.
Exemption Fragility
3. The financial model for many lease-based schemes depends on properties qualifying for exemption accommodation status under housing benefit rules. This status is fragile—changes in tenant needs, or a shift in who is housed, can cause a property to lose its exemption. When that happens, permitted rent levels drop sharply, and the RP’s entire income stream may be compromised, threatening their ability to meet lease payments and operational costs.
Void Exposure
4. Void periods—when homes are unlet—represent a critical financial vulnerability. Lease obligations continue regardless of whether the property is occupied, meaning that any delay in tenant placement or property readiness can immediately create a deficit. For providers with limited cash reserves, even short-term voids can push the business into financial distress.
Governance Weaknesses
5. The RSH highlights that some RPs simply lack the governance strength required to navigate such a high-risk environment. Weak boards, insufficient financial oversight, and poor understanding of lease liabilities contribute to poor decision-making and inadequate risk management. These governance failings undermine both regulatory compliance and service delivery.
Financial Fragility
6. Lease-based providers often operate with minimal capital buffers and rely heavily on consistent cash flow to remain solvent. With lease costs front-loaded and ongoing maintenance obligations to meet, any disruption to income—whether from voids, benefit challenges, or rising costs—can quickly escalate into serious financial instability.
Over-Reliance on Third Parties
7. The success of these models depends not only on internal management but also on relationships with external actors. RPs are often reliant on local authorities for tenant nominations and rent approvals, on care providers to ensure appropriate support is in place, and on freeholders to provide lease flexibility or forbearance in times of difficulty. This reliance limits the RP’s ability to independently manage risk and maintain viability.
Regulatory Concerns
8. In light of these issues, the RSH has intervened in several cases, enforcing improved governance and risk management practices. However, the regulator observes that structural weaknesses—especially around lease terms and business model assumptions—remain widespread. A growing number of providers are under scrutiny, particularly those that have expanded rapidly without sufficient mitigation strategies or resilience planning.
Towards More Sustainable Models
9. Despite the challenges, the RSH acknowledges that some lease-based SSH schemes are functioning effectively. These tend to involve:
- Clear commissioning links with local authorities
- Equitable sharing of risk between RPs and freeholders
- Robust governance and financial planning
- Lease structures that allow for break clauses or adjustments
- Secure arrangements for covering void periods
10. Encouragingly, newer leases are beginning to reflect some of these improvements, including shorter terms, better protections, and increased flexibility. Nevertheless, the regulator warns that only a small number of landlords have demonstrated the ability to operate lease-based SSH at scale while meeting regulatory standards.
Conclusion
11. The RSH continues to work closely with underperforming landlords and is reviewing a range of regulatory interventions to safeguard tenant outcomes and restore sector stability. The message is clear: sustainable lease-based provision requires balanced risk, sound governance, and realistic financial planning. Without these foundations, even well-intentioned schemes risk becoming unviable, to the detriment of tenants and the wider sector.
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