Supported living providers explained

The word provider does a lot of work in supported living and means two different things depending on who is using it. Confusing the two is the most common source of misunderstanding in the sector, including among investors who have already bought.

This guide separates them, explains how each is regulated, and sets out how to assess one.

Two different providers, two different jobs

The housing provider is the registered provider of social housing that takes the lease from the property owner, holds the tenancy or occupancy agreement with the resident, and manages the housing: rent collection, repairs liaison, tenancy matters.

The care provider is the organisation delivering support to the resident: staff, support plans, personal care where needed. It is commissioned separately, usually by the local authority or NHS, and it is regulated by the Care Quality Commission where it delivers a regulated activity.

Sometimes one organisation does both. Frequently they are entirely separate companies. For a property owner, only the first one matters directly, because that is who signs the lease and pays the rent.

Who regulates which

The Regulator of Social Housing regulates registered providers of social housing on governance, financial viability, rents and consumer standards, and publishes judgements on them. The Care Quality Commission regulates providers of regulated care activities in England on the quality and safety of care.

So a supported living scheme can involve two regulators looking at two different organisations doing two different things. A strong CQC rating for the care provider tells you nothing about whether the housing provider on your lease can pay the rent, and investors do sometimes conflate the two.

The lease-based provider model

A specific type of registered provider emerged to serve this market: entities set up largely to take long leases on privately owned stock, funded by housing benefit, holding little capital. They made the supported living investment product possible at scale, because someone had to be willing to sign 20 and 25 year index-linked leases.

They are also where the sector's problems concentrated. Taking on long, index-linked, fully repairing obligations against income that depends on individual benefit decisions, with minimal reserves, is a structurally fragile position. The Regulator of Social Housing has scrutinised the model closely and several such providers have received adverse regulatory judgements.

How to assess a provider before you commit

Start with the regulatory judgement, which is public. Then the accounts: reserves, surplus or deficit, and the scale of lease commitments already taken on relative to the organisation's size. Then how long it has operated and how quickly it has grown, because very rapid growth in lease commitments is a warning sign rather than a sign of success.

Then the commissioning question: are the services in its properties commissioned by a local authority or NHS body, or does it rely on housing benefit alone? And finally, how would it fare under the fit and proper person test that licensing will introduce for licence holders, board directors and service managers?

What a lender does with the same information

Broadly the same analysis, reaching a binary answer: acceptable or not. Provider acceptability varies between lenders, and knowing which provider clears which credit team is most of the practical work in arranging finance in this sector.

Where a provider is not acceptable, the deal is not necessarily dead. It may fund at lower leverage on a vacant possession valuation, or it may need a different provider on the lease. What does not work is submitting the deal and hoping. We establish provider acceptability before an application goes in, because a decline at credit costs weeks and can cost the purchase.