Watch: How private companies are cashing in on social housing
ByMichael Buchanan and Eleanor LawrieBBC Panorama
Some private companies are making huge profits and exploiting the welfare system by receiving housing benefits on behalf of residents but failing to give them the support they're required to, BBC Panorama has found.
Property agents are drawing people into the taxpayer-funded system using social media videos that offer free rooms, PlayStation consoles and even holidays.
The system - called supported exempt accommodation (SEA) - is designed for people in the UK with additional needs, including former prisoners, people recovering from addiction and women fleeing domestic abuse. It provides housing along with care, support and supervision.
For many residents it works well to help them get back on their feet, but charities, politicians and residents tell us parts of the system are being exploited.
Many vulnerable people are being used as "cash cows to generate income" that goes from the Department for Work and Pensions (DWP) into "the back pocket of the landlords", said Patricia Coleman-Taylor, who runs Birmingham anti-poverty charity Narthex.
Panorama has learned the DWP paid out £410m for SEA in Birmingham alone in the last financial year.
The city is the epicentre of the sector, with more than 34,000 people living in SEA. For context, in London about 22,000 live in supported housing despite its population being more than seven times larger.
Labour MP Jess Phillips, whose Birmingham constituency contains large numbers of these properties, said companies spending taxpayers' money while providing a poor standard of support was "an absolute catastrophe" and bad landlords "can make loads of money".
But she added that there are some housing providers who "get this money who are absolutely providing supported accommodation".
The leader of the city council, Liberal Democrat Councillor Roger Harmer, told us that "taxpayers' money is being wasted. It's a scandal."
In Birmingham, BBC Panorama's investigation found:
Vulnerable people are being left with little to no support in often unsuitable accommodation
One big housing provider wrote off £1.8m because of payments to some former directors and companies they ran
Evidence that some are willing to make benefit claims for people who do not live in their properties
Supported accommodation was set up for people like Alysha.
When she escaped a violent marriage, she returned to Birmingham seeking shelter. But her family did not have room so she had to look elsewhere.
Alysha became homeless after experiencing domestic abuse in her marriage
Alysha lived in three different SEA properties, including a shared house managed by a company called Second City Support Ltd.
Things soon started to unravel, she told us. Last December, residents of the house went eight days without any heating or hot water when the boiler broke, she says.
"I was at my wits' end. I'd be begging [Second City] and they would just cut the call because they didn't want to deal with it."
As a survivor of domestic abuse, she also wanted help to get her life on track, including looking for a job, but said there was no support from Second City.
By law, the registered provider of the accommodation only needs to offer "more than minimal" care.
"On the [social media] adverts, they will often say that you have weekly support sessions, help with GPs. It's not the case at all, they're not interested. They come, they want you to sign a paper to say, yes, Alysha's gone to support [sessions] this week."
A closer examination of Alysha's shared house shows how taxpayers' money is used and how companies in the system can make money in other ways too.
The registered provider of the supported exempt accommodation was Dawson Housing, a not-for-profit.
Dawson Housing was being paid £443 a week in housing benefit from the DWP - which it received via Birmingham City Council - for Alysha's room and her support costs, equivalent to £23,000 a year.
Dawson Housing hired Second City Support Ltd to manage it and deliver her support.
The Big Housing Rip-Off
19 October
Why are vulnerable people, including victims of domestic violence and those facing homelessness, not getting the supported housing they’ve been promised?
Separately, a sister company, Second City Housing Properties, had bought and sold the house for a substantial profit.
Land Registry records show it bought the property for £191,000 in 2024 and sold it a year later for £410,000.
Both Second City companies are owned by Darren Davey. He told Panorama that his company had spent about £150,000 on renovation and other associated costs, prior to the sale.
Davey has been very successful in profiting from housing vulnerable people in recent years, operating in both the supported exempt and temporary accommodation sectors.
An analysis of his companies' records shows that over the past three financial years, Davey has paid himself £2.9m in dividends from his network of companies, as well as earning more than £900,000 in salary.
Davey said his salary and dividends must be considered in the context of his wider group of businesses. Any suggestion his earnings came entirely from supported accommodation "would be misleading", he added.
Lawyers for Dawson Housing denied Alysha's support was poor and say that regular in-person support was provided.
They said there were unavoidable interruptions in the provision of a dedicated support worker and that Dawson Housing accepted communications with her fell below the standard expected.
The lawyers added that Dawson Housing's records did not establish that there was an eight-day period without heating or hot water. They said there were several call-outs for a faulty boiler and remedial action was taken.
'Ghost tenants'
There are hundreds of managing agents like Second City in Birmingham.
Social media accounts, particularly on TikTok, are awash with companies trying to attract people on benefits into their properties, mainly clustered around Birmingham's poorest areas.
Panorama has also been repeatedly told about "ghost tenants" - individuals listed as residents but not actually living in properties, for whom managing agents still claim housing benefit.
A Facebook advert we saw had one man "looking for 7/8 ghost tenants in various houses of mine".
When we rang the number listed, a man told us he just needed Universal Credit details and National Insurance numbers.
The claims would be registered to rooms in his houses but "they wouldn't actually have to live there," he said.
He would effectively be receiving housing benefit for people who he was not accommodating or supporting.
Experts explain these individuals may offer respondents a one-off payment or a small recurring fee for using their details, while some people may never know their details are being used.
"That's fraud," said Jess Phillips. "Those people should go to prison."
Adverts on TikTok advertise "free" rooms for people on benefits
Some people said they had been moved into SEA despite them not requiring support. Brian Edwards told Panorama he was one of them.
After a relationship breakdown, the 54-year-old former charity worker found himself homeless. Needing accommodation, he moved into a supported house provided by Windrush Alliance and managed by Nxtgen Housing Ltd.
He said he told Nxtgen that he didn't have any support needs but believes it applied for enhanced housing benefit on his behalf anyway.
Within a week, he'd managed to get some contract work. He said that when he informed the agency, it told him if he worked, he would lose his enhanced housing benefit payment and become liable for his rent of more than £1,000 a month, or need to move.
A year and a half later, Brian said he was still unable to work and receives little support.
"If I work, I lose my housing. If I stay in my housing, I can't work. I've become trapped, not just trapped in housing, trapped on benefits."
Brian says he was accepted into supported accommodation despite not requiring support
Nxtgen Housing told Panorama it had "discussed different support plan options with Brian".
It said "he selected the support areas he considered relevant", and the support worker "subsequently worked with him on those plans".
Nxtgen said it did not discourage Brian from finding employment and improving his financial circumstances.
The government recently changed the rules to allow SEA residents to earn more without affecting their benefits.
Panorama has discovered that the provider of Brian's house, Windrush Alliance, had to write off £1.8m due to the actions of previous directors.
In 2024, a new board of directors at Windrush found "the company's current financial position has been compromised through an outflow of funds to former directors and companies under their control".
The "recoverability" of the payments was deemed by the directors to be "questionable," so the fees were written off.
Windrush Alliance did not respond to a request for comment by the BBC.
Five of the six largest SEA providers in Birmingham, including Windrush, have been deemed to be non-compliant with the standards set by the Regulator of Social Housing.
All five are still operating and receiving hundreds of millions of pounds in housing benefit payments. But the regulator announced last week that it was launching action to close one provider, Concept Housing Association, as it had "failed to address serious failings in the way it is run".
There is no single reason why Birmingham has become the centre of this issue. The availability of relatively cheap three-bedroom family homes - which can quickly be turned into five or six individual rooms with shared facilities - does attract landlords. But many also blame poor oversight from Birmingham City Council for allowing so many conversions to take place.
Another reason, said councillors and charities we spoke to, was that it is not actually council money that Birmingham is signing off but central government funding. The council simply approves the application - it does not have to pay for it.
Councillor Roger Harmer, a Liberal Democrat who became leader of Birmingham City Council after Labour lost power in May's elections, denied that, and told Panorama his officers were working to eradicate fraud and poor provision.
"There is a huge incentive for us to crack down on the bad providers," he said.
"But the problem is you shut down one property, they can just go next door and open up in the next house," he added, pointing out that housing benefit rules were set by the DWP.
Companies advertise rooms across Birmingham on social media
In 2023, Parliament passed a bill to strengthen regulation of the supported housing sector in England. It included a new licensing scheme and a "fit and proper person" test. But more than three years on, the law is stuck in government consultations and has made no practical difference.
A government spokesperson said it is "working to implement measures... to raise standards and drive out the minority of poor providers taking advantage of the Housing Benefit system".
In Birmingham however, residents said they wanted action, not words.
Alysha said it is "shameful that people are being paid so much money. There's a lot of people who are vulnerable and in need. I'm going to class it as neglect."
Additional reporting by Jenny Parks and Lawrence Williams