The state-funded slum scandal: How Victorian homes are being became squalid flats with ex-prisoners, addicts and refugees – whereas landlords and gangs pocket taxpayer tens of millions… JACK HARDY’s stunning dispatch

After 74 years living in a neat bungalow tucked back off one of Birmingham‘s main thoroughfares, Lesley Cowley has decided she has had enough.

Much has changed over a lifetime spent on the Pershore Road, not least sweeping demographic changes caused by decades of uncontrolled mass immigration. But a little-known housing scandal, which is costing the taxpayer millions, has proved the final straw.

‘I used to know the majority of people over the other side of the road,’ she told the Mail. ‘Now I don’t – and I don’t wish to.’

This corner of south Birmingham has seen an explosion in houses being used for unregulated supported accommodation – a sector ostensibly set up to help society’s most vulnerable, but which has become a cash cow for unscrupulous landlords.

Former family homes are being turned into so-called exempt accommodation and rented out to those with support needs, such as recently released prisoners, drug addicts, refugees, individuals with mental health issues or women fleeing abusive homes.

A noble aim. But it is known as ‘exempt accommodation’ for a reason: rents are exempt from a cap imposed by housing benefit regulations.

This loophole means landlords can charge far higher rents than normally would be allowed – a fact being ruthlessly exploited not just by property owners but also supposedly not-for-profit agencies that provide housing and care for vulnerable tenants.

To qualify as an approved provider, firms need only offer what is loosely defined as ‘more than minimal’ support for their tenants. As a result, residents all too often receive not only substandard housing courtesy of unscrupulous landlords but also inadequate care thanks to agencies that take full advantage of the flimsy regulations.

Given the low cost and high returns, the exempt accommodation business has enjoyed an extraordinary boom – and particularly so in Birmingham.

The city now has more than 32,000 units being offered as exempt accommodation, an increase of thousands in a matter of years. It is estimated that half of the country’s entire spending on exempt accommodation – worth roughly £400million – is being hoovered up in the city.

Landlords have been snapping up cheap terrace houses, adding storeys, lowering ceilings and gutting attics to cram in as many people as they can. A six-bed property can generate £6,520 a month, according to some estimates, much of it coming out of central government coffers through housing benefits.

To make matters worse, West Midlands Police believe organised crime gangs are cashing in more than half a million pounds a month through exempt housing, while using shadowy property portfolios to launder dirty cash.

The city council, meanwhile, is largely powerless to quell the sheer numbers, as landlords do not generally need planning permission to turn houses into exempt accommodation.

A report by MPs in 2022 concluded the system was ‘a complete mess’ which had led to ‘the exploitation of vulnerable people who should be receiving support, while unscrupulous providers make excessive profits by capitalising on loopholes’.

‘This gold-rush is all paid for by taxpayers through housing benefits,’ it added.

Barry Toon, a local housing campaigner, is more blunt. ‘It’s more or less legalised fraud,’ he said.

It has meant some areas of Birmingham are swarming with landlords hellbent on buying up more bricks and mortar to rake in taxpayer cash.

Life has quickly become unbearable for families and long-time residents in the worst-affected neighbourhoods; they are afraid for their safety and wearied by incessant police sirens responding to their volatile new neighbours.

On the Pershore Road, where Miss Cowley has lived all her life, a staggering 42 percent of properties are reported to be exempt accommodation, much of it former student housing stock.

The bungalow in which she was born – and now hopes to sell – overlooks a particularly troubled stretch.

‘It’s usually at night time, there’s yelling and shouting, then there’s the cars – they use it as a race track,’ she said.

‘What gets me is that on their side of the road the rubbish is removed by the binmen and then, within an hour, the rubbish is all back there again.’

Despite it all, the traditional Victorian terraces opposite her still maintain a charmingly quaint air. Known locally as the Alphabet Houses, the properties each bear a decorative ceramic name plaque on their frontage, running in alphabetical order along the road.

There was a time Miss Cowley knew every resident.

‘Put it this way, I used to call everybody auntie and uncle, there was a familiarity between us,’ she said of her opposite neighbours.

‘I used to go for tea and coffee, there was toing and froing across the road – the community spirit was really good.’

The alienation she feels from the road of her childhood has only been accelerated by the relentless waves of immigration washing over Birmingham in recent decades, which is reflected in the make-up of the exempt accommodation.

‘I’m the only white person here – around here it’s Asian, you name it, everything other than white people,’ Miss Cowley said. ‘Landlords come and do basic jobs, but no sooner than they’ve done the job it’s all gone upside-down again – they’ve got no pride in the place.’

She has made the difficult decision to sell the house, which belonged to her mother and father before her, in search of a quieter life in leafy Bournville, around a mile away.

Another long-suffering Pershore Road resident is restaurant owner Mahmood Azhar, 68, who has lived in the area for four decades.

‘Almost every second there’s a police car and fighting going on, so many times in the middle of the night we have these people on our drive looking at the cars,’ he said.

‘I don’t feel safe at night anymore.

‘When I come home at midnight I used to come inside straight away. Nowadays when I park the car, I look around before I open my door – my wife doesn’t go out after dark.’

Nor is there any shortage of horror stories from vulnerable residents caught in the middle of this, forced as they are by landlords to endure living conditions which have been described as Dickensian.

Some of those managing the properties on behalf of the landlords pay almost no regard to the mix of tenants in their houses, with victims of domestic abuse horrified to discover they are living with violent men, or recovering drug addicts being forced to live alongside active drug users.

‘We’ve heard some shocking stories from people we support, including rooms infested with mice and mould; washing machines shared with 70 others and people even facing abuse when trying to speak up for themselves,’ Matt Downie, chief executive of homelessness charity Crisis, told the Mail.

‘No one should be forced to live in these conditions, but far too often people are left with no other choice but to stay – the alternative is to face sleeping on the streets.’

Jess Phillips, MP for Birmingham Yardley, even claimed in 2022 that two women had been murdered in exempt accommodation.

These problems are on full display in Handsworth, north Birmingham, which is creaking under the weight of its ever-expanding exempt accommodation stock.

Local campaigner Denise Forsyth, 77, has been tracking its spread through forensic trawls of Land Registry records – finding that one road near her home is now more than 90 percent exempt accommodation.

When the Mail visited the street, Willmore Road, one resident who gave his name as Chris admitted he was desperate to leave and felt unnerved living in a house with drug addicts.

His disillusionment had not taken long to develop.

Dragging deeply from a cigarette on the doorstep of his shared house, he said: ‘I’ve been here three weeks and I’ve already had enough.’

As he spoke, a menacing man dressed entirely in black with a balaclava covering his face approached, glaring at him, before slipping silently past to enter the property.

Mrs Forsyth said: ‘The community has gone, we used to have quite a good community around here. Now a lot of the families have gone.’

The Mail spoke to numerous residents about their ordeals in exempt accommodation. While some felt well-supported, many were withering about their support workers, who are typically employed by a third-party managing agent on behalf of the accommodation provider.

A report by MPs said they ‘often lack training, are inexperienced and unqualified to help people with varying needs’.

But some simply do not seem to care, or cynically exploit what they see as a money-making opportunity.

William, 46, said of his exempt accommodation: ‘We’ve got support workers, but they support themselves – in the last three months we’ve probably had five support workers.

‘You don’t get what you’re supposed to get, we’ve had a leak in our bathroom for six months now.’

He has to pay £80 in service charges for this privilege and feels that little, if any, of it goes towards looking after the tenants.

Another woman living in the area, who asked not to be named, said she had a back injury and suffered from seizures, yet received scant support.

‘It’s definitely got worse, it’s got terrible,’ she said. ‘My support worker told me not to ring him, I told him I can’t text him because I’ve got learning disabilities and he said ‘don’t ring me unless it’s an emergency’.’

Referencing the service-charge payments she has to make in cash, she added: ‘He only comes down when he wants his bleeding money.’

Mr Toon, who campaigns to improve housing in Handsworth, said he had heard of support workers dealing drugs in the houses they were visiting.

It is a grim situation that begs several questions: why has this scandal been allowed to take root so spectacularly? And why is Birmingham a hotspot?

The core problem is that no single regulator oversees the whole system, which often involves three separate parties responsible for a single property.

First comes the landlord, who buys a cheap terraced house and can often turn it into exempt accommodation without planning permission – meaning there is usually no chance for the council or local residents to object.

The landlord then leases the property to a middleman, typically a not-for-profit housing body known as a registered provider.

This provider is the public face of the system: it submits housing benefit claims and deals with the regulator, the council and central government, creating a layer of opacity that can shield the landlords making the real money from being identified and held accountable.

Through that provider, tenants find rooms, whether by referral from a public authority or, increasingly, through social media listings.

Often there is a third player too: a managing agent contracted to run the property day to day and employ the support workers.

Yet the Regulator of Social Housing oversees only one of these three parties – the registered provider – and with a remit limited to governance and financial viability.

Its powers stop well short of tackling landlord profiteering or the shoddy standard of care tenants receive.

A wild west system also attracts criminality. West Midlands Police told MPs in 2022 that the ‘unregulated nature of the sector’ provided ‘an opportunity for organised crime groups (OCGs)’, who ‘typically invested in real estate as a front to launder money’.

Properties linked to these criminals were ‘particularly prevalent’ in areas with the highest levels of crime – and there was ‘a strong overlap’ between these high-crime neighbourhoods and ‘exempt accommodation density’.

‘The OCGs provide cheap, rundown overcrowded accommodation and take advantage of vulnerable tenants while promoting acquisitive crime as a method for paying rent,’ the force said.

Birmingham has been hit especially hard thanks to its supply of cheap Victorian housing and a system long seen as easy to access and highly lucrative.

Inevitably, this has meant ‘the concentration and volume of provision in Birmingham exceeds local need’, according to Birmingham City Council.

‘The growth of the sector has removed thousands of much-needed family homes from the market and created a harmful and unsustainable imbalance within neighbourhoods,’ a spokesman added.

Indeed, the oversaturation of exempt accommodation means more than half of rooms are filled with people who have no connection to the city.

The Government, for its part, has been alive to this scandal for some time. The Supported Housing Act was passed in 2023 to address precisely these problems by introducing licensing schemes, imposing national standards and beefing up powers for local authorities.

But, as is so often the case in our spluttering democracy, real change has been held up for almost three years by consultations on the new regulations.

Crisis said the act needed to be implemented ‘urgently’, while a spokesman for Birmingham City Council said: ‘Effective regulation of the supported exempt accommodation sector is long overdue… we urge the government to accelerate the implementation of the Act and to introduce a robust licensing scheme as soon as possible.’

A spokesman for the Ministry of Housing, Communities and Local Government said: ‘We are committed to improving the regulation and quality of supported housing – work on legislation to do this has already started.

‘It is crucial that we get this right to protect residents and give people the support that they need.’