Whilst Community Interest Companies (CICs) play a vital role in providing supported living accommodation across the UK, many are grappling with a little-known financial barrier that puts them at a significant disadvantage compared to their counterparts in the sector.

The 60% Subsidy Issue

When local authorities pay housing benefit to tenants in supported living properties, they can claim back most of this cost from central government through housing benefit subsidy. However, the amount they can claim back depends critically on who owns or manages the property.

When a not for profit Registered Provider of Social Housing (such as a housing association) provides the accommodation, local authorities can claim back 100% of the housing benefit paid from central government. In contrast, when a charity or Community Interest Company claims the benefit, the local authority can only recover 60% of the cost.

This seemingly technical detail has profound implications for CICs operating in the supported living sector.

Why This Matters

This subsidy differential creates a 40% gap that local authorities must fund from their own budgets when working with CICs rather than registered housing providers. In an era of severe budget pressures, this disparity makes CIC-led schemes significantly less attractive to commissioners, regardless of the quality of care or housing they provide.

For CICs trying to secure properties and funding for supported living schemes, this creates several challenges:

Reduced competitiveness – Local authorities understandably prefer arrangements that maximise their subsidy recovery, making it harder for CICs to win contracts or secure referrals.

Pressure on partnerships – CICs are often pushed towards partnering with Registered Providers to access the full subsidy rate, which can add complexity and reduce their autonomy.

Limited growth potential – The financial disadvantage makes it harder for CICs to expand their services, even when there's clear local demand.

Investor concerns – Property investors may be reluctant to lease to CICs when they understand that local authorities have a financial incentive to work with registered providers instead.

The Wider Context

CICs were established in 2005 specifically to support social enterprises, offering a flexible structure for organisations wanting to make a social impact whilst maintaining commercial viability. Many have chosen the CIC model precisely because it allows them to be nimble, innovative, and closely connected to their communities – qualities that are invaluable in the supported living sector.

Yet this subsidy discrepancy undermines these advantages, creating an uneven playing field that has nothing to do with the quality of housing or care provided.

Potential Solutions

Several approaches could help address this challenge:

Partnership with Registered Providers – Working with a Registered Provider of Social Housing can resolve the subsidy issue, as the RP takes on the property management whilst the CIC focuses on care delivery. However, this adds another layer to the arrangement and may not suit all CICs.

Advocacy for policy change – The sector needs to make the case for equalising subsidy rates, arguing that the structure of the landlord should matter less than the outcomes achieved for residents.

Transparent conversations – CICs should be upfront with local authorities and property investors about this challenge, whilst demonstrating the value they bring in other ways – such as flexibility, innovation, and deep community roots.

Demonstrating value – CICs can work to show that their model delivers better outcomes or lower overall costs in other areas, potentially offsetting the subsidy differential.

Looking Ahead

The demand for supported living accommodation continues to grow significantly. According to the National Housing Federation, by 2040, an additional 167,329 supported housing units will be required across England – a 33% increase from current levels.

Meeting this demand will require contributions from all types of providers, including the innovative, community-focused CICs that have demonstrated their ability to deliver quality supported living services. Yet the current subsidy structure makes it unnecessarily difficult for these organisations to fulfil their potential.

For the supported living sector to truly thrive, we need a level playing field where the quality of housing and care matters more than the legal structure of the provider. Until policy catches up with this reality, CICs will continue to face an uphill battle – one that ultimately impacts the vulnerable people they're working to support.

At Supported Living Gateway, we work with all types of providers – including CICs, charities, and registered housing associations. If you're facing challenges in setting up or expanding your supported living services, get in touch at hello@supportedlivinggateway.com

Note: This article is based on current housing benefit subsidy regulations. We recommend consulting with specialist advisers about your specific circumstances.