Packages, People, Property

Every supported living provider we work with describes the same experience: the business is busy, occupancy is solid, the team is working hard — and yet the money never seems to add up. There is a reason for that, and it rarely comes from one place.

It comes from three.

We call them Packages, People, and Property. These are the Three Pressures™ that sit behind almost every financial problem a supported living operator faces. Understanding them separately — and how they interact — is the foundation of genuine financial control.

Pressure One: Packages

Packages are the contracts your local authority commissions for the individuals you support. They are your income. And for most supported living providers, the problem is not that packages are unavailable — it is that the rates attached to them are structurally too low, and the process for reviewing them is designed to favour the commissioner.

Package rates are set by your LA and reviewed annually, typically with reference to the National Living Wage. But as the first article in this series established, LA fee uplifts have consistently lagged behind NLW increases. The April 2024 uplift of 9.8% in the NLW against an average LA increase of approximately 7.4% left providers absorbing the gap. That gap compounds.

What makes this worse is contract structure. Spot contracts — individual placements commissioned on an ad hoc basis — are typically priced at LA framework rates with no guaranteed volume. Block contracts offer more predictability but lock you into a rate that may have been set years ago with no meaningful inflation mechanism built in.

The question to ask for every package you hold is simple: what is the rate per hour of support, and when was it last reviewed against your actual cost of delivery? If you cannot answer both parts, you are working without a clear view of your own revenue line.

Pressure Two: People

People are your most valuable asset and your largest cost. Staff expenses typically account for 65 to 75% of revenue in supported living. Within that broad figure lies enormous variation in how well operators manage it — and that variation determines whether a business is viable or under permanent financial strain.

Three people metrics matter most.

First: your fully loaded employment cost per hour of care delivered. This includes employer NI at 15%, pension at minimum 3%, and all associated on-costs. Not the headline wage — the total cost per hour on the rota.

Second: your ratio of employed to agency staff. The sector median for agency spend sits at around 5% of payroll. Above 10% it becomes a serious concern. Above 15% it is an acute financial risk. Agency rates typically run 20 to 40% above the equivalent employed cost. If your agency ratio is high, your margin is being eroded in real time.

Third: your staff turnover rate and what it actually costs. The true cost of replacing a support worker — advertising, interviews, induction, DBS, and the reduced productivity of a new starter — runs to between £3,000 and £5,000 per leaver. On a 20-person team with 30% annual turnover, that is up to £30,000 per year in costs that never appear as a named line on your profit and loss account.

In supported living specifically, staff continuity matters more than in many other care settings. You are supporting people in their own homes, often with complex needs, where the consistency of relationships is part of the quality of the care itself. A high agency ratio does not just cost more — it also creates CQC risk, and CQC risk creates revenue risk.

Pressure Three: Property

Supported living sits at the intersection of care and housing, and the property arrangements in the sector are more varied than they might first appear.

Some providers rent directly from a specialist housing association, a social housing REIT, or a private landlord under a long commercial lease — typically ten to twenty-five years. Others own their properties outright, either within the trading company or through a separate property holding entity. A further common arrangement involves a Service Level Agreement (SLA) between the care provider and a landlord, under which rents are paid directly — but where the care provider can carry void exposure through the SLA if a tenancy ends or a placement breaks down.

Underpinning all of these arrangements is an important structural principle: there is a clear obligation — and a strong sector expectation — to maintain separation between the provision of care and the provision of accommodation. This separation preserves full optionality for the people being supported. It means, for example, that a person should be able to change their care provider without losing their home. Providers should structure their property and care arrangements with this principle in mind.

Property is the pressure that operators underestimate most — until it becomes a crisis.

The metric to track, regardless of your specific property structure, is your rent-to-turnover ratio: your total rent payments across all sites as a percentage of annual revenue. A sustainable ratio sits below 15%. When it approaches 18 to 20%, your ability to absorb any other cost pressure shrinks rapidly.

The reason this matters structurally is that your rent is largely fixed. Your staff costs go up every year with the NLW. Your LA rate does not always keep pace. When those three forces combine — fixed or rising rent, rising employment costs, lagging revenue — you get a cash flow problem that builds slowly and arrives suddenly.

Providers who hold their properties in a separate entity from their trading company face an additional challenge: the intercompany rent must be set at a genuinely arm’s-length commercial rate, both for HMRC purposes and to ensure the correct allocation of costs between the two entities. Get that wrong and you can create a value trap — or an unnecessary tax liability — in your property holding.

How the Three Pressures Interact

The real danger is not any one of these pressures alone. It is when two or three combine. A provider with a package rate that was set two years ago (Packages), an agency spend of 12% of payroll (People), and a rent-to-turnover ratio above 18% (Property) is in a structurally precarious position — even if, on the surface, the business looks fine. The annual accounts might show a profit. The bank balance might look adequate. But the structural maths are working against the business every month.

The providers who navigate this well share one characteristic: they look at these three numbers regularly — not just at year end. They know their average rate per package hour. They know their agency spend as a percentage of payroll. And they know their rent as a percentage of turnover. Those three ratios tell you more about the health of a supported living business than any set of annual accounts.

What to Do Now

Pull out your financial data for the last three months. For each service you operate, identify: what is the average rate per hour commissioned by the LA? What is your fully loaded employment cost per hour delivered? What is the gap?

Then calculate your agency spend as a proportion of total payroll. And calculate your total rent across all sites as a percentage of your annualised revenue.

Those three ratios will show you where the pressure is highest — and where to focus first.

How RDA Helps

We build management account structures for supported living providers that show these three metrics clearly, every month — not buried in a spreadsheet, but visible, trackable, and actionable. If you want to see what that looks like for your business, book a call with Dan Daly at supportedlivingfinancials.co.uk or email ddaly@rdaaccountants.co.uk directly.