8 Nov 2012

100,000 council homes in hands of tenancy cheats

New figures estimate 100,000 people have obtained council houses and flats through fraud or are illegally subletting them for profit, writes Jane Deith

100,000 council homes in hands of tenancy cheats (G)

Channel 4 News has been given the first look at new figures from the Audit Commission on tenancy fraud in England.

In Protecting the Public Purse 2012, the commission reveals that council tenancy fraud is costing taxpayers at least £900m a year. That is three times as much as housing benefit fraud, its more widely reported cousin.

But the Audit Commission says too many councils and housing associations are “doing little or nothing” to detect tenancy fraud, because, the report implies, they decide it is cheaper to leave the fraudsters where they are than spend money going to court to kick them out.

But the report says if councils took a tougher line, they could save themselves millions of pounds in expensive bed and breakfast bills for some of the almost two million people on their waiting lists.

Aggressive detective work

Last year the government gave 51 councils £19m to find and stop unlawful occupancy of their council housing stock. And some councils responded, taking back 1,800 properties from tenants who had committed fraud. Most of the aggressive detective work was done by London councils, where tenancy fraud is between 4 and 6 per cent.

But the more startling fact is this. Of non-London councils, the majority – more than half – did not recover a single property from unlawful tenants. Not one.

In 2010, Stoke-on-Trent city council did nothing because it did not think tenancy fraud was a problem. But once it started looking for fraud, it found it. Last year the council seized 54 illegally gained or illegally sub-let properties.

Cases of tenancy fraud councils uncovered last year

A woman who sublet her council house in Harrow for double the council rent, using the profits to pay the mortgage on a house in Luton.

A woman who applied to buy her council house at a discounted rate under the right to buy scheme, although she did not live in the property. She was encouraged in the fraud by her daughter, who was a property developer.

A tenant who sublet his council house while living in Dubai. The person who rented the property had no idea it was a council house and was paying twice what the council rent would have been.

A couple who inherited a house worth £3.5m, but claimed still to be living in a small council house. In fact they were subletting it for profit.

Channel 4 News went to Harrow in north London to meet the council’s housing manager, Karen Connell. She says people are not embarrassed about committing tenancy fraud. She recovered ten properties last year, five so far this year. But she says the fraudsters have a “catch us if you can” attitude.

“They tell us, ‘See you in court’. They know it’s illegal but they’re prepared to fight tooth and nail, hoping we’ll give up. But we won’t.”

In one case Karen Connell’s investigator discovered a council tenant was actually living in a house she had bought in Luton. She was renting out her council house and using the profit to pay off her mortgage. When challenged, she claimed the tenants in Harrow were relatives.

When Harrow council finally got the keys back, they were able to give them to Miranda French.

Seven-year wait

Miranda and her daughter had been on the waiting list for a council house for seven years. Living in temporary accommodation meant it was impossible for them to put down roots. Miranda says it is frustrating knowing she was patiently waiting while a tenant was taking the system for a ride.

“Here’s hoping they don’t get away with it much longer because there are people waiting in tiny cramped properties. Knowing people with two or three-bed homes are subletting them, I find it very unfair.”

Miranda says finally getting a council house means she can start building a life.

“I have a home, I feel settled. It’s wonderful being able to write my address and think, ‘This is it, it’s permanent’. I can look for jobs, go to college. I can breathe now and carry on with living. I feel for the past seven years life’s been on hold.”

Small victories in a fierce war, and in a sense the Audit Commission only has half the picture. Because housing associations, which own more than half of England’s social housing stock, didn’t supply any figures. That is because most do not have any data.

And they have little incentive to fight tenancy fraud. Councils that kick out fraudsters can move genuine tenants in, saving money on temporary accommodation. But housing associations do not bear the cost of temporary accommodation. If they kick out fraudsters, the only thing that happens is they lose income – because the rent stops coming in.

Alan Bryce, who wrote the Audit Commission’s report, says some housing associations have accepted the moral argument that tenancy fraud is wrong, but many still say to him, ‘What’s in it for us?’ when he encourages them to tackle the problem.

Rap on the knuckles

But what about the people found guilty of tenancy fraud? When the knock on the door comes, often the worst they get is a rap on the knuckles.

Very few councils have the money or time to take people to court under the fraud act. Councils are happy if they just give the keys back.

Alan Bryce says that means fraudsters who are found out simply start again somewhere else.

“We’re aware of fraudsters who’ve made £12,000, £15,000 even £20,000 untaxed, unlawfully gained profit. So you can see the attraction. There are cases where people have handed back one set of keys for one property – and gone straight back on to the housing list for another council.”

That might change. Richard Harrington, the Conservative MP for Watford, is fighting to get a private member’s bill passed which would make tenancy fraud a crime. Mr Harrington has said his bill should “bring about a fairer system” and correct a situation where the “incentive is to cheat”.

In Harrow, Karen Connell would like to prosecute people but at the moment they would rather spend what little resources they have on taking back the keys and getting rightful tenants into homes they need – and deserve.