All eyes on tenancy fraud

‘His attitude was: “It’s my flat and I can do what I like with it.”’

That’s how Carol Bayes recalls one of the least admirable characters she’s met in her 16 years investigating tenancy fraud for Southwark Council, in London. The man had managed to secure a tenancy for one of the council’s precious three-bedroom flats, despite having no wife or children - and owning six other houses.

He rented out the council flat by the room: £150 a week for each of the bedrooms, and another £150 for the living room. A tidy profit on a home he paid no more than £140 a week for.

‘Still, when we confronted him he wouldn’t give the flat back,’ says Ms Bayes, who manages a four-strong housing special investigations team.

‘Some people have got that attitude, that once they’ve got a council flat, the council has no business in what they want to do with it.’

It was cases like this that housing minister John Healey had in mind in July, when he announced a ‘co-ordinated crackdown on the tenancy cheats who profit from unlawfully subletting their home’. The Communities and Local Government department promised a ‘multimillion pound anti-fraud drive’ this autumn, including a ‘data sweep of housing and benefit records’, that could free up ‘between 5,000 and 10,000 homes’ within two years.

With the numbers of households on housing waiting lists pushing 1.8 million at the last count, it is easy to see why the CLG thought this might be popular.

But how does it intend to achieve its plans and how likely are they to succeed? Behind the rhetoric, the announcement was light on detail. In reality, the strategy will depend largely on the goodwill of others - particularly housing associations and councils.

The department’s plan has three elements. First, persuade housing associations to participate in the National Fraud Initiative, a nationwide data-matching exercise run by the Audit Commission. Second, encourage councils to help associations investigate potential tenancy frauds highlighted by the NFI or other sources. Third, publish new guidance on the best ways to tackle unlawful occupation.

The National Fraud Initiative has run every two years since 1996, and all bodies audited by the Audit Commission - including councils, police authorities, fire and rescue - are required to participate. The commission collects data from each body, crosschecks it, and alerts participants of any matches that suggest potential fraud. For example, if a council tenant in Sussex is also claiming housing benefit in Warrington, both local authorities involved would be alerted to a ‘match’ requiring investigation.

Housing associations have always been able to participate, but few have to date. According to Audit Commission associate director Peter Yetzes, who runs the exercise, over the past four years about 40 of England’s 1,700 housing associations have participated in each cycle of the NFI.

Increasing participation

This limits the exercise’s capacity to identify unlawful subletting, because it only has access to data for around 50 per cent of the social housing stock. Mr Yetzes says the CLG aims to bring this figure up to 95 per cent, by persuading 300 of the largest associations to join the NFI. To encourage them, he says, the department has offered to cover the fee associations must pay to participate.

But the modest NFI fees - which range from £1,000 to £4,150 per organisation - are hardly prohibitive for landlords with thousands of homes. There must be other reasons so few associations have taken part.

Policy and practice officer at the Chartered Institute of Housing, Joanne Kent-Smith, claims there is a ‘big difference’ between councils’ and housing associations’ approach to illegal subletting. The reason, she says, is financial. ‘Once they’ve identified the wrong person is in there, there are costs involved in righting that situation.’ These can be punishing. Going to court to recover a home can cost as much as £25,000, according to Ms Bayes, and it can take years. During this time, she says, the tenant will often stop paying rent.

A council that is spending millions of pounds every year keeping homeless families in temporary accommodation can recoup the costs, by reallocating the recovered home to someone on the waiting list. But, says Ms Kent-Smith, associations ‘aren’t picking up the costs of homelessness prevention’ so some see pursuing tenancy fraud as a costly exercise.

A recent experiment by Southwark Council and housing association Family Mosaic provides a good example of how these costs and rewards can be shared. The association asked Southwark to check 300 of its tenants, and to recover any unlawful sublets. In return for its expert help, Southwark was given nomination rights on any recovered homes.

Ms Bayes and her team recovered 14 Family Mosaic properties - in all but one case, without going to court.

It may be schemes like this that the CLG has in mind for the second prong of its ‘anti-fraud drive’ - a £4 million fund for councils to ‘work with the [associations] in their area to crack down on fraud’.

Mr Yetzes says this will be significant encouragement for associations with no previous experience of investigating data matches to join the NFI.

The National Housing Federation is also calling on its members to join the NFI. Federation policy officer Anna Dent says: ‘The desire and need to tackle subletting isn’t just about [finances], it’s about a moral imperative as well. It’s not necessarily helpful to speculate about why things may not have been tackled previously.’

Even if the CLG gets full participation from councils and associations, can it really recover 10,000 homes in two years? The figure seems ambitious at best considering that the 2006/07 NFI cycle saw 69 homes recovered over two years. Fifteen homes were recovered in 2004/05.
It is not clear where the CLG got its 10,000 homes estimate. It did not respond to an Inside Housing query. It certainly didn’t get it from the Audit Commission. ‘I can’t say whether that order of magnitude is possible,’ says Mr Yetzes. ‘I don’t know how many [associations] are going to take part. I don’t know how many matches we’re going to get. I don’t know what the nature of those matches is going to be until they’re investigated… I don’t know what resources are going to be made available to investigate.’

We stand to learn much about illegal subletting in coming months - starting with how seriously the sector takes the problem.

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