The government wants to make the unlawful sub-letting of social homes a criminal offence. So what are the challenges and will its proposals bring an end to the practice? Nick Duxbury investigates
On Monday last week a Tower Hamlets politician hit the headlines after admitting benefit fraud for the second time in as many years.
Shelina Akhtar, a 33-year-old independent councillor in Spitalfields and Banglatown ward, pleaded guilty at Snaresbrook Crown Court to falsely claiming housing and council tax benefit for a housing association-owned home she was not living in at the time.
The prosecutor warned Ms Akhtar could face an especially severe punishment when she is sentenced on 6 February because of her political position in a borough with notorious housing need, and because she was previously found guilty of benefit fraud in July 2010.
Had she been caught in 12 months’ time, however, things could have been very different for Ms Akhtar - much worse in fact. Under coalition government proposals for a crackdown on the abuse of social housing, unveiled two days after her plea, she could also have been accused of illegally sub-letting her Swan Housing Group home - a new crime carrying a punishment of up to two years in prison and a maximum fine of £50,000. Unlawfully sub-letting a social home is currently only a civil offence.
Ms Akhtar’s case, though high profile, is just one of between 50,000 and 160,000 examples of unlawful sub-letting the government estimates is taking place in England’s 4.4 million social homes at any given time - the wide range a clue as to how hard it is to identify the problem.
Tabling a consultation outlining his attack on social housing cheats, housing minister Grant Shapps did not mince his words: ‘Tenancy cheats are taking advantage of a vital support system for some of the most vulnerable people in our society and getting away with a slap on the wrist while our waiting lists continue to grow,’ he said. ‘It’s time for these swindlers to pay the price.’
It’s the second time Mr Shapps has had a go at tackling this problem. In December 2010, the Communities and Local Government department announced £19 million of funding to be spent over four years. The first two years’ cash was allocated to 51 councils with the greatest problems that had been seen to do the most to tackle tenancy fraud. The cash was not ring-fenced and could be spent on tenancy audits and specialist in-house investigators. Recipients of the final two years’ cash have not been announced.
So will criminalising sub-letting help councils and housing associations stamp it out and what challenges do they face?
At present social landlords must go through the civil courts to repossess a property from a tenant who is unlawfully sub-letting their home. This is a long and potentially expensive process that does not carry the fear factor of a criminal record, potential jail time and fines.
These latest proposals are therefore generally welcomed by councils in principle. But for housing associations there are concerns over whether or not they will make a big impact given their powers are much more limited. There are also practical hurdles in instigating them. For social landlords generally, the biggest of these is identifying sub-letters in the first place, a process which requires both time and money.
Under the proposals, councils could request data from banks, building societies and utility companies to identify and prove sub-letting. To incentivise this and help with the cost burden, they could also recoup any profit made by the sub-letting tenant.
It’s time for these swindlers to pay the price
Grant Shapps, housing minister
However, the consultation - which closes on 4 April - states it would not be ‘practicable’ to extend the same power to housing associations because of concerns about how this would impact their status as private bodies. Instead the consultation suggests ‘joint working arrangements being extended to enable housing associations to benefit from any new powers given to local authorities’.
Once identified, housing associations would not be able to directly prosecute an unlawfully sub-letting tenant either. The organisations would have to report the case to a local authority or the police instead, who could then start criminal proceedings. Associations could, however, potentially bring a private prosecution against the tenant.
Many landlords point out they are already carrying out extensive audits and initiatives to tackle unlawful sub-letting - and their investigations reveal that dealing with the problem is rarely straightforward.
Andrea Baker, director of housing at 8,500-home Poplar Harca Housing Association in east London, says the association is in talks with companies offering software services that pool information from credit agencies and other landlords to help identify likely culprits. The actual details are protected, but they leave a pattern that can help locate offenders. Furthermore, the association offers tenants incentives for sharing intelligence on unlawful sub-letters.
‘Residents who grass up a local property where it’s taking place get £500,’ Ms Baker explains. ‘In the first six months of the scheme we have got 11 homes back from sub-letters. All our tenants know someone on the waiting lists, so there is a major sense of injustice when someone is playing the system. For this reason, no one has actually accepted the £500 reward.’
Ms Baker warns that making sub-letting a criminal offence could reduce the number properties the association recovers. She is concerned that this could act as a disincentive to residents who would otherwise tip landlords off. Few of them, she reckons, would want to be responsible for seeing someone go to jail - and without the help of willing neighbours, she says it is extremely difficult to identify properties being sub-let.
There are other complications. Home Group is currently reviewing its procedures on the back of Mr Shapps’ proposals and working out what they mean for their own tenancy policies - some of which allow lawful sub-lets.
‘We want our tenants to be aware of their rights,’ explains Rosemary du Rose, executive director for customer service at the 51,000-home housing organisation, who is unconvinced the proposals will have big impact. ‘In Scotland our tenants can sub-let their properties on a six-month basis if they have written consent. Scottish law is different. If it’s for the right reasons then sub-letting is not necessarily a bad thing. It is not always for profit.’
And even in the case of an unlawful sub-let, there is no saying that Home Group would push to criminalise a tenant. ‘We would always take the appropriate steps if it is unlawful - but we might not always evict,’ says Ms du Rose. ‘Depending on the circumstances, we would offer advice and support where appropriate.’
Similarly, while Poplar Harca has a policy of pushing for eviction in every case of tenancy fraud, more often than not, Ms Baker is happy if ‘the keys get returned through the letterbox and they leave’, as it saves the need for costly and time-consuming legal action.
There is, then, a potentially fine line between a tenant receiving a two-year jail sentence and someone receiving advice and support.
While most councils, housing associations and even the Labour Party, seem to agree that the proposals send out a strong, positive message, far fewer believe they will have a major impact on unlawful sub-letting.
‘I am not convinced it will make a big difference,’ says Paul Tenant, chief executive of 36,000-home Orbit Group. ‘Yes, making it [unlawful sub-letting a criminal offence] will be a deterrent, but people will still do it. Organisations are already alert to this and doing a lot of work around it already. I have not heard concerns coming from the sector - just from the housing minister.’
Swan Housing Group declined to comment whether Ms Akhtar is likely to keep her home. But regardless of the outcome of her case, she must consider herself fortunate that it is limited to two counts of fraud and not also an allegation of unlawful sub-letting.
Howard Kleinburg, head of operations at counter fraud investigator HJK Associates which worked on the case of Shelina Akhtar, has a unique perspective on the practical challenges around tackling unlawful sub-letting. Indeed, the company uncovered the fraud in the Akhtar case when investigating a separate sub-letting case.
He reckons around 90 per cent of housing associations don’t have in-house fraud investigators. ‘Instead they report the problem to their local authority’s in-house fraud team,’ he explains. ‘Local boroughs usually have a fraud unit with someone who specialises in housing fraud. But no one focuses just on housing sub-letting - they rarely go after that.’
While he believes criminalising unlawful sub-letting is the ‘right way to go’, and may help mend a ‘two-tier system’ in place at the moment in which police and councils prioritise criminal fraud cases over civil ones like unlawful sub-letting, it doesn’t change a more fundamental problem: the lack of funding to tackle the problem.
‘Housing associations have no budget for housing fraud,’ he says.
In addition he says the £19 million government cash given to councils to tackle fraud is not ring-fenced, so it is often spent elsewhere, meaning councils are also under-resourced to use the new legal powers they could receive.
‘To make it [the crackdown] work, it will require funding,’ he concludes.