Saturday, 01 November 2014

Right to buy changes risk increase in fraud

Fraudsters are targeting the government’s revitalised right to buy programme, a report from the Audit Commission has revealed.

The number of right to buy fraud cases has risen by 52 per cent in the last three years and the commission warns that the newly extended discounts pose an increased risk of fraud.

In April the government increased the maximum discounts on right to buy properties to £75,000 and since then councils have been inundated with applications from tenants.

The report Protecting the public purse 2012 said that right to buy fraud is a ‘new emerging fraud’ and that although the level is currently relatively low – in 2011/12 there were 38 cases with a value of £1.2 million – the increased discount would make the scheme ‘more attractive to fraudsters’.

It warned that ‘social housing providers should ensure their right to buy fraud defences can respond to this increased risk’.

Right to buy fraud is commonly when people provide false identification when making an application or a householder applies for a discount when they are not eligible.

The report, published today, revealed that overall, councils are becoming better at cracking down on tenancy fraud.

Fraud was down 3 per cent on last year from £185 million to £179 million which the report attributed to improved detection by councils.

More than half of this – 124,000 cases totalling £117 million - came from housing and council tax benefits.

Councils recovered around 1,800 homes with a total replacement value of nearly £264 million last year – which was broadly the same as the previous year. However, since 2008/09 the number of properties recovered from tenancy fraudsters has risen by 82 per cent.

The report shows 69 per cent of all recovered properties last year were in London despite only 27 per cent of council housing being in the capital. This is because many London councils work with housing associations to tackle fraud.

More than half of non-London councils did not recover a single property last year.

The report recommended that the Communities and Local Government department incentivises social landlords to tackle fraud.

Readers' comments (6)

  • Chris

    This ignores the long standing anecdotal allegations of fraud using RTB. For instance sons helping their elderly mothers to buy so they can cash in on the discount five years later on, or lenders stretching convention to lend to those who clearly can not afford the loan, again so they can cash in on the property equity when the mortgage defaults. Extended family shadow purchasing and unsustainable mortgage advancing may not have a clear statistical report in proof of the frauds, but does anyone who has worked in housing over the past 30-years not know categorically of at least one case where such has occured.

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  • ‘new emerging fraud’ LOL-I know for certain of many widespread scams (a decade ago ) in inner London by organised groups who supplied the mortgage and bribed tenants to exercise the RTB and then sell them the property.

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  • The "scams" were perfectly legal Omega 3. Governments were so obsessed that councils would obstruct RTB that almost no action was taken to stop the transfer of property from councils to private landlords at high cost to the public purse.

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  • I work in a Home Ownership department and this is nothing new, we see it all the time especially as Chris mentioned, children "helping" their elderly parent purchase the property they have lived in for 20-30 years, knowing that mum or dad are guaranteed to get the full discount.

    Before the government raised the RTB cap they sent the initial consultation to all councils, ALMO`s etc to ask our opinions, we said that it needed to be policed as it would raise the amount of fraud obviously, everyone that works in the industry knows this and also knows this certainly is not a new emerging fraud. It really must be stopped. Also, if you have £230k cash lying around as plenty seem to, then why not buy on the open market and leave social housing for what it was originally intended for. People who could never afford to buy on the open market.

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  • Kent D

    I agree with nrobinso, but would go further, I do not see why 2 gainfully employed adults in their 30s should be allowed to buy a 3 bed property in a high priced Kent village with any sort of discount just because one of them works for the prison service. The only reason the female in the party obtained the home for rent in the first place, apparently as a single person, is apparently because nobody in real need of social housing wanted to live there because it was too far away from everything, i.e. people in real need can't afford transport either a private car or public transport!!!

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  • Hi all

    I'm doing some research on RTB and you all make really interesting comments here. It'd be great to talk to you more about it directly but I can't work out whether it's possible for us to message each other through this site.  If you get this message please can you drop me a line and I can explain more? I'm

    jaimetaylor_uk [at] yahoo.com

    ?Thanks so much.  I'm working on an interesting project and it would be great to talk to people who know more about housing policies, issues and debates than I do!

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