In 2012, the Audit Commission reported that social housing fraud accounts for the largest losses, arising from fraud, in local government with approximately 98,000 social homes being subject to fraud (“Protecting the Public Purse” 2012). The National Fraud Authority estimates the cost of social housing fraud to be around £900 million per year and it’s believed that there are currently around 1.8 million households waiting for an allocation of a social sector tenancy.
These statistics only show half the picture. Whilst social housing fraud not only has a devastating financial impact upon local government and private registered providers of social housing (PRPs), it also has considerable societal consequences. Social housing fraud deprives those in greatest need of a home meaning that families spend longer in temporary accommodation which, in turn, may inhibit social cohesion within communities, interrupt educational provision and employment, and give rise to increased costs for local authorities.
So what is social housing fraud? Social housing fraud takes many forms and includes the following scenarios:
- Where a tenant sublets the entire property eg he/she is not using the property as his/her only or principal home and profits from subletting the property;
- Where a tenant attempts to take an assignment of, or succeed to, the property when he/she is not entitled to do so;
- Where a tenant lies on his/her application to obtain a property eg falsely declaring himself/herself as homeless or in priority need;
- Where a tenant uses false documents to obtain a property eg using a forged identity document.
The political imperative to tackle social housing fraud is clear. On 20 June 2012, Richard Harrington MP presented a Private Members Bill which attracted cross party support and government backing leading to legislation being enacted. The Prevention of Social Housing Fraud Act 2013 (the Act) received Royal Assent on 31 January 2013 and is due to come into force imminently.
The Act creates two new criminal offences of illegal subletting, provides for the creation of unlawful profit orders (criminal and civil), enables the loss of assured tenancy status for tenants in breach and gives local authorities the power to obtain information from third parties for the purposes of investigating fraud. The maximum penalty for the most serious form of illegal subletting is up to two years’ imprisonment and/or a fine, and it is notable that local authorities will have the power to prosecute both offences on behalf of RSLs/PRPs and other local authorities also.
Jonathan Manning of Arden Chambers, one of the leading housing law chambers, comments:
“The Prevention of Social Housing Fraud Act 2013, when it comes into force, will be a very welcome addition to the tools available to social landlords to combat housing fraud. Especially given the current economic climate, it is inevitable that the pressures on social landlords, from various different sources, to tackle these issues effectively will increase and that the recovery of unlawfully obtained profits will become a very powerful remedy.”
Local authorities and PRPs therefore now have, more than ever, a mandate to deal with social housing fraud and expectations are growing as to how each organisation will rise to the challenge. It was recently announced by the Housing Minster, Mark Frisk, that a second tranche of funding: £9.5 million has been set aside to help local authorities tackle social housing fraud and 62 councils have been named as the beneficiaries. There are already a number of notable examples of good practice and some very effective campaigns are being run by local authorities. The challenge will be all local authorities and PRPs, especially those who may not have the in-house capacity or resource to dedicate to tackling these potentially complex matters.
One issue that appears to arise on a regular basis is data sharing. Whilst local authorities and PRPs clearly understand the need to share data to prevent and tackle social housing fraud, there remains a great deal of concern about how this should be undertaken.
Whilst the Act has provided what is known as a mandatory gateway to enable the provision of data for the purpose of investigating social housing fraud, the regulations conferring the power have yet to be issued. It is, however, very encouraging that the definition of “housing fraud investigation purposes” has been drafted very widely to include not only offences under the Act but also offences under the Fraud Act 2006 relating to illegal subletting and other frauds (which have always been and remain liable to prosecution). Whilst the regulations are awaited, the Information Commissioner’s code on data sharing and the checklist for data sharing are invaluable resources for local authorities and PRPs in the fight against social housing fraud.