Prevention of Social Housing Fraud Bill

Julie Hilling Excerpts

Friday 13th July 2012 Commons Chamber

[Richard Harrington]

I am grateful to my hon. Friend for that intervention. I had heard of the Enfield case he mentions. The fact that it was reported makes it very rare. The authorities in Enfield were delighted that they had managed to get through all the different hoops despite the fact that it is very difficult for them to deal with these cases, of which there are many, as elsewhere in the country, with the weapons they have available. The Bill would help the authorities in Enfield and elsewhere that have been pursuing such cases. It would give them teeth and ensure that they do not have such difficulties in proving their case before a court and then end up allowing people to escape following blatant misuse of their social tenancies.

The National Fraud Office estimates that such social tenancy fraud costs the Exchequer and taxpayers over £900 million a year. I do not know how it arrived at that figure, because the nature of the crime makes it difficult to work out how widespread it is. However, one can understand its having done so given that most conservative estimates predict that about 50,000 properties are affected, while some say that the figure is 150,000.

As I have said, the level of such fraud differs across the country. Where there are bigger profit margins, it is more commonplace. As I mentioned to my hon. Friend the Member for North Thanet (Sir Roger Gale), it is most prevalent in London. Westminster city council estimates that up to 5% of London’s social housing stock is sub-let. That is a huge amount.

In my constituency of Watford, a family living in a three-bed social housing property pay £111 a week in rent. A similar property on the market would cost £263 a week. If such a property was sub-let, it could make the person letting it a profit of more than £150 a week. That assumes that they are paying for the social rent. If it was paid for through housing benefit, the entire £263 a week would be kept. We are talking about profits of £7,000 to £15,000 a year with no tax. That is appalling, especially as there are 4,000 people on the waiting list in Watford. People wait for years for social housing to become available. This is an absolute affront.

While researching this subject, I chaired a useful seminar that was attended by a large number of leading organisations, mainly local authorities and housing associations. I heard several horror stories from local authorities. One organisation showed me their properties being sub-let on the websites of letting agents. That is being done brazenly and openly, not in the corner of a pub. People are saying, “This is my property and I’m going to let it out,” despite the fact that others are crying out for such properties. That has to be stopped.

People sub-let such properties for different reasons. On a small scale, some people sub-let their house while they are abroad for the month. I am not really concerned about that. I am concerned about the most extreme cases, which involve organised criminal gangs operating on a large scale. They get people to put themselves on the waiting list and help them to qualify, with the sole intention of providing the base for a fraud.

Housing associations, local authorities and Governments have not been blind to these issues over recent years. The right hon. Member for Wentworth and Dearne (John Healey), who dealt with this issue under the previous Government, has been extremely helpful to me, although he is not in his place today. He and the current Minister for Housing and Local Government have made significant improvements in the rate of detection and the number of properties recovered by providing funding to help the officers of local authorities and housing associations track down fraud.

Peabody, a large housing association in London, made 700 visits and recovered 19 properties in 2009. It told me at the conference that, with some changes to its practices, it made 1,544 visits and recovered 63 properties in 2010. Those are still quite small numbers, but they show that if Government funding is used selectively, it can lead to more detection.

I hope that with this Bill, which contains greater powers and financial incentives for such organisations, the numbers will begin to increase. They need greater powers to do what they are currently trying to do with limited powers. Until now, the efforts have focused on detecting the problem. The resources made available by this Government and the last Government have helped tremendously in financial terms, but it is like saying that we will deal with shop lifting and training special officers to do so, without having a law that provides a proper sanction for people who steal from shops. We do have such a law, by the way. I believe that providing local authorities with extra powers will help dramatically to reduce this crime.

As I have said, the most common consequence at the moment is the shrugging of shoulders. The tenant returns to the property and then disappears, fully able to commit the crime again. I have every reason to believe that there is consensus on this issue. I hope that that is confirmed by the Second Reading of this Bill. We need to help social landlords tackle the abuse of their stock, and I believe the Bill will dramatically help them to do so.

If I may crave your indulgence a little longer, Mr Deputy Speaker—I am looking you firmly in the face now, Sir, as is my duty and honour—I wish to point out that clause 1 will make it a criminal offence improperly to sub-let a social housing property. That will cover people who sub-let either part or the whole of their property, and those who no longer occupy a property but take part in what is known, in what we might call in the trade, as key-selling. That is when people get hold of a property and then sell their key—either physically or theoretically—to a new tenant. I am told that the cost of that is typically £2,000 to £4,000. They then pocket that money and disappear back to wherever they actually live, and the new family occupy the place.

[Julie Hilling (Bolton West) (Lab)]

I have a slight concern about the provision on those sub-letting part of a property. Local authorities are advising some people facing the potential bedroom tax that they could take in a lodger, in other words sub-let part of their property to avoid paying the additional costs, particularly if they cannot be rehoused. Could such people be caught by clause 1?

[Richard Harrington]

The hon. Lady asks a valid question. If I may crave her indulgence, I hope to convince her that that has been taken into consideration in the drafting of the Bill. We want to catch people who pretend that they are still occupying a property by using what is known as the airing cupboard option—they pretend that a little room is theirs and that they occupy it all the time. We want to catch those people, but not those who just let out a room.

In fact, the Bill states that people can sub-let with the landlord’s consent, and circumstances such as the hon. Lady mentions are quite genuine. Such sub-letting is good from a social point of view, because it adds to the number of people living in social housing without depriving other people of it. I hope that the drafting of the Bill takes care of that. If the Bill continues its passage, I hope she will be interested in taking part in the Public Bill Committee, where we can get down to the details of it, because she makes a good point.