Prevention of Social Housing Fraud Bill

Roger Gale Excerpts

Friday 13th July 2012 Commons Chamber

[Richard Harrington]

I am aware of the consultation. Having researched the matter, I know that the problem has increased over the years, as my hon. Friend the Member for Bury North (Mr Nuttall) suggested. I hope that there is a general consensus that it is time to do something about it. My hon. Friend the Member for Hertsmere (Mr Clappison) has been in the House since 1992 and so might remember speeches and contributions right hon. and hon. Members have made on the subject. Like my hon. Friend the Member for Bury North, I was quite surprised that it has not been included in legislation by this Government, the previous one, or indeed the one before that. In my humble way, I can simply deal with the problem as it is today.

Clearly there is a problem. This type of sub-letting is something I am sure the public think is a criminal offence. It is an outrage that an estimated 150,000 social housing tenants—50,000 is the most conservative figure, but the National Audit Office’s estimate is 150,000—are illegally sub-letting their properties. Typically, it is done by someone who qualifies for a social tenancy because they have the necessary points in the scoring system. They sign a contract with a social housing provider but then illegally sub-let it to a tenant, who in many cases pays a market rent for the property, and then pockets the difference between that rent and either what they are paying themselves or what is being paid as part of their housing benefit.

That is not simply taking advantage of the situation financially; it also means—in many ways this is a worse aspect—that a family who are on a waiting list and would be entitled to the property cannot occupy it. I know from correspondence with hon. Members across the House that this is a problem in their constituencies; I know of no area where it is not a problem. The shadow Minister, in my discussions with him, explained that he thinks it is a greater problem in the London area, but that is only because properties in London are rented out in the private sector at a much higher rate. I have yet to meet a Member of the House who is not aware of this being a problem in their constituency.

[Sir Roger Gale (North Thanet) (Con)]

Does my hon. Friend accept that this is a problem not only in high-rent areas? East Kent has some of the highest levels of social deprivation in the whole south-east—indeed, they are some of the highest levels in the country—and families who have been on the waiting list for a very long time find it deeply offensive that this kind of practice goes on in low-rent as well as high-rent areas.

[Richard Harrington]

I agree absolutely with my hon. Friend. I know that it is a problem in Scotland, Wales and other places a long way from London, but I think that the numbers are accentuated in the central London area, and in terms not just of the total volume of social housing property, but of the value of the rent. The problem is still the same. It is depriving people who are entitled to social housing and in desperate need of it and who, in many cases, are having to live in really sub-standard temporary accommodation, which is a burden to them and comes at a high cost to the taxpayer. It is keeping very suitable properties provided in the social housing field from them, and I think that it is very wrong.

What would the Bill do? It would create some new criminal offences of sub-letting social housing without permission. It would introduce appropriate penalties, ranging from a fine to a maximum custodial sentence of two years, in order to provide a proper and correct punishment and also an effective deterrent. It would allow local authorities to prosecute for offences in the Bill on behalf of housing associations and other local authorities. It would allow social landlords to recover the profits made by tenants who sub-let their property without permission. If such activity is a criminal racket and people have made money out of it, the Bill would allow social landlords to recover the money. It would make it easier for housing associations to gain possession of a property from tenants who have moved back in having previously illegally sub-let it, because that is something that has been reported a lot.

In promoting the Bill, I am trying to outline why I believe these measures are most effective in creating the right legislation to deal with this problem. There is no point making the effort and for the Bill to become law without it once and for all dealing with the problem, but it should not do so too severely, by victimising genuine social housing tenants or those who have a reason for temporarily not living in their property, because life is like that, and there are genuine reasons. A lot of thought has therefore gone into the Bill, and I thank the Department for Communities and Local Government, and Opposition Members who encountered the issue when they were Ministers, for their help in creating what we believe is sensible and balanced legislation.

In my own world of Watford, the Watford Community Housing Trust has been helpful, and I have consulted it regularly. In a letter to me early on in my time as a Member, it outlined several measures that it thought would make a difference in preventing social housing fraud, and each one is covered in the Bill. With due respect to colleagues, we hear things from a certain angle, so I have tried my best to speak to people in housing associations and local authorities who deal with these issues on the ground, because as things filter upwards they can be changed; there might be political factors and things can be sanitised. I hope that I have included both levels of the issue, and I thank Ruairi McCourt of the Watford Community Housing Trust for his helping in dealing with it.

It was unbelievable to me, as a new Member dealing with constituents for the first time, to find that so much of our constituency work involved dealing with extensive social housing waiting lists. I am sure that colleagues from all parts of the House have heard similar stories, but properties owned by housing associations are sub-let by tenants, often on the private market and in estate agents’ windows, in all our constituencies. I had seen it with my own eyes, but little seemed to have been done to marry the two issues, so I was grateful this year when the Government, based on work that they and the previous Government had done, launched a consultation on social housing fraud and started to look seriously at criminalising the activity I have been talking about.

I was a little naive about the way things worked, however, because I thought, “Ah! There will be consultation, then it will become legislation.” I have since learned that things do not always work like that, and to my frustration it was not possible to pass any legislation—or at least not until now. So when I was given an opportunity to introduce a private Member’s Bill, I really wanted to introduce this one. However much my political career to date and in future may lack an illustrious aspect, whatever may or may not happen electorally, and whatever I may or may not contribute to the House, I should like to feel that this Bill is going to become law, and that my name will go down in one little footnote in history—not to make a political point, but because I believe that this legislation is an important part of social justice.

The Bill represents a little gap in the market, but like so many small things that are debated in the House, it will have a significant effect on people’s lives and remedy not just an injustice to all of us as taxpayers who fund what is happening, but a real injustice to people throughout the country who are desperate for social housing and are told that there is a four or five-year waiting list, while people who do not deserve it occupy properties and people who pretend that they deserve it profit from it. I am very pleased to have the opportunity to do something about that.

--- Later in debate ---

[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.

[Sir Roger Gale]

I know that you abhor over-lengthy interventions, Mr Deputy Speaker, so I hope to avoid making a speech.

The hon. Member for Bolton West (Julie Hilling) raised a point that is very important in east Kent. We suffer from what I might describe as horizontal mobility. People move from household to household and change partners on a depressingly regular basis. They take in lodgers and then move to stay with a fresh partner, leaving the lodger behind with the tenancy and then possibly moving back in later. There seems to be a grey area in the Bill, and perhaps my hon. Friend the Member for Watford (Richard Harrington) and the Minister might wish to consider that in Committee. My personal preference would be to say that that should not be done at all, but will my hon. Friend take that point on board?

[Richard Harrington]

I thank my hon. Friend, and that certainly will be taken on board. The key to the drafting of the Bill is that it has to be clear about what is allowed and what is not. We have to avoid a lack of clarity, which would allow loopholes—I think the mixed cliché in the trade is “creating a chink of light to drive a coach and horses through it”. I hope Hansard records that, because I do not think I can say it again, but I think it is relevant in this case.

I certainly assure the House that in creating the new criminal offence, it is not my intention to fill prisons with thousands of people who sub-let their properties. It is designed as a tool with which local authorities can take action against tenants who have defrauded them, and to create an effective deterrent to prevent others from doing the same.

The criminalisation of this fraud is long overdue, and many housing associations have called for it for some time. In its response to the social housing fraud consultation, the Chartered Institute of Housing stated:

“The majority of housing providers CIH has spoken with agree that tenancy fraud should be a criminal offence”.

Some 90% of respondents to the Government’s consultation supported the new criminal offence, and in Watford both the community housing trust and borough council have welcomed it.

Any criminal conviction needs to be met with an appropriate and effective punishment. There has been a lot of consultation on this with the Ministry of Justice, the Home Office and the Cabinet Office. The Bill makes provision for sentences varying between a fine and a maximum two years’ custody. That strikes the right balance for the crime and will deter others from committing it. I cannot reiterate enough that, currently, anyone planning on sub-letting has nothing greater to fear than having to return the property, after which they can try somewhere else.

The Bill extends the power of prosecution for local authorities. They can currently prosecute when it is deemed to be in the interests of people in their area, but the Bill introduces more flexible powers and enables local authorities to prosecute the crimes laid out in the Bill on behalf of other local authorities. Different housing associations operate in different local authorities and across local authority borders, and the measure deals with that anomaly. In this world of joint partnerships, and of landlords coming together regionally and sub-regionally, we must give those who want to enforce the law those powers.

I keep mentioning landlords, by which I mean not private landlords with thousands of problems, but social landlords. The Bill gives social landlords the chance to get the money back and to use it to fund more anti-fraud work. That will provide an incentive and resource for local authorities to investigate more, which in addition provides a further deterrent. The National Housing Federation and the Local Government Association, which are important bodies in this field, support that measure.

Lastly, by removing assured status from the housing associations that sub-let the whole property, the Bill makes it easier for landlords to gain possession when a tenant who has previously sub-let moves back in. Currently, if the landlord wants to end such a tenancy, they must prove to the court that it is reasonable to grant possession for breach of a tenancy agreement. The Bill will enable the landlord to end the tenancy by giving notice, which brings housing association tenants into line with local authority tenants. That anomaly has been used as a loophole, but under the Bill, landlords will have the same powers as local authorities.

It is a pleasure to present the Bill with support from so many colleagues from both sides of the House. It is fair to say that the sponsors of the Bill transcend the full political spectrum. I hope that that alone satisfies both the Housing and Local Government Minister and his shadow.

The results of the Government consultation have been put into the House of Commons Library today. The timing is a bit unfortunate, because I have not had time to read the Government response in full, but I understand there is an overwhelming consensus on the measures. I take comfort in the fact that most of those who have contacted me—80% to 90%— support the Bill.

During my research, I have spoken to so many different people, and I thank Joe Joseph of Peabody; Kevin Campbell-Scott, the fraud director at Southwark council; David Clayton and Stephanie Toghill of the Chartered Institute of Housing; and Paul Keogan of Westminster council. I could go on. All those people deal with these issues on behalf of social housing providers. I am not playing politics and the measure has not been dreamt up—there is a real grass-roots need for the Bill. Lest anyone believe that the Bill is London-centric, I have also spoken to Stoke-on-Trent city council and people from all over the place. They are all in favour of the Bill.

I should mention possible opposition to the Bill—one problem was mentioned by my hon. Friend the Member for Bury North, who asked whether existing legislation is enough. As my hon. Friend the Member for Enfield North (Nick de Bois) said, there have been successful prosecutions, but they are few and far between, and not all organisations have the resources or expertise to conduct the kind of case that was conducted in his constituency. This my final quote—I will not read any more out. The Chartered Institute of Housing said:

“Some are already attempting to”

prosecute

“using the Fraud Act 2006 and they are keen to make use of any new legislation granted to enable them to tackle social housing fraud more effectively.”

I want to give local authorities the rights and powers to bring charges against those who defraud them, and the Bill would only enhance the work already being done and the local laws already in place.

I would have liked to include other subjects in the Bill, but I could not, at this stage, because extra consultation would have been required. I hope that the issue of information sharing, which, as was pointed out to me, is vital, can be rectified in Committee. There has also been discussion about introducing a framework on the intention to return—if people leave with the genuine intention to return for a genuine reason—but on consideration I decided that it was far too complex to introduce at this stage. I feel that these Bills need to be as simple as possible.

The lack of social housing is of great concern to all housing associations, to me and to the Government, and although I do not flatter myself by suggesting that the Bill would solve these problems in one go, it would provide local authorities with the opportunity to make use of the stock they have and not to incur unnecessary costs from providing homes to people who could otherwise live in this stock. It is estimated that on average it costs £18,000 a year to house a family in temporary accommodation and about £150,000 to build a new property for social housing stock. It is not acceptable that local authorities and housing associations have to meet these costs when they already have properties that could be used for these purposes, but which instead are being used by people to make money illegally—off the back not only of the taxpayer but of decent people living in temporary accommodation who need these properties.

I hope that the Bill will become an effective and lasting piece of legislation that will make a real difference by preventing such social housing fraud; will have the necessary measures to punish those who cheat and profit from the system; will create punishments that deter offenders; will help local authorities and prosecutions; and will allow social landlords—in a way, all of us—to recoup profits made by tenants in their properties and to use that money to provide more genuine social housing. The Bill aims to bring about a fairer system and rectify the anomaly whereby the incentive to cheat is so much greater than the risk of detection and the penalty incurred. It would also free up thousands of properties that could instead be given to hard-working individuals and families who play by the rules and deserve this social housing.