The importance of housing fraud

CIPFA writes

Housing is a fundamental service that UK local authorities have a responsibility to provide.

Councils across the UK offer social housing options for local people based on a variety of factors, ranging from financial strains related to unemployment to above-average rents in urban areas.

For the most vulnerable in society, this public service can be a lifesaver in the most literal sense.

Unfortunately, as with all public services, the housing sector is not immune to fraud and other financial crimes. People can exploit the public housing system, depriving councils of funding by illegitimately participating in state programmes, making those in need worse off.

Fortunately, counter-fraud efforts in council housing are proving effective. The latest iteration of the Chartered Institute of Public Finance Accounting (CIPFA)’s Fraud and Corruption Tracker (CFaCT) shows that the number of fraudulent cases is decreasing – UK local authorities detected and/or prevented 3,632 instances of housing fraud in 2018/19, a decline of roughly 20% from the previous year and the second year of decline since 2016/17.

Of course all this shows is that detection is decreasing. It may not reflect the underlying level of fraud.

Over the past year, they prevented 652 and 826 cases of Right to Buy and illegal sublet frauds respectively. Furthermore, housing fraud represented 54% of the total value of fraud prevented by local authorities in 2018/19, while making up only 5% of the total estimated number of fraud cases.

While the numbers of Right to Buy and illegal sublet fraud cases declined, ‘other’ types of housing fraud, which includes succession and false applications, held steady at approximately 2,150 cases.

It’s worth noting that the way authorities record the income lost from housing fraud can vary. They may include the cost of putting up a family in a bed and breakfast for several months or they may include the cost of replacing a property entirely.

However, although making these calculations is certainly challenging, they provide a helpful snapshot of local authorities’ effectiveness at tackling this problem.

In recent years, local authorities have stepped up their counter-fraud work in social housing. This has had a big impact, given the low rates of turnover in tenancies in the current social housing stock.

The screening of Right to Buy applications by councils protects valuable housing stock from being sold at a discount to ineligible individuals. This measure, paired with tenancy audits and proactive exercises to detect illegal subletting and unused social housing, is tackling abuse in the sector.

By recovering properties from ineligible tenants, councils can then reallocate housing to those in legitimate need. These controls, along with more stringent checks on all applications, are preventing fraud in the housing stock and reducing the overall level of housing fraud.

It’s a strategy that CIPFA thinks has worked very well – and the figures tell us that councils’ counter-fraud strategies for housing are shifting trends in the right direction.

At CIPFA, we believe our role is to help councils put in place the proper preventative measures, controls, training and governance structures to stop fraud from happening at all. There’s still much to be done across all counter-fraud areas, but this year’s CFaCT report gives us a snapshot of the real progress that has been made on council housing counter-fraud efforts.

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