PublicSectorSolutions

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1 White Paper PublicSectorSolutions Shutting the Door on Tenancy Fraud - One Year On

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3 // // White Paper // 02 PublicSectorSolutions Our approach Our research continues to show that whilst improvements have been made there is still a long way to go to stop tenancy fraud. The problem is widespread and is happening across a wide range of regions but by working together it can be tackled. The first step is realising that it can t be dealt with in isolation and realising that the true value of data is derived from the insight it delivers, insight that can only be effectively seen when data is shared between local authorities and enhanced by third parties like Callcredit. Following the publication of our research in 2012 we have been working to help establish a pilot Fraud Hub bringing together a number of London Borough Councils, which has been called the ThreeSixty Hub, consisting of eight founder members, with a further eight in the process of joining. The rationale behind the formation of the hub is that not only can these London Borough Councils share data between each other we can also help match their data with our own extensive data sets. This will help to provide greater insight, help to target fraudsters more effectively and save time and money - money which can be used to much greater effect elsewhere. We have already seen some significant results (details appear later in this whitepaper) and our plan for 2013/2014 is to replicate this across the UK. Whilst tackling tenancy fraud in isolation won t solve the chronic shortage of housing, we cannot simply let fraudsters continue to exploit a system that has been designed to provide those that are most vulnerable an affordable place to live. There is clear evidence that by working together with local authorities, sharing their own data together with that of third parties, such as that held by credit reference agencies, these tools enforced with new legislation will help stamp out this unacceptable abuse of the system. We hope that you find this paper to be informative and helpful whether you are experienced in fighting tenancy fraud or just taking your first steps. Andrew Davis Director of Public Sector Callcredit

4 // 03 // White Paper // Executive summary This is the second annual report published by Callcredit Public Sector Solutions on this subject of tenancy fraud. Following our research in 2012 we recommended the following actions should be taken to better combat tenancy fraud: 1. Prepare a specific tenancy fraud strategy 2. Establish a dedicated tenancy fraud investigation team 3. Work with third parties, like Callcredit, on data-matching exercises This year s research has confirmed that more fraud is in fact being identified with an increase of over 70% in detected frauds. In addition there has also been a 33% increase in the number of dedicated fraud teams being established those local authorities that now have dedicated fraud teams are responsible for three quarters of the fraud identified - but there is still a lot of work to do with over 80% of local authorities still having no dedicated fraud team in place. A surprising statistic on two counts, firstly given that legislative changes mean that it is now a criminal offence to commit tenancy fraud, meaning that more appropriate prosecution options have been made available for the local authorities to pursue. Secondly properties are easier to recover with almost two thirds of recoveries now involving no court action at all. The nature of tenancy fraud is changing with more non-occupation or abandonment cases combined with a rise in the number of fraudulent right-to-buy applications. This should not be a complete surprise given that fraudsters will always target areas where the returns are greatest. Sub-letting a property and then successfully purchasing it via a right-to-buy can attract discounts of up to 100k (England only) rich pickings indeed for the fraudster. Our work with customers (including those using the ThreeSixty Hub ) also proves that when tenancy fraud is discovered other fraud such as, multiple housing benefit fraud, is also detected. Consequently the savings to both the tax payer and government cannot be underestimated - in one such case ten tenancy fraud cases (in one street alone) led to the local authority identifying over 400k worth of housing benefit fraud. So what does this all this mean? One simple fact emerges from the research, whilst there is some excellent work being undertaken across the country, if just a further 20% of local authorities introduce dedicated fraud teams the return to the tax payer would be in the region of 200m - 300m p.a.

5 // // White Paper // 04 Introduction In 2012 we carried out research into the prevalence and consequences of tenancy fraud in social housing across the UK. The results highlighted a growing issue, particularly amongst those local authorities without a dedicated fraud team or strategy. The focus on these types of fraud has increased over the past year, both at local and central government levels. Therefore the purpose of this paper is to identify whether local authorities are detecting more cases of fraud, the level of action being taken to recover properties and whether there has been a shift in the type of social fraud being committed. The Audit Commission now estimates that approximately 98,000 social homes in England could be subject to tenancy fraud compared to 50,000 in The cost of housing tenancy fraud across both local authorities and housing associations to the public purse is now 1.8 billion per annum. 2 As with all types of public sector fraud, the key to tackling tenancy fraud is to understand the scale of the problem and the inherent risk, work to prevent fraudulent activity occurring and put in place a zero tolerance approach to dealing with identified cases. By sharing data, knowledge and adopting a more collaborative approach with neighbouring authorities, housing associations and where applicable, central government departments, local authorities can work to reduce the risk of tenancy fraud and increase the detection rate, thereby reducing monies lost and ensuring more social housing is made available to those who need it. Our previous experience In our report published in 2012, of the 29% of local authorities reporting cases, we estimated that 2,140 tenancy fraud cases had been reported in England, Wales and Scotland in % of detected frauds led to recovered properties this action taken mostly without the need for court action 3. 1 Protecting the Public Purse, Audit Commission, November National Fraud Authority Annual Fraud Indicator, June Shutting the Door on Tenancy Fraud, Callcredit Information Group, March Callcredit Information Group Ltd. All rights reserved

6 // 05 // White Paper // The picture today Using the same methodology as our previous research, we estimate that the number of detected cases rose in 2012 to 3,708 across England, Wales and Scotland, which represents a year-on-year increase of 73%. Region Cases Detected 2012 Cases Detected 2011 London 2,324 (62%) 1,193 (56%) Yorkshire and Humber Scotland South West Wales North West West Midlands South East North East 7 5 East Midlands East of England Total 3,708 2,140 Figure 1. Number of cases detected by region compared to 2011 As in 2011, a disproportional number of cases in 2012 were detected in London, with over 2,000 cases being found, compared to 1,193 cases in Recovery of property In 2012 over 1,000 detected cases resulted in court action, with a further 1,700 cases resulting in the property being recovered by the local authority. A greater number of cases naturally leads to a greater number of recoveries - the percentage of detected cases resulting in recovery in 2012 was 76% compared to 60% in This increasingly tough stance on proven tenancy fraud not only increases the number of properties recovered but can generate public awareness that the issue is being tackled, therefore acting as a potential deterrent to future tenancy fraudsters.

7 // // White Paper // No Action Taken Property Recovered Without Court Action Case Resulted in Court Action 0 Cases Detected in 2011 Cases Detected in 2012 Figure 2. The number of detected cases resulting in property recovery or court action In 2011, 40% of frauds detected were cases of unlawful subletting, with a further 38% cases resulting through non-occupation as principal home % 1.35% 5.47% 32.32% Illegal Sublet Non-occupation Application Fraud Succession Other 43.26% Figure 3. Reported social tenancy fraud cases by type In 2012 this split shifted slightly, 43% of detected cases now being for non-occupation as opposed to illegal sub-letting which accounted for 32%. Wrongful succession accounted for 5% of cases and application fraud a further 1.35%. The remaining 17% of tenancy fraud cases include key selling, multiple tenancies, non-occupation after tenancy secured and right-to-buy fraud Callcredit Information Group Ltd. All rights reserved

8 // 07 // White Paper // Right-to-buy fraud Following an increase in the maximum discount available to potential right-to-buy claimants (increased to 75,000 in April 2012), housing providers have received an increase in applications, reversing the decline seen nationwide over the 1990s. This increased interest has naturally led to an increase in fraudulent applications. A small number of cases (0.4%) highlighted in our research, related to right-to-buy frauds. This included submitting an application using false information, claiming the right-to-buy on a non-occupied or illegally sublet property or unlawful application for discount. Fraudulent right-to-buy applications are more likely where an existing tenancy fraud is taking place and with the cost of such frauds totalling both the discounts illegally obtained and the loss of social housing stock, it is important measures are put into place to ensure all applications are assessed thoroughly. Non-occupation as principle home (NOPH) We estimate that over 1,600 cases of non-occupation as principle home were detected in 2012, with nearly half of these cases occurring in London. As the pressure increases on social housing stock in metropolitan areas, recovering non resided properties will increase the number of properties available either permanent or temporary tenants L YH SC SW NW WM SE NE EM E Wales Number of non-occupation cases Figure 4. The total number of non-occupation as principal homes cases found in 2012 by region

9 // // White Paper // 08 Sub-letting Whilst not the most reported type of tenancy fraud in 2012, the issue of Illegal sub-letting of social homes continues to grow. Over 900 cases were detected in London alone, but for the rest of the UK, this is an issue that appears to affect metropolitan and non-metropolitan areas equally. Non-Metro Metro Unitary London Figure 5. The total number of Illegal sub-letting cases detected in 2012 by authority type Tenancy Fraud Case Study London Total stock 38,000 properties Typical Results Outside of London Total stock 20,000 properties 900 total cases identified 40 red cases identified 81 properties recovered so far - 54k each 2 right-to-buys blocked so far 75k each Total saving - 4,524, cases Approximately 10% properties recovered (34) - 54k each Total saving - 1,836, Callcredit Information Group Ltd. All rights reserved

10 // // White Paper // The way forward In 2012, we have noted a marked difference in the rate of detection between those local authorities with a specialist fraud team and/or dedicated officers and those without. This trend continues, with 74% detected cases being found by local authorities with a dedicated fraud team. These authorities account for 20% those we received information from, up from 15% a year earlier. A number of other authorities are currently putting teams in place to ensure that resource is available to prevent and detect cases in the future. Our research shows the value of this investment and further encouragement should be made to the remaining local authorities to put similar plans in place. Are tenants really there? The majority of tenancy fraud cases can be detected by regularly checking whether a tenant is actually residing at a property and the most effective way of doing this is combining the local expertise of housing and fraud officers with residency data matching. The latter can be carried out in a number of ways joint data matching projects with neighbouring authorities and housing associations or through the National Fraud Initiative or other third parties. Ensuring any application information provided by an individual is accurate is also key to minimising the risk of costly tenancy application or right-to-buy fraud. 2013/14 Recommendations Increase the number of dedicated fraud teams evidence of success is irrefutable Robust checks are needed on right-to-buy applications effective checks can reveal fraudulent activity Increased vigilance on the lookout for empty/abandoned homes which can be brought back into use Perform simple ID verifications checks at point of housing application to prevent fraudsters from entering the system

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12 To find out more about Callcredit s Public Sector Solutions publicsector@callcreditgroup.com call or visit For a specific enquiry relating to this White Paper, please contact: Andrew Davis, Director of Public Sector, andrew.davis@callcreditgroup.com Callcredit Information Group Enabling Smarter Decisions About Callcredit Information Group Callcredit has been helping the Public Sector to tackle its most difficult and sensitive problems for more than a decade. Callcredit offers comprehensive data sharing and matching services to screen new tenants and detect change-of-circumstances. We would be delighted to help you to assess the size of the problem in your stock and waiting list to identify cases for immediate action, and to help you put in place initiatives to prevent future fraud Callcredit Information Group Ltd. All rights reserved