02 Nov 2021
For anybody dealing with tenancy fraud at a council or private registered provider (PRP) in the last ten years, there has been one issue that has consistently divided opinion – what is the true cost of a tenancy fraud? On first consideration this may seem like a navel gazing issue, purely academic and not relevant to the important day-to-day job of actually preventing and detecting such fraud. In reality it is fundamental to ensuring all social housing providers play their part in the fight against tenancy fraud. Let me explain why.
The starting point for tackling any type of fraud is a proper risk assessment. At its most basic, such a risk assessment considers the likelihood of the fraud occurring and the resulting cost/benefits of taking action. And this is where we reach the first problem.
When I started researching tenancy fraud back in 2009, for the Audit Commission’s series of annual publications called Protecting the Public Purse, there was only a handful of housing providers (mainly, but not exclusively, in London) who were taking effective action to tackle tenancy fraud. In other words, a proportionate response to the scale of the problem and the cost/harm done.
There were several justifications given by those housing providers who were not taking any action. Perhaps the most common comment was along the lines of “if the rent is still being paid by somebody why take action as there is no real loss”. For me, such views missed the point entirely. When a social home is unable to be accessed by those in genuine need or have a genuine right to that property, then it is those families who are the true victims. That is why it was encouraging to see many councils adopt the approach of linking the cost of homelessness, a cost that falls on local authorities, to tenancy fraud. The result was a significant increase in the resources many councils deployed to tackle tenancy fraud, resulting in a near doubling of the number of properties recovered from tenancy frauds by English councils in just four years. Outside London there was a an incredible five-fold increase in detected tenancy frauds. However, this still left many issues unresolved such as any offsetting housing benefits that relate and that old conundrum - how long does a tenancy fraud typically last for? As a result, the value that councils placed on tenancy fraud varied considerably, and perhaps unsurprisingly this resulted in significant variations in tenancy fraud detection by councils, both within and between regions.
For PRPs of course, the issue is different, as they do not incur homelessness costs. That was why it was so encouraging to hear some PRP Chief Executives talk about their moral duty to take action. But the same conundrum faces PRPs as councils - when undertaking a cost benefit assessment of any action to tackle tenancy fraud, what value should be given to a property recovered from a tenancy fraudster.
That was why this year we at the Tenancy Fraud Forum, in partnership with the London Boroughs Fraud Investigators Group, and supported by key stakeholders such as the Cabinet Office’s National Fraud Initiative, Chartered Institute of Housing, Northern Ireland Housing Executive (NIHE), Fraud Advisory Panel, G15 group of housing associations, Chartered Institute of Public Finance and Accountancy and Cifas, came together to research the true cost of tenancy fraud.
We quickly identified an approach and formula that the expert working group of stakeholders believed best reflected the true cost of a tenancy fraud. That formula, first pioneered by NIHE, required only minor modification to establish the national cost to the taxpayer of a tenancy fraud. The approach we developed is also flexible enough to allow individual councils to tailor the formula to identify their own local cost, should they want too.
For PRPs, we recommend using the average cost to the national taxpayer that the formula established, in effect the moral/public duty value of a tenancy fraud. However, we also suggest that when undertaking cost/benefit assessments, PRPs consider their responsibility as stewards of housing assets which they have, due to the actions of the tenancy fraudster, temporarily lost control of. This is a new concept, but fundamental to PRPs governance responsibilities.
And finally, what is the answer to the question we set ourselves at the start of the year- what is the true cost of a tenancy fraud. It is of course £42,000 per detected tenancy fraud.
Alan Bryce is the non-executive director of the Tenancy Fraud Forum.