Tenancy fraud detection rates on the increase, but more still to be done warns Callcredit

shutting the door on tenancy fraud Research released today (10 September) by Callcredit Information Group has revealed a 70 per cent increase in the number of detected tenancy fraud cases in 2012, but Callcredit warns against complacency as there is still much to be done to shut the door on tenancy fraud.

The findings, which used data obtained from local authorities under the Freedom of Information Act*, build on Callcredit's research published in 2012 which highlighted that in 2011 90 per cent of all tenancy fraud cases went undetected.

Whilst the findings show improvements in detection rates for tenancy fraud, it highlights the scale this type of fraud has reached. The Audit Commission now estimates that approximately 98,000 social homes in England could be subject to tenancy fraud compared to just 50,000 in 2009**. The cost of tenancy fraud across both local authorities and housing associations to the public purse has now risen to an estimated £1.8bn a year***, compared to last year's estimate of £1bn a year.

Callcredit's research also found that:

over 80 per cent of local authorities still don't have a dedicated fraud team in place
the number of cases of fraud detected for non-occupation as principal home has increased to 43 per cent
the number of unlawful subletting fraud accounted for 32 per cent
five per cent of cases accounted for wrongful succession.

The positives were:

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
76 per cent of detected cases resulted in successful recovery compared to 60 per cent in 2011**** a 16 per cent increase.

Whilst not the most prominent type of tenancy fraud, the issue illegal sub-letting still remains an issue with over 900 cases detected in London alone. There was also a rise in the number of fraudulent right-to-buy applications, no surprise given that fraudsters will always target areas where the returns are greatest. Sub-letting a property and successfully purchasing it via a right-to-buy scheme can attract discounts of up to £100k (England only).

Andrew Davis, Director of Public Sector, Callcredit Information Group said: "Our research continues to show that whilst improvements have been made there is still a long way to go to tackle tenancy fraud. The problem is extensive and is happening across the country but by working together it can be tackled. The first step is realising that it can't be tackled in isolation and acknowledging that the true value of data is derived from the insight it delivers, insight that can only be maximised when data is shared between local authorities and enhanced by third parties like Callcredit."

Since the publication of Callcredit's research in 2012 the company has been working to help establish a pilot 'Fraud Hub' bringing together a number of London Borough Councils (LBCs), called the 'ThreeSixty Hub', consisting of eight founder members, with a further eight in the process of joining. The rationale behind the Hub is that not only can LBCs share data between each other Callcredit can also help match the LBCs data with its own extensive data sets. This helps to provide greater insight and in turn help target fraudsters more effectively, saving time and money - money which can be used to greater effect elsewhere. Significant results have already been seen and Callcredit's plans to replicate across the UK in 2013/2014.

Callcredit's 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.

Andrew concluded: "As with all types of public sector fraud, the key to tackling it 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. A number of 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.

"One simple fact emerges from the research, whilst there is some excellent work being undertaken across the country, if just a further 20 per cent of local authorities introduce dedicated fraud teams the return to the tax payer would be in the region of £200m - £300m p.a."

Callcredit believes that tackling tenancy fraud in isolation won't solve the chronic shortage of housing but we cannot also allow fraudsters to continue to exploit a system 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 data together with that of third parties, these tools enforced with new legislation will help stamp out this unacceptable abuse of the system.

Following on from last year's white paper entitled, 'Shutting the Door on Tenancy Fraud,' Callcredit has published the new survey findings in its latest white paper, 'Shutting the Door on Tenancy Fraud - One Year On'.

We have also created an infographic pulling out the key findings from the white paper.

*The findings cover England, Wales and Scotland

** Protecting the Public Purse, Audit Commission, November 2012

*** National Fraud Authority Annual Fraud Indicator, June 2013

**** A greater number of cases naturally leads to a greater number of recoveries