Housing Benefit Frauds How Widespread Are They Plus Institutional Investment in the PRS May Be Near

A few weeks ago, a landlord I advise told me how some tenants of his had contacted him with a request to help them make a fraudulent housing benefit claim.

The landlord lets out a property to three people who are all on a single assured shorthold tenancy. The tenants are related to each other. There is a young woman, Miss X (income £38K) and who is a distant relation of the other tenants, who are an older couple each of about 55 year of age.

The older man, Mr. Y is self employed on a low income and his wife, Mrs. Y is a housewife. The older man had suffered an injury and could not work so the landlord got a request which said:

“Dear Mr. Landlord, Mr. Y has had a leg injury and there is a chance that he will receive housing benefit for a couple months. We would be very grateful if you could rewrite the tenancy agreement in Mr. and Mrs. Y’s name.”
The landlord rightly refused, pointing out that 1) It would make him a party to a potential fraud which, if found out, would have very serious consequences for him and his lettings business 2) It is unfair on the tax payer and 3) The tenancy was granted with them all on it and references were taken on their combined income of which the principal earner’s income was a big factor.

Housing Benefit Fraud

What they were proposing is housing benefit fraud, of course, which I suspect  is pretty widespread. But how could it be stopped?

One solution is to simplify the tax and benefit system.

Now, I have to say, I’m something of a fan of simplification of the tax system.

Many moons ago, back when I was at University, I recall studying the tax system proposed by the economist, JE Meade.

Meade’s idea was that every person would get a “credit”, an amount of money sufficient for the necessities of life. This might be £15K or it might be £20K, but it would be an amount on which they would pay no tax at all. Exactly how much it would be would be up to society and for MPs to decide.

Along with that – and here is the smart thing – if the amount was set at the right level, most of the means tested benefits system could then be dismantled along with all the huge cost of administering the whole edifice.

These days this policy is probably most associated (in the UK) with the Liberal Democrats.

Downsides

It sounds simple and it is – but the downside is that it would require a big increase in the starting rate of tax – which would definitely be higher than the current 20%.

And of course, whatever the benefits in terms of a simpler and less costly system, to many people, the high starting rate of tax does make it a bit of a “hard sell.”

But I like it. I especially like the way a whole bureaucracy of administrating a complex means tested benefits system gets swept away.

And I really worry that within the current system there is a lot of fraud where people are cheating the system.

Equally, there are people who aren’t claiming for what is rightfully theirs because they cannot be bothered to work through the 100 odd page claim forms – and often these will be the old or infirm.

Housing Benefit Fraud

As part of my consulting business helping local authorities and RSLs with their private rented sector access schemes, I am all too aware of the terrible complexity of the Local Housing Allowance system – which, of course, puts lots of landlords off letting to people in receipt of this benefit.

Armies of people are employed at the town halls administering this maddeningly complex system – helping tenants with the forms and offering assistance to landlords to help them understand it all too.

A simpler tax system that provides a decent safety net standard of living to all should be able to wipe out this particular part of the ludicrous means tested system we have in the UK.

No Money Left

“There’s no money left” the last government said in a note one minister left.

And, of course, there won’t be much for housing.

This is why I feel pretty viagra canada online pharmacy sure that the current government will soon announce big tax breaks to get institutions investing in the private rented sector.

In the meantime, the Town Halls hardly seem to be busting a gut to deliver private rented sector access schemes. (These are where the private rented sector is used as an option for people coming out of social housing.)

In most local authorities within the housing strategy document and at most of the very many housing conferences, it gets barely a mention.

Perhaps they are already waiting for the institutional investors to come in like the seventh cavalry. Perhaps only then they will get serious about using the private rented sector as an option for people coming out of social housing. Perhaps, dealing with pesky individual small scale private landlords is too much hassle for some of them at the moment.

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One comment

  • You r quite rite when u express the opinion that by changing the wording of the tenacy fraud was probably the intension. However if the agreement is in all 3 names the couple involved could still make a claim 4 hb in their own rite. They r responsible 4 2 3rds of the tenacy so it is irrelevent as 2 the income of the 3rd party their claim would b based on thier income only. They do not fall into the category of close relative either.

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