Parliament’s Plan to Control Housing Benefit Fraud

News by IPINGlobal.com

Whilst topics regarding the NHS, taxation and immigration are the most notable leading up to the British 2015 election, one issue that certainly gets its share of media attention is that of public housing benefits. Weekly media stories can be found showing people receiving all matter of public assistance and in some cases with no plans of becoming financially self-sustaining and it now appears that the British public is tiring of it as well. Many feel the program is widely abused and poorly managed. As a result Parliament has released the ‘Housing Benefit and Error’ report in order to address the problems with housing benefits. 

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts is quoted as saying in the 15 January 2015 report, “Billions of pounds have been lost to the taxpayer as a result of the Department for Work and Pensions’ failure to tackle Housing Benefit fraud and error effectively. Around £12.6 billion has been spent on Housing Benefit overpayments since 2000/01—money that could have been used to improve the system.” 

‘The size of overpayments is going up, not down’

 The report also concluded that due to a lack of oversight that ‘the size of overpayments is going up, not down’. In the last financial year £1.4bn of overpayments were made – 5.8% of Housing Benefit spending – up from £980 million (4.6%) in 2010/11. £900m of the £1.4bn was claimant error, £340m was claimant fraud and £150m was official error. Even after recoveries by local authorities, this is a huge cost to taxpayers. The increase shows that the Department has still not effectively targeted the major sources of fraud and error – 16 years after this Committee first sounded the alarm.’

The report claims that the Department spends only about 8% of its funding for fraud and error for Housing Benefit even though overpayments for Housing Benefit total 42% of all benefits. Another source of the problem mentioned in the report was the lack of local personnel to monitor the programs for fraud, error and underpayment due to cutbacks in funding stating ‘The incentives provided by the Department for local authorities to tackle fraud and claimant error are not good enough. These weak incentives are exacerbated by pressures on local authority funding, including a 17% reduction since 2010–11 in the funding available for administering Housing Benefit.’

“We are also concerned that the Department is not doing anything to target underpayments, despite the hardship caused to those who miss out on the support they are entitled to.”

Recommendations

As a result of the committee’s review of the fraud and error situation a number of suggestions were made. Most importantly, a review of the procedures in money allocation with attempts to reduce overpayments as a result of fraud and error. The Department will be allocated 6 months to report on what steps it will take to target underpayments and encourage legitimate take-up. The creation of incentives for local Housing Benefit authorities will assist effective controls and procedures to stop fraud.

No To Social Housing?

One of the most common elements of housing developments is the Section 106 agreement for providing funds for local affordable housing by developers. This has been a particular part of the construction of properties in London to help lower income residents who work in the city but is also a scheme that is found throughout Britain.

Are developers now trying to find a way out of Section 106 agreements?

The nine-storey Abbey Tower is being developed into an £85m luxury residential property with 30 flats located in Greenwich by Development Securities and Hurlington. Sales of the flats start this week in London and later for potential buyers in Hong Kong. The property agent, Fraser & Co has claimed that the development will be “a fully private block with no social housing“ and are using this as an incentive to attract buyers. The other incentive being used to attract buyers is the new Abbey Wood Crossrail Station that will be operational in 2018. The area of the new development is located in one the poorest areas in London.

Abbey Tower has flats with prices starting at £275,000, including a free furniture package but no social housing

 The issue brought this response from London Assembly Green Party member Darren Johnson said, “Boasting about the absence of social housing in adverts for new developments shows that housing policy in London is about meeting the needs of wealthy investors, not about the needs of ordinary Londoners. At least this appalling advert is honest about it.”

Real estate and property investing news from IPIN Global