LGA - End housing scam and jail more rogue landlords, urge councils

11 Apr 2017 09:20 AM

A housing benefit scam forcing people to live in poor and dangerous accommodation needs shutting down and more rogue landlords should be jailed, councils urged last Friday.

The Local Government Association (LGA), which represents more than 370 councils in England and Wales, is calling on government to close a legal loophole which allows landlords to convert properties into multiple tiny “units” which are marketed as self-contained flats in order to secure the maximum level of housing benefit payments which are paid on behalf of tenants direct to landlords.

The loophole abuses legal exemptions and the lack of clarity in environmental health, planning and housing benefit rules to avoid detection and is resulting in widespread abuse of taxpayers’ money, as well as housing tenants in poor and often dangerous accommodation.

The LGA is also calling for more prison sentences for the worst landlords, rather than imposing fines - which can be as low as £1,000 for serious safety offences - offset by profits at the expense of exploited and vulnerable tenants whose lives may be at risk.

Industry figures show private landlords pocketed £9.3 billion in Housing Benefit in 2015, twice that of £4.6 billion in 2006. The micro sub-division of properties - called the Lockdown model - used by landlords is thought to have contributed to this sharp rise and the loophole which first started in London, the most fertile and lucrative ground for the model, is now spreading across the country.

Landlords can convert homes into a maximum of six small self-contained studios with en-suite showers and portable cooking equipment, without planning permission, but the electricity supplied to the different properties is often run on stolen meters or hotwired supplies, creating fire hazards.

Councils will be able to issue the worst landlords with fixed penalty notices of up to £30,000, for offences including failure to comply with improvement and overcrowding notices, and apply for new “banning orders” when new government regulations come into force later this year, which will help enforce housing laws.

But the LGA says the micro-conversion loophole being exploited by rogue landlords is undermining these new powers. Councils need streamlined housing and planning powers to stop landlords converting properties into “micro flats” without planning permission to protect tenants.

More jail sentences for the worst operators would also be more effective at keeping them “out of the game” than issuing a fine.

To help tenants at the sharp end of our housing crisis avoid falling victim to rogue landlords, councils are building private rented homes to help improve quality. The LGA says councils must also be able to build more affordable homes which are far more likely to meet decent standards than the private rental sector.

Cllr Judith Blake, LGA Housing spokesperson, said:

“No landlord can act outside the law and councils will do everything in their powers to ensure tenants can live in rented properties safe in the knowledge that local authorities are there to protect them.

“However, the reputations of all good landlords are being tarnished by the bad ones and councils are being let down by the current system. Legislation is not keeping pace with the ingenuity of landlords to exploit loopholes which need to be closed as soon as possible.

“Legislation needs to be more joined up to prevent some landlords taking advantage of people at the sharp end of our housing crisis.

“Giving councils powers to be able to build more affordable homes is likely to be more successful at meeting necessary standards than the private rental sector, and help reduce the risk of tenants falling victim to potentially tragic and preventable consequences due to unscrupulous landlords.

“Councils won’t hesitate to take irresponsible landlords to court for blatantly failing to comply with housing laws and any tenants who suspect their landlord of criminal behaviour or who have been evicted illegally should contact the housing team at their local council.”

Case studies - housing benefit payments

• A woman previously dubbed Britain’s worst rogue landlord was prosecuted by Westminster Council and banned from managing property in two London boroughs for 10 years under a landmark court order handed out because of the dangerous condition of the homes that she rents out. She was given the Criminal Behaviour Order (CBO) – the first issued against a housing offender in London, and only the second such case in Britain - for breaching the Housing Act at a rental flat which council inspectors found to have no mains-connected fire alarm, a lack of fire-proofing in the lobby, an outdated fuse box and no fixed heating. She was also fined £3,500 and told to pay £7,645 costs. The woman is understood to own four flats in Westminster and two properties, divided into 12 flats, in Haringey. Haringey Council has previously estimated her income, including housing benefit payments from the properties in the borough, to be around £188,000 a year. Read the story.
• A landlord who rented a house with no working fire alarms, no kitchen fire door, a blocked fire escape route and holes in walls was fined £5,750 after a prosecution brought by Oxford City Council. Following a separate legal action brought by the council, a tribunal ordered the landlord to pay back £3,460 of housing benefit to the council. Read the story.

Case studies – small fines

• A landlord who let a house to a family - including a disabled child – with no gas safety certificate, dangerous electrical wiring, a leaking roof, no heating upstairs and extensive damp and mould in the bedrooms was fined just £1,000 following a prosecution by Newcastle-under-Lyme Borough Council. The family is thought to have paid more than £40,000 in rent with little improvement work carried out since their living conditions were exposed. Read the story.
• A landlord who let a house to up to 10 people despite it being structurally dangerous, having faulty electrics faults, no fire escape and no evidence of gas safety checks ever being carried out, was fined just £1,230 following a prosecution by Gloucester City Council. Read the story. 
• Two landlords who rented a house with smoke alarms broken, fire escapes blocked and windows with no limiters, meaning occupants could easily fall out, were each fined just £2,400 by magistrates following a prosecution by Reading Borough Council. Read the story.
• A landlord who let a property with ‘extremely dangerous electrics’, no heating system, a leaking roof and excessive damp was fined just £440 by magistrates following a prosecution by West Lindsey District Council. Read the story. 

Notes to editor

• Planning permission is not normally required to convert a family house into a shared house or HMO for up to six people.
• In one outer London Borough the Local Housing Allowance rate for a non-self-contained room was £84 per week and for a one-bedroom self-contained unit it was £181 per week. Typically, a three-bedroom house could be converted into six units which, taking the figures above, would generate an annual rental of more than £56,000.
• A coalition of London councils - supported by the Association of London Environmental Health Managers - is spearheading work to stop landlords exploiting the loophole and force all substandard properties to comply with legislation. The project, called Operation London Lockdown and chaired by Lambeth Council, is using data from council records to identify and inspect suspected properties and take enforcement action where necessary. Officers then use the data to investigate the extent of organised criminal activity, aiming to expose rogue landlords operating across different boroughs and prevent displacement. The project aims to achieve better protection for housing charities and homelessness teams whose vulnerable clients are being targeted, while enabling evidence-gathering to ensure prosecution cases are robustly prepared and action can be taken to recover the associated proceeds of crime.
• Private landlords pocketed £9.3 billion in Housing Benefit in 2015, twice that of £4.6 billion in 2006, according to the National Housing Federation.
• If all those housed in the private rented sector (PRS) lived in affordable housing, the nation would save £1.5 billion. One in three homes in the PRS fail to meet the English Housing Survey’s decent homes standard.
• Housing Benefit claims in the PRS are much higher than in the non-profit housing association sector. More than £1,000 a year extra is spent per family living in the PRS compared to the social rented sector. In London, the contrast is even starker with PRS payments amounting to £3,300 more each year than the social rented sector.