Councils demand crackdown on housing conversion "scam"

A HOUSING BENEFIT "scam" that often leaves vulnerable people living in poor and dangerous accommodation must be shut down and more rogue landlords jailed, councils have said.

The Local Government Association is calling on the Government to close a "legal loophole" that allows landlords to maxmise housing benefit payments by converting properties into a maximum of six self-contained studio flats without planning permission.

Figures from the National Housing Federation show landlords directly received £9.3bn in housing benefit in 2015, double the £4.6bn they were paid in 2006. The LGA said the sharp rise is thought to have been fuelled by the micro-subdivision of properties into houses in multiple occupation (HMOs), known as the Lockdown model, which began in London and is now spreading across the country.

In one London borough, the Local Housing Allowance rate for a non-self-contained room was £84 per week. For a one-bed self-contained flat, it was £181 per week. A three-bedroom property could therefore be converted into six units and generate an annual rental income of more than £56,000.

However, the LGA said, the electricity supplied to such properties is often run on stolen meters or hotwired supplies, creating fire hazards. Others have been found to have severe damp and mould, no gas safety certificate, poor wiring and leaking roofs.

At present, fines for serious safety offences can be as low as £1,000, which the association said are offset by the profits from exploiting vulnerable tenants.

Later this year, new regulations will come into force giving councils the power 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. They will also be able to apply for banning orders.

Nevertheless, the LGA believes the loophole for HMO conversions will undermine the new powers. It said councils must be able to stop landlords converting properties without planning permission.

It also wants more jail sentences for the worst offenders, arguing they would be more effective than fines in keeping them "out of the game".

Furthermore, councils should be able to build more affordable housing. Not only would these properties be more likely to meet decent standards than those in the private rented sector, where one in three currently fail, but also it would help to cut the housing benefit bill, the LGA said. If all those living in private rented accommodation were in affordable housing, it would reduce housing benefit by £1.5bn. 

Cllr Judith Blake, the LGA's housing spokesperson, claimed councils are being "let down" by the current system.

"Legislation needs to be more joined-up to prevent some landlords taking advantage of people at the sharp end of our housing crisis," she said.

"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."