Several local authorities in London have launched an investigation into a multi-million pound business model where a number of letting agents appear to have used legal loopholes to earn millions from the taxpayer.
The revelation is part of a Dispatches documentary, broadcast on Monday, which examined how private landlords are now the fastest growing provider housing for housing benefit tenants, receiving an estimated £9bn a year from the housing benefit budget.
Using Freedom of Information data from the country's 60 biggest councils, Dispatches revealed that more than 200 landlords and letting agents across the country have received £1,000,000 or more in housing benefit payments in the past three years.
Although many landlords provide good homes, reporter Antony Barnett discovered some vulnerable people being housed in poor and potentially dangerous accommodation whilst the landlord or letting agent is receiving large sums in housing benefit.
Dispatches uncovered how a number of letting agents based in North London have used legal loopholes in the housing system to receive millions of pounds a year in housing benefit.
The scheme involves converting hundreds of family houses into properties that comprise of multiple tiny units. Each of these units has a small shower room and basic cooking facilities. This means that they could be eligible for the higher rate of housing benefit, which can often be more than double the rate of a room in a fully-shared property.
Dispatches examined two properties in Brent and discover that one letting agent is collecting nearly £70,000 per year and another nearly £80,000 per year in housing benefit. One of the letting agents is believed to have almost 100 of these properties across the capital and has earned at least £2m in housing benefit over the past three years.
In addition to these funds, in attempt to alleviate the housing crisis, local councils are offering private landlords and letting agents financial incentives to rent their properties out to tenants on housing benefits. A letting agent Dispatches secretly filmed receives approximately £800 to1000 per tenant as an enticement from local authorities to secure rooms for housing benefit tenants.
Dr Victoria Cooper, lecturer in Social Policy at the Open University told Dispatches that “approximately 40% of the housing benefit budget is spent on the private rented sector. What we're seeing is a redistribution of wealth and while public funds were previously spent within social housing and then used to reinvest to expand that social housing, this is no longer the case. With the private rented sector the money isn't redistributed and it simply goes into the pockets of private landlords.”
A group of London councils including Greenwich, Hackney, Haringey, Lambeth, Lewisham and Southwark have become increasingly concerned by this model and have received funds from central government to investigate further. The consortium tagged as the “London Lockdown” project plan to inspect 1500 letting units that attract more than £15m a year in housing benefit.
The Association of London Environmental Health Managers which is co-ordinating the investigation believe this is just a “small proportion of the total number” across the country in what it describes as a “rapidly expanding business model”.
Lawyers acting for the agents told Dispatches: “Our companies manage a number of properties in London and across the UK. Each one is subject to the regulation of the appropriate local council, is inspected by them and subjected to independent certification generally. We have an excellent working relationship with each council. They said they refute all the allegations and would 'continue to work with local authorities to provide much needed accommodation.”