Fraud within the social housing sector is a widespread issue, impacting both tenants and landlords significantly and costing taxpayers millions of pounds every year. It can be broadly categorised into two areas; general fraud which affects many industries, and the more sector-specific issue of tenancy fraud.
Tenancy fraud has become an increasing concern, particularly in light of the increase in short term lets available through online agents in recent years, combined with an increased strain on resources to tackle fraudulent activities and a rise in motivation and opportunity for fraudsters. For instance, in 2023, a report by the Tenancy Fraud Forum in conjunction with the Fraud Advisory Panel (the TFF 2023 Report) [1] found that at least 148,000 social homes in England are subject to some form of tenancy fraud, highlighting the urgent need for awareness and action.
This article delves into the main forms of fraud within this sector, examining their effects on both tenants and landlords; including ways to mitigate these risks. Additionally, we will address the increasing threat of cybercrime, which poses new challenges and risks to social housing providers.
Tenancy fraud
The term 'tenancy fraud' encompasses a range of scenarios in which social housing is misappropriated. Categories includes:
- Sub-letting: where tenants sub-let a property without permission;
- Application fraud: where tenants lie about their circumstances or other information when applying for a property;
- Succession fraud: where a person fraudulently lives in a social housing property after the legal tenant has passed away;
- Abandonment: where properties are left empty without the social housing provider being notified;
- Joint tenancy fraud: where the original tenant moves out to leave the remaining tenant, who often does not have a genuine need for the tenancy, in situ; and
- Key selling: where a physical key to a property is sold to an unauthorised third party by the tenant.
The consequences of tenancy fraud when carried out by one tenant may not be considered particularly severe for a social housing provider or local authority. However, when carried out by many tenants across a portfolio, the consequences to not only the landlord, but also the wider economy can be financially devastating. With the building of social homes reducing due to lack of funding and Government restrictions, yet over one million people on the waiting list for social housing, tackling tenancy fraud should be high on all housing providers' agendas.
The consequences of tenancy fraud
The TFF 2023 Report found that the highest ratio of social housing properties affected by tenancy fraud were in London (1 in 20), with 1 in 30 social housing properties in the regions thought to be subject to some form of tenancy fraud. [Ibid]
The reported figures are significant, but it is thought that there is a large gap between detected and actual tenancy fraud; particularly following the closure of the Audit Commission in 2015 (an independent public body that previously carried out detailed reports and helped to highlight the impact of tenancy fraud when first identified). [Ibid]
Tenancy application fraud alone has reportedly increased by 140% in the last year according to an April 2024 report by Goodlord [4], making it increasingly challenging for social housing landlords to filter through and identify legitimate applications. As such, not only are there financial implications of this fraudulent activity, but also significant social and emotional impact on the individuals affected by the national housing crisis in the UK. A 2024 UK Government report recorded that approximately 1.33 million households were waiting for a local authority to provide them with a social housing property; a 3% increase from the report carried out the previous year. [5] The strain on temporary accommodation has also been effected as a result of the rising figures, as well as the statistics recorded for those experiencing homelessness which continue to rise exponentially each year. [6] Tenancy fraud therefore deprives those in real need of housing and costs providers thousands seeking to recover them.
Solutions
Some social housing providers have seen success in combatting this fraudulent behaviour by carrying out tenancy audits. For this, a landlord (or their representative) attends the property unannounced to carry out a survey and ask questions of the tenants. For instance, the representative may ask to see identification documents for the tenants, so that there is evidence as to who the occupiers of the property are and whether these match the application records.
There are common signs that could assist in spotting whether a social housing property might be subject to tenancy fraud. For example, these signs could include disrepair, unauthorised tenant improvements, multiple requests for additional keys, overcrowding and a lack of response to communications from the landlord, although these are not exclusive indicators of tenancy fraud. There are certain signs that will be more noticeable and disruptive to other tenants, meaning that they are more likely to be aware of potentially fraudulent activity than the social housing provider or local authority. The availability and publicity of an anonymous whistleblowing function can assist landlords in discovering cases of housing fraud at a much earlier stage.
Is Whistleblowing really an effective way to tackle tenancy fraud?
Case study - In Manchester, 18 organisations joined forces to create a shared telephone hotline, as part of the Manchester Tenancy Fraud Initiative; a policy introduced by Manchester City Council. A full publicity campaign was launched, and people in Manchester were encouraged to call the hotline to anonymously report situations which they believed might amount to or be symptomatic of tenancy fraud. Over the course of one year, the hotline received 76 reports, which lead to recovery of 7 properties and the subsequent investigation of 35 separate cases of suspected fraud. [7]
Educating employees is another key method that can be effective in combatting tenancy fraud. The more alert that employees at social housing providers and local authorities are to the symptoms of social housing fraud, the sooner the fraudsters can be caught, therefore reducing the loss to the provider. It also enables any signs of fraud to be acted on promptly by the landlord, and any legal action or interventions (if needed) can be taken at an early stage as a result.
Use of technology to target fraudsters can enhance and facilitate more efficient fraud detection methods. For example, using records of credit reference agencies and other financial information available, as well as using toolkits to reduce review times in order to catch offenders. In addition, data sharing agreements with local authority fraud teams can help where providers have limited resources to prosecute.
Cybercrime & social housing
The social housing sector is one of the most targeted for cyber-attacks. Inside Housing reported that in 2024 cyber security was the most frequently flagged risk in housing association risk registers. [8]
Cyber issues experienced within the sector include:
- Data breaches;
- Ransomware;
- Phishing;
- Insider attacks;
- Supply chain hacks.
A significant number of organisations have been affected, including Waverley Housing, Clarion Housing Association, Connexus and Hackney Council, who have all been victims of significant attempts at cyber-attacks within the last five years. For Clarion Housing, the cyber-attack they were hit by in summer 2022 caused major disruption for its customers and has resulted in costs of £17million. [9] Unfortunately, they are not alone, as a report by RSM UK has noted - between 2022 and 2023, approximately a quarter of housing associations in the UK suffered a cyber-attack. [10]
Why is the social housing sector vulnerable?
The sector is particularly vulnerable to data breaches due to the vast quantities of information held by providers relating to past, current and future tenants as well as in relation to its operations. There is a tension between the requirements from the Regulator of Social Housing (the RSH) to obtain more personal data about their tenants and the increasing number of digitised projects, as against the ongoing need to increase data security and ensure secure information governance procedures are in place generally.
The RSH correctly identified that the proposed requirements of the Transparency, Influence and Accountability Standard (published on 2 April 2024) will require registered providers to collect increasingly sensitive data about their tenants in order to understand and meet their needs. This information can make registered providers attractive targets for cyber-attacks, as cyber criminals seek to quickly auction off or leak data for a significant profit.
At Trowers & Hamlins we have seen a particular increase in clients facing insider attacks. Where there is a profit to be made, it can be tempting for employees to exploit their access to sensitive information. We can assist in both implementing strategies to reduce your fraud risks and providing tailored advice and responsive action should a cyber incident occur through our CyberSecure 360 cyber risk management services.
Solutions
There are a number of steps which social housing providers and local authorities can be taking to reduce their fraud risks generally, such as staff training and awareness, as already touched on above. We recommend that our social housing clients undertake specific phishing simulation exercises or penetration testing to ensure sufficient internal safeguards are in place. With AI enabling cyber-attacks to become increasingly sophisticated, employees need to be aware of social engineering tactics, alert to red flags and comfortable in questioning suspicious or potentially suspicious activity.
It is also important for organisations to have policies and procedures in place (both in relation to cyber and fraud generally). Cyber Response Plans are often critical in enabling reactive and effective steps to be taken should a cyber incident occur. Cyber insurance policies can provide some financial protection if a cyber-attack or data breach occurs. It is important that any existing policies are reviewed to ensure that the level of coverage is commensurate to organisational risks.
Mitigation steps should extend beyond internal controls. Social housing providers frequently engage with third party suppliers and so due diligence is required to ensure contracts have adequate protections in place. Where a third-party supplier holds any tenant data, strict cybersecurity protocols and provisions should be in place.
For further information on cybersecurity in the housing sector, please see our recent webinar CyberSecure360 – Housing.
Conclusion
Addressing fraud and cyber threats in the social housing sector is important to the safeguarding of processes and resources for both landlords and social housing tenants. Tenancy fraud, in particular, deprives those in genuine need of housing and leads to considerable financial loss for housing providers. Solutions such as tenancy audits, whistleblowing systems, employee education, and the use of technology can help mitigate some of these risks.
The increasing prevalence of cybercrime presents an additional layer of vulnerability that must be addressed. The increasing sophistication of cyber-attacks highlights the need for robust cybersecurity measures, including staff training, internal safeguards, and comprehensive policies to protect sensitive data.
Collaborative efforts between social housing landlords, tenants and regulators could assist in developing strategies that have a combined approach in tackling both fraud and cybercrime.
By increasing awareness, encouraging reporting and adopting proactive and multifaceted strategies to combat fraud and cyber threats, social housing providers can better safeguard resources, protect tenants, and ensure the long-term sustainability of the sector.
If you would like to discuss the fraud risks affecting your organisation, fraud prevention measures or hear more about our CyberSecure360 offering, please contact Helen Briant or Emily Sharples.
