Combatng Housng Beneft Fraud: Local Authortes' Dscretonary Powers A study carred out on behalf of the Department of Socal Securty by Roy Sansbury Socal Polcy Research Unt, Unversty of York
Crown copyrght 999. Publshed wth permsson of the Department of Socal Securty on behalf of the Controller of Her Majesty's Statonery Offce. Applcatons for reproducton should be made n wrtng to Keth Watson Socal Research Branch, Room 4-26, Adelph, - John Adam Street, London WC2N 6HT Frst Publshed 999 ISBN 8597 876 3 ISSN 368 244X
CONTENTS Page LIST OF TABLES EXECUTIVE SUMMARY v. INTRODUCTION Polcy background I The `ft and proper' regulatons The addtonal powers to suspend payments to clamants 2 Ams of the research 3 Research desgn 3 Intal development stage 3 The telephone survey 4 A note on the tmng of the survey 6 Structure of the report 6 I 2. LOCAL AUTHORITIES' USE OF THE NEW POWERS TO STOP DIRECT PAYMENTS TO LANDLORDS 7 Introducton 7 Numbers of landlords and clamants affected by use of new powers 7 Reasons why local authortes have stopped drect payments 9 Responsblty for makng `ft and proper' decsons Local authortes' response when both landlord and clamant are consdered unsutable to receve payment of Housng Beneft Landlords' reactons to the new powers 2 Appeals aganst decsons to stop drect payments 3 Dscusson 3 3. CHARACTERISTICS OF LOCAL AUTHORITIES WHICH HAD NOT USED THE NEW POWERS TO STOP DIRECT PAYMENTS 4 Introducton 4 Local authortes' explanatons of why the new powers had not ben used 4 Potental need for new powers 6 How `non-user' authortes expected to mplement the new powers 8 Dscusson 9 4. VTEWS ABOUT THE NEW POWERS TO STOP DIRECT PAYMENTS 23 Introducton 22 Vews about the mpact of the new powers 2 Dscusson 22 I
5. LOCAL AUTHORITIES' USE AND NON-USE OF THE NEW POWERS TO SUSPEND BENEFIT 24 Introducton 24 Local authortes' use of the powers to wthhold or suspend payments 24 Numbers of clamants whose beneft was suspended under the new power 25 Local authortes' use of tme lmts 25 Reasons why local authortes have suspended payments under the new powers 26 Appeals aganst decsons to suspend payments 27 Local authortes' explanatons of why the new power to suspend had not been used 28 Dscusson 29 6. VIEWS ABOUT THE NEW POWER TO SUSPEND BENEFIT 3 Introducton 3 Vews about the mpact of the new powers 3 Dscusson 32 7. USING THE NEW ANTI-FRAUD DISCRETIONARY POWERS - SUMMARY AND DISCUSSION 33 Introducton 33 The new powers to stop drect payments to landlords 33 There s lttle need for the new power n some authortes 33 The new powers must be seen n the context of other counter-fraud actvty 34 The nterests of the clamant are not always served by stoppng drect payments 34 Stoppng drect payments n the future 34 The new powers to suspend beneft payments from clamants 35 Fnal comments - montorng the use of counter-fraud measures n the future 36 REFERENCES 37 APPENDIX A : QUESTIONNAIRE FOR TELEPHONE SURVEY APPENDIX B : INTRODUCTORY LETTERS FROM DSS AND SPRU SENT TO LOCAL AUTHORITIES I
I LIST OF TABLES Table. : Table.2 : Sample of local authortes for the development stage The acheved sample Page 4 5 Table.3 : Analyss of non-response 5 Table 2. : Table 2.2 : Table 2.3 : Table 2.4 : Local authortes whch had used the new powers to stop drect payments, by local authorty type Number of landlords whose drect payments had been stopped snce November 997 usng the new powers Number of clamants affected by decson to stop drect payments to ther landlords Number of clamants affected by decson to stop drect payments to ther landlords (authortes usng ther powers on one landlord only) 7 8 8 9 Table 2.5 : Factors taken nto account n `ft and proper' decsons 0 Table 2.6 : Analyss of who makes or wll make `ft and proper' decsons Table 2.7 : Table 3. : Table 3.2 : Reacton of landlords to authortes exercsng new powers to stop drect payments) 2 Local authortes whch had not used the new powers to stop drect payments, by local authorty type 4 Prncpal reasons for not usng the new powers to stop drect payments 5 Table 3.3 : Analyss of the number of landlords recevng drect payments 7 Table 3.4 : Analyss of the number of landlords suspected of beng fraudulent 7 Table 3.5 : Analyss of the prevalence of fraudulent landlords (data from 236 authortes) 8 Table 3.6 : Table 4. : Factors that local authortes wll take nto account n `ft and proper' decsons 9 Housng Beneft managers' vews about the new powers to stop drect payments 22
Table 5. : Use of exstng and new powers to suspend payments, analysed by local authorty type 24 Table 5.2 : Number of cases where local authortes had used the new power to suspend payments to clamants 25 Table 5.3 : Tme gven to clamants to respond to requests for nformaton 25 Table 5.4 : How clamants respond to tme lmts 26 Table 5.5 : Reasons why local authortes have suspended payments to clamants 27 Table 5.6 : Appeals aganst decsons to suspend payments 28 Table 5.7 : Prncpal reasons for not applyng new or exstng powers to suspend or wthhold beneft payments 29 Table 6. : Housng Beneft managers' vews about the new power to suspend beneft 3
EXECUTIVE SUMMARY. Introducton Local authortes have a range of dscretonary powers whch can be used n the admnstraton of Housng Beneft. Ths study evaluates authortes' use of dscretonary powers n two areas: stoppng or refusng drect payments to landlords who are not `ft and proper' persons to receve them (under regulatons n force snce November 997); and suspendng payments of beneft to clamants whose contnung enttlement s uncertan (under regulatons n force snce November 997). The research methods comprsed vsts to 8 local authortes durng whch face-to-face ntervews were conducted wth Housng Beneft managers, assessment staff and fraud offcers, and a telephone survey of Housng Beneft managers n all authortes n Great Brtan. Successful ntervews were conducted 305 local authortes, a response rate of 75 per cent. The Department of Socal Securty commssoned ths research to montor the early mpact of new regulatons amed at counterng landlord and clamant fraud. From 3 November 997 new regulatons made under exstng powers gave local authortes new abltes to combat Housng Beneft fraud, ncludng the power to stop or refuse to make drect payments of beneft to landlords who are consdered not to be `ft and proper' persons, and extended powers to suspend payments from clamants where enttlement s uncertan. The ntenton behnd the new powers n relaton to landlords s that when a landlord's probty s n doubt when a drect payment s ether mandatory or made under dscretonary powers, the `ft and proper' test should be appled. Under the test, a local authorty has to be satsfed that a landlord s ft and proper to receve a drect payment. If the authorty s not satsfed t can refuse to pay Housng Beneft drect to the landlord. DSS gudance on what consttutes `not ft and proper' suggests that local authortes could take nto account any of the followng crcumstances: the landlord has been engaged n fraudulent actvty n the past (the actvty must be related to Housng Beneft only, other fraudulent actvty must not be taken nto consderaton) falure to report changes n crcumstances falure to repay recoverable overpayments. The regulatons also ncrease the optons open to local authortes when there s some suspcon that a Housng Beneft recpent s no longer elgble for Housng Beneft. For some tme local authortes have had the power to wthhold payment of beneft under the Housng Beneft Regulatons 987. The new regulatons allow them to suspend beneft f, upon a reasonable nvestgaton, there s doubt about the clamant's contnung enttlement. Furthennore, the suspenson s lnked to a requrement on the clamant to provde nformaton to the local authorty whch can be used to establsh enttlement. v
I Local authortes' 2. use of the new powers to stop drect payments to landlords Of the 305 local authortes n the survey, 49 (6 per cent) had used the new powers snce ther ntroducton n November 997. London Boroughs and the Metropoltan authortes were qucker to start usng the new powers but stll only around one n four of these authortes had stopped any drect payments. Most authortes (30) had only dealt wth a sngle landlord under the new powers. The total number of landlords dealt wth was estmated at 87. The number of clamants affected n these 87 cases was estmated at 630. Landlords wth multple tenants were therefore more lkely than sngle landlords to be the subject of the new powers. The prncpal reasons why local authortes were applyng the new regulatons were the same as those mentoned n the DSS gudance,.e. prevous Housng Beneft fraud by a landlord, falure to report changes n crcumstances, and falure to repay overpayments. Other factors consdered by local authortes ncluded : a landlord havng other debts owng to authorty, a landlord's propertes beng poorly mantaned, a landlord usng threatenng or abusve language or behavour to local authorty staff, and a landlord havng a crmnal record. The DSS gudance emphasses that matters unconnected wth Housng Beneft should not be a factor n assessng a landlord's probty and states clearly that authortes expose themselves to legal challenge f they do. The survey fndngs suggest that some local authortes may be strayng nto uncertan terrtory f they take nto account factors such as a landlord's non- Housng Beneft debts, crmnal record, the state of ther accommodaton, and ther treatment of local authorty staff. In most local authortes, decsons about whether a landlord s `ft and proper' s taken by ether supervsory or manageral staff rather than assessment or fraud staff. When ther drect payments had been stopped, some landlords were reported to have reacted n ways that are undesrable for clamants or for the local authorty and ts staff. Ten authortes reported nstances of landlords evctng tenants or refusng to take beneft recpents. In fve authortes, landlords had taken legal acton (these were ether London Boroughs or metropoltan authortes). The outcomes of such acton are not yet known. 3. Characterstcs of local authortes whch had not used the new powers to stop drect payments Of the 305 local authortes n the survey, 256 (84 per cent) had not used the new powers to stop drect payments to landlords snce ther ntroducton n November 997. The predomnant reason put forward by Housng Beneft managers for not stoppng drect payments was that no relevant case had arsen n ther authorty. Other reasons ncluded: authorty s n the process of developng necessary polces or procedures dffcultes n fndng suffcent evdence to justfy stoppng drect payments authorty uses other exstng powers to combat landlord fraud authorty lacks resources to carry out necessary nvestgatons. v
f Although the most common reason for not stoppng drect payments was that the need to had not arsen, the survey also showed that most authortes could dentfy a number of `problem' landlords n ther areas. These apparently conflctng fndngs are probably partly the result of the tmng of the survey sx months after the powers came nto force. New or renewal clams from tenants of problem landlords mght not have been receved wthn the survey perod. 4. Vews about the new powers to stop drect payments A majorty of Housng Beneft managers expressed postve vews about the mpact of the new powers, wth lttle dfference between the authortes who had used them and those who had not. The number of authortes expressng at least one postve comment on the new powers was 35 (7 per cent) of the authortes who had used them, and 90 (74 per cent) of those who had not. Four out of fve authortes, regardless of whether they had had any experence of usng them n the past, reported that they expected to use the powers n the future. Ten per cent (27 authortes) sad that they would not be usng the powers (or usng them more). Of these, 3 reported that they had no problem landlords n ther areas. Some Housng Beneft managers who dd not thnk the powers to stop drect payments would have a major mpact on tacklng or deterrng fraud stll reported that they would make use of the powers n the future. 5. Local authortes' use, and non-use, of the new power to suspend beneft Of the 305 local authortes n the survey, 26 (86 per cent) had wthheld/suspended payments to clamants, of whom 90 (30 per cent of the whole sample) had used the new power. London Boroughs had used the new powers more than other types of authorty. Of the authortes who had used the new powers n the frst sx months snce they came nto force, most used them n relatvely few cases. Some authortes, however, were comparatvely bg users, seven reportng usng them n over 00 cases. Of these seven, four were coastal authortes where clamant populatons are generally more transent than other authortes. Clamants must be gven four weeks at least to respond to a request for nformaton to support ther clam, but local authortes have the dscreton to extend ths perod to up to 3 weeks. Around half of the `user' authortes had used ther dscreton to extend the four week perod for clamants to reply, whle just under a thrd had gven clamants the statutory mnmum of four weeks. However, around one n fve authortes appeared to be operatng outsde the statutory lmtatons, most by askng clamants to respond n less than four weeks, but a few by allowng them longer than the maxmum 3 weeks. Most authortes reported that the majorty of clamants responded wthn the tme lmts mposed by them. r The prncpal reasons why local authortes were applyng the new regulatons were: a suspcon that the clamant was not resdent n the rented property an allegaton that the clamant was workng nconsstent nformaton had been provded by the clamant a suspcon that the clamant and partner were lvng together as husband and wfe v
a suspcon that the clamant was n collusve tenancy a record of prevous Housng Beneft fraud by the clamant. The predomnant reason put forward by Housng Beneft managers for not suspendng payments to clamants usng the new power was that no relevant case had arsen n ther authorty. Other reasons ncluded: authorty uses other exstng powers to combat clamant fraud authorty lacks resources to carry out necessary nvestgatons authorty s n the process of developng necessary polces or procedures. It s to be expected that the new power wll be of use n some cases of suspected fraud rather than all, snce t was ntroduced as an addton to the exstng range of responses avalable to local authortes n order to avod payng beneft when a clamant mght not be enttled. I t 6. Vews about the new power to suspend beneft A majorty of Housng Beneft managers expressed postve vews about the mpact of the new power wth lttle dfference between the authortes who had used t and those who had not. The number of authortes expressng at least one postve comment on the new power was 63 (70 per cent) of the authortes who had used t, and 34 (62 per cent) of those who had not. Four out of fve authortes, regardless of whether they had had any experence of usng t n the past, reported that they expected to use the power n the future. Ten per cent (28 authortes) sad that they would not be usng the power (or usng t more). Some Housng Beneft managers who dd not thnk the power to suspend payments wll have a major mpact on tacklng or deterrng fraud stll reported that they wll make use of the powers n the future. 7. Usng the new ant-fraud dscretonary powers - Summary and dscusson Consderable cauton must be exercsed n nterpretng the survey fndngs on the use of the new powers avalable to local authortes to combat landlord and clamant fraud. The seemngly low level of use can be partly explaned by a number of contrbutory factors, the most mportant of whch are as follows: The tmng of the survey,.e. sx months after the new powers were ntroduced. It s undoubtedly the case that had the survey taken place 2 or 24 months after the November 997 mplementaton date, more `user' authortes would have been dentfed. The range of other powers that local authortes can use to respond to suspected fraud. It cannot be concluded at ths stage that a local authorty whch has made lttle or no use of the new powers s neglectng ts responsbltes n addressng Housng Beneft fraud. Other measures mght be more approprate n partcular cases. In addton there may be structural pressures, through the ncentve arrangements based on weekly beneft savngs, to deal wth suspected fraud cases n ways whch lead to a quck termnaton of a clam. r
The dversty of local authortes n the speed and commtment of ther response to the new powers. Some authortes have clearly been, on the evdence of the survey and vsts, qucker to dentfy how the powers can be used. The survey fndngs gve a strong ndcaton that the new powers wll be used by an ncreasng number of authortes n the future and are generally vewed as a postve contrbuton to the range of responses that local authortes can make to cases of suspected fraud. The Beneft Fraud Inspectorate can be expected to play a role n the future to ensure that the new powers are used approprately and effectvely. w r x
. INTRODUCTION In January 998 the Department of Socal Securty commssoned the Socal Polcy Research Unt to carry out research nto local authortes' use of new dscretonary powers desgned to ncrease ther capacty to combat Housng Beneft fraud. The feldwork for the project comprsed ste vsts to 8 authortes n Great Brtan and a telephone survey of Housng Beneft managers and was carred out n February to June 998. Polcy background The Socal Securty Admnstraton (Fraud) Act 997 gave authortes new powers to combat Housng Beneft fraud by landlords and by clamants. In addton, new powers to stop or refuse to make drect payments to landlords, and to suspend beneft payments to clamants where there are doubts about enttlement, came nto force on 3 November 997. A DSS Crcular, A48/97, gves gudance to local authortes on ther use. Local authortes already had a wde of range of powers pror to the 997 Act n exstng regulatons but the experence of local authortes had shown that there were a number of ways n whch the rsk of fraud could be reduced. Payng Housng Beneft drect to landlords was recognsed as one securty rsk whch fraudulent landlords could explot, partcularly as part of organsed frauds nvolvng fcttous clams. Exstng regulatons gave local authortes no opton but to pay Housng Beneft drectly to landlords n specfed crcumstances even when fraud was suspected. The new powers are ntended to reduce the rsk of fraud by allowng local authortes to stop, or refuse to put nto place, drect payments to landlords who are not consdered `ft and proper' persons to receve them. Local authortes have always had the power to wthhold beneft from clamants whom they have reason to thnk were not enttled, but the regulatons concernng the revew of benefts n payment restrcted them n what further acton they could take. The new powers to suspend beneft extend exstng optons for local authortes by allowng them to mpose tme lmts wthn whch clamants must supply any nformaton requested by the authorty to support ther clam and thereafter revew the clam n the customary way. The `ft and proper' regulatons Pror to the ntroducton of the `ft and proper' regulatons, a local authorty was oblged to make drect payments of Housng Beneft under certan condtons (for example, f the clamant had more than eght weeks of arrears of rent payable to the landlord, or f a part of the clamant's Income Support or Jobseekers Allowance was already beng pad drect to the landlord). Local authortes also had dscretonary powers to make drect payments at the request of the clamant. The ratonale for the new powers to stop drect payments was to mantan the postve aspects of the scheme (for example, guaranteed rental payments to landlords, convenence for clamants) whle reducng the securty rsk of payng Housng Beneft to fraudulent landlords (who could, for example, knowngly cash payments after a tenant had left the property).
The new powers requre a local authorty to apply the `ft and proper' test when the probty of a landlord s n doubt n relaton to new cases where a drect payment s mandatory, or could be made under dscretonary powers, and exstng cases where a drect payment s already beng made. Under the test, a local authorty has to be satsfed that a landlord s ft and proper to receve a drect payment. If the authorty s not satsfed t can refuse to pay Housng Beneft drect to the landlord. Gudance on the `ft and proper' test s contaned n the DSS Crcular HB/CTB A48/97 ssued n October 997. The gudance on what consttutes `not ft and proper' suggests that local authortes could take nto account any of the followng crcumstances: the landlord has been engaged n fraudulent actvty n the past (the actvty must be related to Housng Beneft only, other fraudulent actvty must not be taken nto consderaton) falure to report relevant changes n tenants' crcumstances falure to repay recoverable overpayments. In the crcular, ths lst s descrbed as `not exhaustve' but advses local authortes that t must `act reasonably' n what crcumstances t consders when makng decsons. The addtonal powers to suspend payments to clamants For some tme local authortes have had the power to wthhold payment of beneft under the Housng Beneft Regulatons (General) 987. The new regulatons allow authortes to suspend beneft f, upon a reasonable nvestgaton, there s doubt about the clamant's enttlement and, as an addtonal power, to lnk the suspenson wth a requrement on the clamant to provde nformaton to the local authorty whch can be used to re-establsh enttlement. If the clamant does not provde the nformaton wthn a specfed tme (a mnmum of four weeks but possbly up to 3 weeks at the authorty's dscreton) the clam can be revewed n the normal way (whch may lead to a termnaton of the clam). To an extent, the new regulatons standardze the practces of some authortes who routnely termnated clams f clamants faled to respond to correspondence or were not at home when an offcer made a vst on the grounds that resdence had not been establshed (as reported n Sansbury et al., 998). However, the new regulatons also place responsblty on local authortes to undertaken reasonable nvestgatons before benefts are suspended. Gudance on the new regulatons s contaned n the DSS Crcular HB/CTB A48/97, ssued n October 997. Two examples are gven of when the powers mght be used. The frst example s when an anonymous letter alleges a clamant has left a property ; the second s when a house of multple occupancy s the source of more clams than the capacty of the property. 2 I
Ams of the research The man am of the research was to explore how the new powers were beng used by local authortes n the frst sx months after they came nto force and to montor ther early mpact. Part of the ratonale for the study was the percepton of the DSS that the powers were not beng extensvely used and the need to explore the reasons for ths. The specfc research questons on landlord fraud to be addressed were as follows: How many `ft and proper' decsons have been taken snce 3 November 997, and what has been ther outcome? How many landlords wthn each local authortes' catchment area are thought to be possbly fraudulent? Whch grade of staff make decsons about `ft and proper' landlords? What factors do local authortes take nto account n makng `ft and proper' decsons? Have decsons to stop drect payments been challenged by landlords or clamants, and what has been the result? Are the new powers effectve at preventng and deterrng fraud? How do local authortes vew ther use of the new powers n the future? The specfc research questons on clamant fraud to be addressed were as follows: How frequently have the new powers been used? Why have some authortes not used the new powers? What factors do local authortes take nto account n makng decsons whether or not to suspend payments under the new regulatons? Do clamants provde the requred nformaton wthn the tme lmts mposed on them? How do local authortes vew ther use of the new powers n the future? Research desgn The man element of the research desgn was a telephone survey of all local authortes n England, Scotland and Wales. Ths was conducted on behalf of SPRU by Publc Atttude Surveys Ltd. (PAS) of Hgh Wycombe. The survey was preceded by a development stage comprsng vsts to 8 local authortes. Intal development stage The prncpal objectve of the development stage of the project was to collect nformaton on the man research ssues n order to nform the development of a questonnare for use n the telephone survey. The 8 local authortes were selected on the bass of the followng crtera: sze of Housng Beneft workload (usng beneft expendture as an ndcator) type of authorty geographcal area. 3
I Table. : Sample of local authortes for the development stage Number Englsh Dstrct and Untary authortes 8 Englsh Metropoltan authortes 3 London authortes 3 Welsh authortes 2 Scottsh authortes 2 Total 8 In each authorty we conducted ntervews wth a Housng Beneft Manager and one or more offcers wth responsblty for nvestgatng suspected fraud. Feldwork vsts took place n late February and early March 998. The telephone survey A plot of the telephone ntervews was conducted wth sx local authortes. A copy of the fnal questonnare can be found n Appendx A. Housng Beneft Managers n the 42 local authortes n Great Brtan were sent ntroductory letters from DSS and SPRU (reproduced as Appendx B), a background document explanng the research and a copy of the questonnare'. PAS conducted successful ntervews wth 305 authortes n Aprl and May, a response rate of 75 per cent. Table.2 shows the response rate for each local authorty type. ' Durng the feldwork nformaton was also collected on local authortes' use of dscretonary powers allowng them to make exceptonal hardshp payments to Housng Beneft recpents. The results of ths research appear n the DSS Research Report seres. 4
Table.2 : The acheved sample by local authorty type Possble Acheved Response rate (%) Englsh Dstrct and Untary authortes 289 22 76 Englsh Metropoltan authortes 36 27 75 London authortes 33 9 58 Welsh authortes 22 5 68 Scottsh authortes 32 23 72 Total 42 305 75 The table shows that London authortes (.e. the 32 London Boroughs and the Cty of London) are under-represented n the acheved sample. Snce these authortes are generally larger than most other authortes, ther under-representaton affects the overall representatveness of the acheved sample. From data suppled by DSS, we compared the non-response authortes wth the total populaton of authortes by the sze of ther prvately rented sector (usng rent allowance expendture as an ndcator). Table.3 presents the results of the comparson. Table.3 : Analyss of non-response Percentage of authortes n each quartle Non-response All local authortes of the rent allowance dstrbuton authortes " quartle 29.0 25.5 2nd quartle 24.7 25.3 3` d quartle 9.4 24.2 4 th quartle 26.9 25.0 Base 94 380 Source: Department of Socal Securty. The table shows that, as suggested above, we have lost from our acheved sample more of the larger authortes than expected. We have also lost more of the smaller authortes (by sze of prvate sector). From prevous research work wth local authortes ths outcome s not surprsng. Many small authortes appear to be reluctant to engage wth research projects, sometmes because ther resources are small, but also because they do not see the relevance of the research to ther authorty. However, the two most common reasons cted by Housng Beneft managers from non-partcpatng authortes were nablty to meet the tght deadlnes for the project, and the amount of work that would have been needed to gather the nformaton we requred. 5
A note on the tmng of the survey The ntervews for the study mostly took place n May 998. Hence, local authortes had been able to use ther new powers for, on average, around sx months pror to ntervew. As wll be shown later, many authortes had not stopped any drect payments and/or suspended payments n ths perod but expected to at some tme n the future. Some authortes explaned that they needed to set up approprate systems before they could mplement the new provsons. It s mportant to recognse, therefore, that the pcture that wll emerge from the analyss of the survey data represents a partcular snapshot of actvty n what s a perod of consderable development and change. Structure of the report Chapter 2 presents the fndngs from the survey about the use of the new powers to stop drect payments to landlords. The factors taken nto account by local authortes when they make decsons based on the `not ft and proper' regulatons are analysed, and landlords' reactons to havng drect payments stopped are explored. A prelmnary examnaton of the number and outcome of appeals aganst adverse decsons s also presented. Chapter 3 comprses a complementary analyss of the reasons why local authortes have not used the new powers. The sze of the `problem' of fraudulent landlords s explored usng survey data, and Housng Beneft managers' vews on how the `ft and proper' regulatons mght be used n future are analysed. Chapter 4 examnes Housng Beneft managers' vews on the utlty and mpact of the new powers to stop drect payments. Chapter 5 presents an analyss of the use of new powers to wthhold beneft payments from clamants. The factors taken nto account by local authortes when they make decsons to suspend beneft payments, and the use made of the tme lmts that authortes can mpose on clamants to respond to demands for nformaton are looked at. A prelmnary examnaton of the number and outcome of appeals aganst adverse decsons s presented. The chapter also contans an analyss of why local authortes have not used the new powers. Chapter 6 explores Housng Beneft managers' vews on the utlty and mpact of the new powers to suspend beneft payments. Chapter 7 comprses a summary of the fndngs of the research on the use of the new counter-fraud powers and a dscusson of ther mplcatons for polcy. 6 I
2. LOCAL AUTHORITIES' USE OF THE NEW POWERS TO STOP DIRECT PAYMENTS TO LANDLORDS Introducton Of the 305 local authortes n the survey, 49 (6 per cent) had used the new powers to stop drect payments to landlords snce ther ntroducton n November 997. In Table 2., the authortes that had used the new powers are analysed by local authorty type. Table 2. : Local authortes whch had used the new powers to stop drect payments, by local authorty type Authortes whch had used new powers to stop drect payments 0/0 Number Base (number of authortes) Englsh Dstrct authortes 33 5 22 Englsh Metropoltan authortes 7 26 27 London authortes 5 26 9 Welsh authortes 2 3 5 Scottsh authortes 2 9 23 All authortes 49 6 305 The table shows that n the frst sx months of ther operaton, the new powers to stop drect payments were used by only one n sx of local authortes. The London and Metropoltan authortes were qucker to start usng the new powers but stll only around one n four of these authortes had stopped any drect payments. Numbers of landlords and clamants affected by use of new powers From what s currently known about landlord fraud, the problem s connected more wth landlords who have more than one property or own houses of multple occupancy, than wth landlords wth a sngle tenant. Any decson to stop a drect payment, therefore, may often affect a number of clamants. In the survey, therefore, Housng Beneft managers were asked how many landlords had had payments stopped and how many clamants had been affected. Ths type of nformaton s not routnely collected by local authortes, and n all but two authortes Housng Beneft managers were able to gve the exact number of landlords affected and some estmate of the number of clamants nvolved. The responses are presented n Tables 2.2 and 2.3. 7
Table 2.2: Number of landlords whose drect payments had been stopped snce November 997 usng the new powers Number- of landlords Number of authortes 30 2 3 2 4 5 8 2 Total 47 Table 2.3 : Number of clamants affected by decson to stop drect payments to ther landlords Number of clamants affected 2-5 6-20 2+ Number of authortes 8 2 20 7 Total 47 Tables 2.2 and 2.3 show that whle few landlords (87 n total) had ther drect payments stopped, far more clamants (630) were affected. Most authortes (30) had only dealt wth a sngle landlord under the new powers, but n 22 of these cases more than one clamant was nvolved. There s some ndcaton therefore that, n the frst sx months, local authortes were more lkely to have appled the new powers to landlords wth multple tenants. Table 2.4 shows the number of tenants affected n the authortes who had stopped payments to a sngle landlord. w 8
Table 2.4 : Number of clamants affected by decson to stop drect payments to ther landlords (authortes usng ther powers on one landlord only) Number of clamants affected 2-5 6-20 2+ Number of authortes 8 0 Total 30 9 3 Table 2.4 supports the observaton that whle some authortes have used the powers on landlords wth only a sngle tenant, most had targeted landlords wth large numbers of tenants. One authorty had stopped drect payments to a landlord wth 60 tenants. Reasons why local authortes have stopped drect payments As mentoned n Chapter, local authortes can apply the `ft and proper' test when consderng whether to make or contnue to make drect payments to landlords where there s some doubt about ther probty. The DSS gudance crcular gves examples of three types of crcumstance whch could be taken nto account (prevous fraudulent actvty, falure to report changes n crcumstances, and falure to repay overpayments). Local authortes are able to consder other factors but they must relate to the landlord's probty n dealng wth Housng Beneft. In the survey, we were able to explore factors that had been consdered n makng decsons to stop payng beneft to landlords. Housng Beneft managers were asked to dentfy the factors they had consdered from a lst that was compled usng the nformaton gathered from the managers ntervewed n the development stage of the project. Table 2.5 presents an analyss of the survey responses. 9
Table 2.5 : Factors taken nto account n `ft and proper' decsons (base = 49 authortes) Factor (a) Mentoned n DSS gudance Factor taken nto account? Number (and percentage) o authortes Yes No Don't know No. (%) No. (%) No. (%) Prevous Housng Beneft fraud by landlord 35 (7) 2 (24) 2 (5) Falure to report changes n crcumstances 33 (67) 8 (37) (2) Falure to repay overpayments 40 (82) 8 (6) (2) (b) Other factors Landlord has other debts owng to authorty 4 (29) 33 (67) 2 (4) Landlord's propertes are poorly mantaned 3 (27) 34 (69) 2 (4) Landlord has been threatenng or abusve to local authorty staff Landlord has a crmnal record 9 (8) 5 (0) 39 (80) 39 (80) 5 (2) (0) It appears from the table that local authortes mostly took nto account those factors mentoned n the DSS gudance. Other factors have been taken nto account but these were, as far as the data show, n conjuncton wth one or more of the three prncpal factors. It seems, therefore, that local authortes tend to buld a composte pcture of landlords who are not `ft and proper' persons to receve drect payments from a number of sources. In the sx authortes where only one landlord had been affected by the new powers and the local authorty has cted only one reason, four mentoned falure to repay overpayments (the factor most mentoned by local authortes n Table 2.5), and two mentoned prevous fraudulent actvty. The fndngs from the survey confrm the vews emergng from Housng Beneft managers n the development stage. Prevous fraud by a landlord s a clear ndcaton that he or she s not a `ft and proper' person. Falure to report changes n crcumstances creates suspcons of a lack of probty but t s possble that landlords genunely are not aware of relevant changes n the crcumstances of ther tenants. Hence there was less certanty about whether there was a delberate ntent to mslead the authorty. Falures to repay overpayments were taken as clearer ndcatons of lack of probty because t s wthn a landlord's control when and f they pay back money owng to the authorty. Hence, local authortes were more reluctant to make drect payments of Housng Beneft f they felt there was a rsk that any possble overpayment n the future would not be repad. (It was mentoned by some Housng Beneft managers ntervewed that new powers under the Socal Securty Admnstraton (Fraud) Act 997 to recover overpayments from the beneft pad on behalf of other clamants are expected to reduce the problem of recovery n the future and n consequence may reduce ther use of the power to stop drect payments.) 0
U The DSS gudance emphasses that matters unconnected wth Housng Beneft should not be a factor n assessng a landlord's probty and states clearly that authortes expose themselves to legal challenge f they do. The responses set out n Table 2.5 suggest that some local authortes may be strayng nto uncertan terrtory f they take nto account factors such as a landlord's non-housng Beneft debts, crmnal record, the state of ther accommodaton, and ther treatment of local authorty staff. Responsblty for makng `ft and proper' decsons In the survey, all Housng Beneft managers were asked whch grade of staff was responsble for makng the decson whether or not to stop a drect payment to a landlord. Table 2.6 compares the responses from authortes where the new power had been used wth those where t had not. Table 2.6 : Analyss of who makes or wll make `ft and proper' decsons Grade of staff Housng Beneft assessment offcers Supervsory staff/team leaders Manageral staff Fraud or nvestgaton staff Local authortes who HA VE used new powers No. (%) 3 (6) 4 (29) 30 (6) 2 (4) Local authortes who HAVE NOT used new powers No. (%) 3 (5) Base (number of authortes) 49 253 88 (35) 29 (5) 23 (9) I As we have seen, relatvely few authortes have used the new power to stop drect payments. It s perhaps too early to say therefore whch grade of staff s the most approprate to make `ft and proper' decsons. Very few authortes have allocated, or ntend to allocate, the task to assessment staff. Most appear to vew the task as a supervsory or manageral responsblty. Local authortes' response when both landlord and clamant are consdered unsutable to receve payment of Housng Beneft Apart from the statutory crcumstances n whch a local authorty must make a payment drect to a landlord, there s a dscretonary power to make a drect payment when t s deemed n the nterests of the clamant. Ths mght arse when, for example, a clamant s consdered rresponsble by the authorty or s unable for some reason to manage ther resources. In such a stuaton the local authorty could fnd tself n a dlemma f t wshes to stop drect payments to the landlord f hs or her probty s n doubt. A smlar dlemma mght also arse f both a landlord and ther clamant are n some way suspected of possble fraudulent behavour (for example, where there s evdence of a collusve tenancy). In order to explore how local authortes react to such stuatons, Housng Beneft managers (n authortes where the new power had been used) were asked to state what acton they would generally take where both the clamant and landlord were consdered unsutable to receve payment.
I No Housng Beneft managers sad that they would contnue to pay the landlord and only one sad they would pay the clamant nstead. Most (29 of the 49 respondents) dd not commt themselves to specfyng a `general' response but sad that ther acton would depend on the crcumstances of the partcular case. The most common response (from 8 managers) was to wthhold payment altogether pendng further nvestgaton of the case. Managers ntervewed n the development stage gave smlar responses. It was not unusual for them to be faced wth cases of suspected fraud where both landlord and clamant were mplcated. The new powers, n such cases, were largely rrelevant because a more proactve, nvestgatve response was approprate. Landlords' reactons to the new powers Clearly t would be undesrable, f not unavodable, f clamants suffered n some way as a result of a local authorty stoppng drect payments to a landlord. In order to explore ths possblty, Housng Beneft managers were asked n the survey f they were aware of any landlords reactng adversely to the authorty exercsng ts new powers ; 23 managers gave examples, some of whom cted more than one. Table 2.7 presents an analyss of the responses. Table 2.7 : Reacton of landlords to authortes exercsng new powers to stop drect payments (base = 49 authortes) Type of reacton by landlords Reacton experenced by local authorty? Number (and %) of authortes Yes No Don't know No. (%) No. (%) No. (%) Landlord has refused to take beneft clamants 9 (8) 37 (76) 3 (6) Landlord has evcted clamant(s) 6 (2) 40 (82) 3 (6) Landlord has been abusve or threatenng to beneft 5 (3) 33 (67) (2) staff Landlord has been abusve or threatenng to 5 (3) 29 (59) 5 ( 0) clamants Landlord has taken legal acton aganst authorty 5 (0) 44 (90) 0 (0) 2 Table 2.7 confrms that some landlords react n ways that are undesrable for clamants (some, and possbly most, of whom wll be bona fde clamants) or for the local authorty and ts staff. Ten authortes reported nstances of landlords evctng tenants or refusng to take beneft recpents. Such reactons do not help ether the ndvdual tenants concerned nor people on beneft more wdely f the stock of avalable rented accommodaton s effectvely reduced. However, f the small percentage of landlords concerned cease to receve socal securty payments as a result, then some purpose wll have been served by removng a source of potental Housng Beneft fraud.
The fve authortes n whch legal acton had been taken by a landlord were ether London Boroughs or Metropoltan authortes. The outcomes of such acton are not yet known. Appeals aganst decsons to stop drect payments Landlords are able to challenge a decson to stop makng drect payments to them. In the sx months snce the new powers came nto force, a total of 23 appeals were rased n 4 of the authortes that had used the new powers. Nne of the appeals were n London Boroughs. Twenty-three appeals represents an appeal rate of around 25 per cent. Four appeals, two of whch were n the same authorty, were reported to have been successful. Dscusson The evdence from the survey ndcates that, perhaps surprsngly, relatvely few authortes have taken advantage of ther new powers to stop drect payments to landlords. Where the powers have been used, the nfluence of the DSS gudance s apparent n that most decsons appear to be based on at least one of the three crtera mentoned n the gudance. There s some evdence that n a number of authortes some factors are beng taken nto account that may possbly be outsde the scope of the regulatons. Further gudance mght therefore nclude examples of where authortes should take partcular care n future. DSS mght also consder whether to ssue gudance on the most approprate level of staff to make `ft and proper' decsons, gven the possble mplcatons - for landlords, clamants and local authortes, and the relatonshps between the three partes - of decsons to stop drect payments. 3
3. CHARACTERISTICS OF LOCAL AUTHORITIES WHICH HAD NOT USED THE NEW POWERS TO STOP DIRECT PAYMENTS Introducton Part of the ratonale for conductng ths element of the research project was the apparent paradox that whle local authortes had pressed for new powers n combattng fraud, ncludng the power to stop drect payments, there was also anecdotal evdence that ther use, so far, was very lmted. Of the 305 local authortes n the study, 49 (6 per cent) reported that the power to stop or wthhold drect payments had been used by the tme the survey was carred out. Table 3. presents an analyss of the 256 authortes whch had not used the new powers by local authorty type. Table 3. : Local authortes whch had not used the new powers to stop drect payments, by local authorty type Authortes whch had NOT used new powers to stop drect payments Number % Base (number of authortes) Englsh Dstrct authortes 88 85 22 Englsh Metropoltan authortes 20 74 27 London authortes 4 74 9 Welsh authortes 3 87 5 Scottsh authortes 2 9 23 All authortes 256 84 305 In the survey we asked Housng Beneft managers n these authortes to explan n ther own words, why they had not taken advantage of the new powers. Managers were also asked what factors they would take nto account n decdng whether a landlord was `ft and proper' f the need arose. Ths chapter presents the fndngs n relaton to both questons. Local authortes' explanatons of why the new powers had not been used Table 3.2 presents an analyss of the reasons put forward by Housng Beneft managers for why they had not used ther new powers to stop drect payments to landlords. Respondents were allowed to cte as many reasons as they wanted. 4
Table 3.2 : Prncpal reasons for not usng new powers to stop drect payments Reason New powers not yet requred/no approprate cases Authorty s n the process of developng necessary polces or procedures Dffculty n fndng suffcent evdence to justfy stoppng drect payments Authorty uses other exstng powers to combat landlord fraud Authorty lacks resources to carry out necessary nvestgatons Authorty s currently takng legal acton n relevant case(s) Percentage of authortes mentonng ths reason 64 Base number of authortes 256 4 9 9 4 4 A number of other reasons were gven but were mentoned by fve or fewer authortes: Authorty has current polcy to pay clamants rather than landlords Lack of a sutable computer system to support mplementaton Local authorty s currently gong through re-organsaton Concerns about consequences of labellng a landlord `not ft and proper' Vew that new powers are not `new' but renforce exstng powers. There are a number of observatons that can be made about Housng Beneft managers' explanatons for not usng the new powers. We have already mentoned, n Chapter, that the tmng of the survey has very lkely had a consderable nfluence on the results. The fact that an authorty had not stopped any drect payments n the frst sx months snce the powers were ntroduced does not mply that t vews them as beng of margnal use. As the responses n Table 3.2 show, there were a number of reasons whch suggest that use would be made n the (possbly near) future - for example, where an authorty s currently developng polces and procedures, or s dealng wth a reorgansaton. Some other authortes were dealng wth problem landlords n other ways. What s more puzzlng, at frst sght, s the number of authortes whch reported that they had had no use for the new powers up to the tme of the ntervew. The tmng of the survey may help to explan ths apparent anomalous response. Local authortes must apply the `ft and proper' test to clams where the landlord's probty s n queston. New clams n relaton to propertes from such landlords should have prompted authortes to nvoke the test. However, there may have been few or no such clams between November 997 and the research ntervew. Although local authortes can use the new powers at any tme n the lfe of a clam, the renewal stage of a clam should also prompt authortes to consder stoppng exstng drect payments to possbly unsutable landlords. However, the tme for whch a Housng Beneft award s made s for the local authorty to decde. Most clamants wll not 5
be requred to make a renewal clam for at least sx months after the last award. It may be therefore that many of the cases to whch the `ft and proper' test mght be appled were not due for reconsderaton n the sx months snce November 997. Some of the reasons for not usng the new powers are more closely lnked to the nature of the powers themselves rather than the tmng of the survey. Examples nclude Housng Beneft managers' concerns that labellng landlords `not ft and proper' would create problems for them, dffcultes n fndng suffcent evdence, and the comment that nsuffcent resources were avalable to nvestgate approprate cases. These reasons were not mentoned by many authortes but may be amenable to some form of polcy response. The observaton that the label `not ft and proper' may be perceved as pejoratve or, worse, defamatory was also made by some managers ntervewed n the development stage of the project. The pont was also made by a number of managers n the development stage that t was perhaps msleadng to consder ther use of the new powers n solaton from the other means at ther dsposal for respondng to actual and suspected landlord fraud. In some cases, other acton, such as stoppng the clam altogether rather than just stoppng drect payments, was more approprate. It was often the case that where a landlord was nvolved n a fraud there was also a suspected clamant as well. Some vewed the new powers as useful n a lmted range of crcumstances rather than n every suspcous case. Stoppng drect payments was one way of preventng overpayments to landlords who were known to be unrelable n repayng Housng Beneft debts to the authorty or unrelable n reportng changes n clamants' crcumstances (partcularly when a tenancy has ended). However, even n these crcumstances some authortes expressed the vew that some of the other new powers contaned n the Socal Securty Admnstraton (Fraud) Act, for example to recover overpayments from awards to other tenants, would probably prove more useful n reducng and deterrng fraud. Potental need for new powers Notwthstandng the dscusson n the prevous secton, the level of use of the new powers does appear unexpectedly low compared wth the apparent sze of the problem of fraudulent landlords. Tables 3.3 to 3.5 attempt to put the number of landlords suspected of beng fraudulent nto perspectve. Table 3.3 presents data on the number of landlords recevng drect payments n each authorty. Table 3.4 shows data on the number of landlords suspected of beng fraudulent by the Housng Beneft managers ntervewed, and Table 3.5 combnes the nformaton from 3.3 and 3.4 to show the proporton of suspected landlords. The ntenton of presentng the data n ths way s to demonstrate that, n most local authortes, fraudulent landlords represent a relatvely small secton of the prvate rented sector. 6
Table 3.3 : Analyss of the number of landlords recevng drect payments (278 responses) Number of landlords recevng All authortes drect payments No. (%) -250 25-500 50-000 over 000 86 67 63 62 Base 278 (3) (24) (23) (22) Table 3.3 shows clearly that most authortes are payng Housng Beneft drectly to hundreds or, n many cases, thousands of landlords. These large numbers contrast wth the relatvely small number of landlords suspected of beng fraudulent by local authortes, as the rghthand column of Table 3.4 shows. Table 3.4 : Analyss of the number of landlords suspected of beng fraudulent Number of landlords Local authortes who Local authortes who All authortes recevng drect payments suspected of HAVE used new powers HAVE NOT used new powers (column % n brackets) beng fraudulent No. (%) (row %) (row %) Zero 3 87 90 (36) -0 5 85 02 (40) -20 2 88 25 (0) over 20 26 74 9 (8) Number of authortes 39 23 252 Table 3.4 shows that over three-quarters of local authortes reported that they had ten or fewer fraudulent landlords n ther areas. Over a thrd of authortes reported that none of ther landlords were fraudulent. The fndng that some authortes (2) who reported no fraudulent landlords also reported that they had used the new powers s at frst sght contradctory but can possbly be explaned by the tmng of the survey. At the tme of the ntervew t s feasble that a local authorty had current dealngs wth no fraudulent landlords but had done at some pont n the prevous sx months. The evdence cted n Chapter 2 that some landlords have stopped takng beneft recpents as tenants or had evcted tenants supports ths possblty. The table also shows that among those local authortes wth the hghest number of fraudulent landlords, use of the new powers was greater than n the other authortes. Among the local authortes n the `over 20' category, were 9 authortes reportng over 40 fraudulent landlords. I 7