16.The availability of publicly-funded discounts has provided an incentive for fraud and abuse since the original Right to Buy was introduced in 1980. An example of fraud would be an applicant lying about their identity or eligibility for a discount, for instance by claiming to have lived continuously at a property, having in fact been illegally sub-letting it. Abuse includes third party lenders providing finance to eligible tenants to enable them to access the discount, and then taking over ownership of the property, potentially leasing back the property to the original tenant. The Department observed that it was difficult to draw a dividing line between sharp practice and outright fraud, and said that any such forms of exploiting the system were not easy to eliminate.
17.We heard evidence that these risks had grown in recent years, along with the size of the discounts under the reinvigorated Right to Buy: the bigger the discount, the bigger the incentive to profit from it dishonestly. Lord Kerslake estimated that, taking account of inflation, the real value of a Right to Buy discount had risen from £30,000 for a house in 1980 to up to £103,900 today. The Chartered Institute of Housing said fraud was a big and growing problem, stating that in 2014 the Audit Commission had estimated the losses at £12.3 million per annum, a five-fold increase since 2009–10.
18.The Department said that work had been done to address fraudulent applications, and that it had worked with the Financial Conduct Authority to clamp down significantly on sale and lease-back arrangements with third party lenders. The Department added that it was looking to the current pilots of the extended Right to Buy to provide more information about this situation, and what could be done to deal with it, including estimating how much was being lost to people exploiting the system. Other witnesses paid tribute to the pilots as a valuable and constructive exercise, with the National Housing Federation discussing a series of application checks that were being developed. At the same time, Lord Kerslake stressed that the vetting processes being developed, including interviews with each applicant, could make demands on the capacity of housing associations, and that whatever processes were finalised would have to work at scale once the scheme went live. The Chartered Institute of Housing agreed that vetting procedures were resource-intensive, and said its members were already struggling to cope with the increase in applications under the reinvigorated Right to Buy.
39 National Housing Federation paras 1.1–2.3.4;
45 National Housing Federation paras 3.1–4.2;
Prepared 26 April 2016