The mainstream media is curiously quiet about the practice of sub-letting: where tenant X rents a property at a substantially discounted rate - typically, from the local council - and then finds a sub-tenant Y who pays them less than the commercial rate but more than the discounted rate. X makes a profit of close to 100% of the differential. If the local rent for a 2-bedroom apartment in Camden is £2400/month and tenant X gets a council rate of 30% of that value, tenant X is paying £720/month and could easily charge tenant Y £1560/month, for a monthly profit of £840. The council - or rather, its taxpayers - are spending £1680/month for zero social benefit. Meanwhile, tenant X and tenant Y are laughing at them.
The effect of this phenomenon obviously depends on its frequency. If 1 in 1000 council tenants sub-let, this is too small to worry about. If 1 in 10 tenants sub-let, this rises to a significant level of concern.
Google found a very interesting study from 2012:
In 2,120 cases, 8 per cent of the total, HJK found "red" indicators of fraud, where the registered tenant had a mortgage, bank account, active credit or utility bills at another residential address.In the light of the Grenfell fire, where the "rumblings" were that a significant number of tenants were sub-letting and hence it was difficult to identify who was missing and who was not, you'd have thought that there would have been more interest from the London councils in identifying illegal sub-letting - apparently not, though...
In 3,180 cases, 12 per cent of the total, they found "amber" indicators of fraud – active credit, bank accounts, Sky TV or utility bill records held by a person with a different surname at the tenancy address, but no such activity there by the registered tenant.
How to fix this? The first step is to find people who are being sub-let to but are unaware of this fact (their landlord is tenant X). Every council knows which properties it is providing at sub-market rates. Have a major cross-London publicity campaign with letter mailshots to "Occupier, <ADDRESS>" at each subsidised house; each letter says
we believe that you are tenant X and are currently paying £YYY/month to the council. If tenant X is not living at this address, please provide evidence of your current rent payments to them and we will accept you as a social housing resident instead of them, at that payment level. If you do not do this, and we subsequently find you, you will be evicted with no notice and we will impose a fine of £ZZZComplying sub-letters get a year of their current rate, then council has discretion to ratchet up the rent significantly above rent inflation (say, 3x).
Second step: exclude most innocent council tenants. Each 6 months, random visit from a council member. They provide their ID and ask to speak to tenant X face-to-face. Crucially, they don't arrange follow-up appointments - if they can't speak to X on the day, they call back one day in each of the next 2 weeks - but they do follow suggestions about what time of day is good to catch X. If they don't speak to X within 2 weeks, X gets a black mark.
Black-marked tenants then shift to being the subjects of active detection:
- Inspect the mail going to that address: how much is addressed to X, how much to someone else? Check with utilities, specifically TV and mobile phone companies.
- If there's significant evidence of sub-letting then bring in the police, enter and inspect the property, illegal sub-letters have their property seized.
- Councils publish a bulletin every 6-12 months - sent to "Occupier, <ADDRESS>" at all subsidised housing - with statistics of sub-lets detected and seized, and the amount of money saved.
- Active publicity to residents in the same building: "do you know of illegal sub-letting in your building? Provide evidence to us at <EMAIL> and be eligible for a reward up to £5000, no questions asked.
Coming back to the root cause, though - why aren't councils more interested in detecting illegal sub-letting? It's direct theft from them, and not small amounts either. If Geraldine in accounts snaffled £10K with invoice fraud over 12 months they'd happily throw her in jail and trumpet the detection. Why aren't they similarly vocal about the sublet fraud by Darren and Beyrooz which is ratcheting up a similar loss rate? Is it just too much hassle? Is this a classic example of P. J. O'Rourke's classification of "other people's money spent on other people" - you don't care how much is being spent, and you don't care whether the receivers are getting value for money, as long as you're getting your regular salary and don't have to work too hard?