‘Lockdown’ is a model that can make £56,000 a year from public funds. But the scandal goes on

Highly organised gangs of rogue landlords are making millions every year out of the housing benefit system by enticing desperate local authorities to place single homeless people in micro-flats in shoddily converted and dangerous former family homes.

Three-bed houses, where the maximum weekly housing benefit for flat-sharers is under £100 a person, are being converted into as many as six tiny self-contained studios – as little as 10 sq m in size. Each then qualifies for housing benefit of £181 a week, enabling a landlord to squeeze £56,000 a year in rent from a property on London’s fringes, all paid from public funds. The £56,000 compares with the typical £6,200 annual rent on a three-bed council house.

A previously unpublished government report into a £700,000 project to tackle the scam, released this week under freedom of information laws, shows that councils are struggling to contain the spread of the “lockdown” model, which has taken hold in at least 12 London boroughs since 2015.

It warns of “well organised but unscrupulous landlords” profiting despite some councils – including Hackney, Bexley and Greenwich – launching prosecutions, raids and prohibition orders.

“Given available resources and the potential number of ‘rogue landlord’ properties, regulatory activity on its own would not solve the problem as long as the market was so heavily weighted to favour the supplier and the housing benefit rules allowed for high payments on such small conversions,” says the report. “Investors typically buy a three-bedroom house and convert it into six rooms, each with basic cooking facilities, in order to claim the maximum housing benefit rate.

“The lettings model was also being actively promoted as an investment opportunity amongst both existing landlords and, possibly, more widely. This has contributed to the strong growth of conversions using the model,” it says.

The report – obtained by local housing campaigner, Jon Knowles, after he appealed to the Information Commissioner – reveals “lockdown landlords” are exploiting planning loopholes created by the Conservative-led government in 2010.

“The basic premise […] was to convert houses into a large number of very small ‘self-contained’ units, each containing basic cooking facilities, but to also have a shared kitchen so as to be able to claim, for planning permission purposes, that the house was a house in multiple occupation and fell within permitted development rules,” it says.

Councils can apply to place restrictions on these rights but the report says only one councils in the project has managed to do so.

The converted flats, frequently approved by the landlord’s own private building control firms and electricians, are offered to homelessness services across the capital in need of rentals.

“The landlords often target local authority services which are looking for units when they accept either a full, or interim, homelessness duty for an individual. The landlords are aware that such individuals will be entitled to housing benefit, and are also aware how difficult it is for such services to locate suitable units,” it states.

Services from different areas regularly compete for the same properties, which can lead to “uncoordinated placements and clashes between the residents”. One incident resulted in a stabbing, and a woman living in one of these flats has been assaulted by other tenants. Checks by planning and environmental health officers are rarely carried out because homeless services are under such pressure to find rooms immediately.

“It was recognised that, with the shortage of units and the frequent emergency need for placements, the priority would often be to just get a person into some accommodation for the night.”

Housing inspectors found the micro-flats were often in very poor condition with inadequate fire safety provision and dangerously overloaded electrics and plumbing systems.

Neighbours complained of anti-social behaviour and feeling unsafe when there were influxes of often single men, with substance abuse and mental health problems .

Councils are reluctant to take a hard line because they fear it could make people homeless: “There were clear concerns about the model becoming too widespread and it was felt that changes did need to be made in order to contain its growth. However, it was accepted that these could not be wholly retrospective otherwise it would create a spike in homelessness.”

Lambeth council, whose officers coordinated the research project, says landlords using the model were still operating in the capital and that family houses were being divided up into micro-flats all the time.

“They are always being created to meet the demand for the lack of social and affordable housing,” it says.

Knowles fought to get the report released after he discovered a string of “lockdown properties” in his neighbourhood of Hanworth, west London. “I simply could not believe that you would be allowed to cram six bedsits into a former two-bed home,” he says.

Retired builder Gary Warren found himself sofa-surfing because he could not afford a deposit on a flat in west London. He thought his luck had changed when he found a letting company that accepted people over 35 and claiming benefits.

“I stayed with a few friends and then I found out about this company that rents flats out without a deposit if you are on benefits,” he says.

A letting agent showed him what they called a flat in Hanworth but it was actually a tiny room measuring just 10 sq m, including the toilet. He took it because he “had no deposit to put down on a private flat”.

Gary, who is 63, pays £980 for his room, which is mostly covered by his housing benefit.

The people in the four other flats are charged the same, which potentially earns the company £3,920 a month in rent.

“The length of my bed is the width of the room. I’ve got a wardrobe and fridge. So I have about 10ft by 3ft of space – it’s a corridor,” he says. “There’s no room for a chair, so I lay down all day. I don’t see anyone, so I don’t get any stimulation – I’m just stuck in this room.”

Water pours down the walls when it rains because the flat roof above him leaks. It got so bad over Christmas that the council moved him to a B&B as the room was uninhabitable. But Gary – who has had a stroke and is in the early stages of dementia – has carried on paying the rent because he needs somewhere to live. “It is robbery,” he says. “They are ripping off the council. Why are they letting it go on?”

•This article was amended on Sunday 14 January 2018 to correct the name of Mark Warren.

