The Lambeth walk of shame
Major fraud, poor repairs, late billing, staff failings, overspends, deficits and cuts - since 2005 Lambeth’s housing department has lurched from one crisis to the next. Clara Story charts the council’s dance towards a £37 million disaster and asks whether it can finally get back in step.
One scandal in a housing department could be considered misfortune, but the litany of them at Lambeth Council looks like carelessness. In recent years the south London borough has staggered from one housing crisis to the next, beginning in 2005 when a crooked housing officer pulled off a £2.9 million fraud and ending with the council being up to £37 million out of pocket.
In 2007 the council alleges £200,000 worth of housing repairs by contractor Axis were found to be unacceptably poor, and it severed ties the following year. (Lawyers for the contractor are currently ‘in negotiation’ with the council, says an Axis spokesperson.) The council’s leasehold department has still not billed residents for £10 million worth of capital building work completed between 2000 and 2006. Last year it emerged that the council had overspent its 2007/08 homelessness accommodation budget by £6 million, which could grow £13.5 million by April. And to cap it off, the council has been forced into desperate measures to tackle a potential £8.9 million housing budget deficit by March 2009: last week Lambeth agreed a huge 17 per cent rent rise, believed to be the highest in the UK.
In a highly politicised borough, where the former Liberal Democrat administration blames the current Labour council for the budget failures and vice versa, what really went wrong in the housing department – and has it finally got its act together?
Fancy footwork: Operation Ruby
In 2005, a tip-off from a contractor alerted Lambeth that a convicted fraudster was working in the housing department. A police investigation code named Operation Ruby revealed some evidence he had set up a bogus heating company and he is alleged to have convinced the council to make a series of £100,000 payments to it, totalling £2.9 million. After questioning by auditors, the man is said to have fled with the money, was arrested the following year. He has not been charged and remains on bail and under police investigation.
A report by Pricewaterhouse Coopers found that the council had failed to follow its own anti-fraud checks, and executive director of housing Stewart Holton left the council in the wake of the scandal. Lead member for housing Keith Fitchett also resigned in protest at Mr Holton’s treatment.
Chris Lee, executive director of housing, regeneration and environment since 2006, says: ‘We have frozen his assets to recover our money and the insurance claim covers most of it.’
Cost: £2.9 million, retrieved on insurance
Cock-up cause: anti-fraud procedures ignored
In a spin: temporary accommodation budget
At the end of the 2008 financial year, the housing department told councillors it had overspent its £11 million budget for homelessness accommodation by £6 million, and projected a further overspend in 2008/09 of £7.5 million.
The council had leased too much private housing for a declining number of homeless people. In 2007/08, 42 per cent of the stock was standing empty. Lambeth’s head of homelessness, Russell Hudson, left the council in the middle of last year.
The council pins the blame on a ‘high-risk’ contract with housing association Amicushorizon Group to run its temporary leasing, which the Liberal Democrat administration signed in 2003. The association says it was simply responding to council instructions. Since the deal ended a year ago, the council has reduced its void levels from 180 homes to 42.
Compounding Lambeth’s budget woes, a damning report by three councillors found that the authority had ignored central government homelessness funding cuts, announced in 2006. The 2008 report branded the housing department ‘reckless’.
‘It is hard to understand how, when such a fundamental point was not integrated into the planning or the response of the department, members can have any confidence in its more detailed workings,’ the report states.
The Liberal Democrat opposition had a field day. ‘This is a detailed report on the failings of Labour-run Lambeth and the biggest loss of money in the council’s history,’ thundered leader of the opposition Ashley Lumsden at the time.
The councillors’ report also said the housing department had failed to monitor billed repairs to temporary accommodation properly, leaving it ‘exposed to the risk’ of fraud.
Mr Lee says Lambeth’s internal audit team found no evidence of fraud, when it carried out extra checks on the department in response to the commission’s recommendations.
Last summer a council spokesperson confirmed it had inspected 54 properties and found £200,000 worth of repairs completed by Amicushorizon contractor Axis were not up to scratch – in fact just six properties were ‘completed to a standard where they could be paid [for]’.
A spokesperson for Axis says the company ‘is unable to comment on a case that is currently going through arbitration’. He adds that Axis maintains a ‘strong relationship’ with Amicushorizon.
Cost: potentially £13.5 million, plus £200,000 worth of substandard repairs
Cock-up cause: too many homes leased and incompetent budgeting
The price of a dance: housing revenue account
In September last year the council revealed its HRA was expected to run into a massive deficit by the end of this financial year in March – the latest estimate is £7.4 million.
Lambeth switched from a Lib Dem to a Labour-run council in 2006, and the current administration blames the shortfall on historically low rents – the third lowest in London before service charges – along with a smaller government settlement and poor rent collection.
One councillor says that because Lambeth changes political hands regularly, ruling parties may have avoided raising rents for fear of alienating voters.
The current council also blames a housing department reshuffle in 2004/05 by the previous administration, which was supposed to save money but mostly failed, current housing boss Mr Lee says.
‘The HRA was living beyond its means, with a number of assumptions that were made by business plans that weren’t working,’ he says.
Officer failings in 2007 also cost the council dear. Mr Lee says one officer miscalculated rental income, meaning a lower government subsidy. Another failed to send out invoices to leaseholders totalling £2 million before the financial year end. Both officers have now left the council.
In fact, a lot of Lambeth housing officers have left in recent years, suggesting a none too healthy organisation, and certainly one lacking consistent leadership. When Mr Lee took over the department in autumn 2006, the posts of finance director, head of housing management and head of properties were all filled by temporary staff , and several other staff remained suspended over the 2005 fraud.
At a time when tenants were concerned about the running of the department, only one permanent senior manager was in place – divisional director of housing Mary Lynch, who left in November 2007.
‘The whole of my management around housing had gone, either resigned or disciplinary action had been taken,’ Mr Lee says. ‘It was a difficult place to come into.’
Richard Hornby, the current finance director, joined in January 2007 and a new divisional director of housing, Rachel Sharpe, joined last week from neighbouring Southwark Council to finally replace Ms Lynch.
Cost: £7.4 million
Cock-up cause: low rents, inefficient department, officer incompetence.
Out of step: TMOs and ALMOs
To cope with the HRA deficit, the council announced it would cut its management fees it pays the borough’s 14 tenant management organisations by £4.5 million over the two years to March 2010. In 2009/10 it will also shave £2.6 million from payments to new arm’s-length management organisation Lambeth Living, which launched in July. The ALMO will axe about 55 jobs as a result.
Many people now question the ALMO’s chances of gaining a two-star rating from the Audit Commission, crucial to bagging £240 million of decent homes funding. Performance ratings for the ALMO’s services are lacklustre, with a customer service centre response rating hovering at 45 per cent.
But Mr Lee says he is confident that the ALMO will cope. ‘Making savings isn’t incompatible with achieving two stars,’ he says.
The Audit Commission is due into Lambeth Living this week for an ‘advice and assistance’ inspection – its inspection proper is due early next year – so an independent picture will soon emerge.
Meanwhile a group of TMOs is planning legal action against the council over the cuts. A member of Blenheim Gardens TMO says: ‘This will sink us financially, if not this year then next year.’
To complete the problems facing both the TMOs and Lambeth Living, suspicions of fraudulent activity have surfaced recently.
Lambeth Living’s chair Asuman Ozkan was forced to resign in December after she was arrested and bailed on suspicion of obtaining property by deception. The allegations relate to a time before she took the post.
And at the council’s corporate committee on 15 January, a report described incidents of suspected TMO fraud since April 2008 – one of which culminated in Holland Town TMO’s contract with Lambeth Living being terminated. The TMO has since folded.
Five Lambeth tenants have been charged with property-related deception, the report adds – one of whom was a Lambeth social worker who resigned during the police investigation into the matter. She obtained her property by deception and attempted to purchase it using the right to buy, and was handed an 80-hour community penalty.
The defunct Holland Town TMO is also under investigation after a suspicious cheque passed through its bank account. The cheque, originally for £52, appeared to have been copied and the amount changed to £42,000.
Cost: £4.5 million cut from TMOs, £2.6 million from Lambeth Living
Cause: The HRA deficit, alleged fraud
Taking a tumble: effect on tenants and leaseholders
Perhaps unsurprisingly tenants and leaseholders are less than impressed with their lot. In September the council raised service charges for heating and hot water by 65 per cent, and the authority has now voted to raise rents by 17 per cent from this April to tackle the HRA deficit.
This brings rent up to an average £84.86 a week, which rises to nearly £100 a week when service charges are included, says Jean Kerrigan, chair of the Brixton Area Forum.
At the council meeting last month, tenants filled the public galleries waving protest posters and heckling lead councillors with cries of ‘shame on you’.
Ms Kerrigan spoke on behalf of tenants, saying that the 40 per cent of tenants not on housing benefit would be hit hardest. ‘The agenda is clearly to make tenants pay for the council’s mismanagement,’ she said at the meeting. ‘A council led by Labour particularly should not be pushing those tenants into benefit.’
But cabinet member for housing Lib Peck says the only other option would have been cutting £9 million from the repairs budget.
‘[The tenants’ anger] is understandable. It isn’t a position we want to be in, but I am certain it is the right choice,’ she says.
Leaseholders are also dissatisfied with the council. A poor record of billing leaseholders for capital repair work to homes has led to a backlog of £10 million worth of unpaid work to homes between 2000 and 2006.
The leasehold department has recently billed leaseholders for £6 million of this – up to nine years late – in a plan referred to as ‘Project 500’. Officers admit the other £4 million is irretrievable, as council paperwork is missing.
Mr Lee says the leasehold service is being revised. Of the extreme lateness and the loss of the paper-trail, he says a departmental organisation was to blame. ‘The leasehold service is not an excellent service,’ he admits.
One leaseholder says the council has often sent incorrect or late bills, and many older tenants ‘live in terror’ of them. ‘Because of the mess caused by the HRA mismanagement and the [homelessness budget], leaseholders are now told that there is no money available to allow for any leeway in repaying bills, often up to £20,000,’ she says.
Cost: 17 per cent rent rise, £6 million in backdated bills for leaseholders
Cock-up cause: The HRA deficit and officer incompetence
TOTAL COST: up to £37.1 million, plus a 17 per cent rent rise
Hot to trot?: the future
So after the fraud, the incompetence, the soaring rents, the poor repairs – is Lambeth finally getting a grip on its housing?
Residents are angry, but some now feel action is being taken to get back on course.
Many managers have gone, the council has a hard line on fraud and the HRA and homelessness budgets are forecast to fall in line at the end of next year – even if many more tenants will be on housing benefit by then thanks to the recession.
Ms Peck says the establishment of Lambeth Living has helped ‘put the spotlight on some of the facts and assumptions’ made by the housing department. ‘That is why this year we have exposed some of the long-term problems with the HRA which weren’t so obvious to us,’ she says.
The council is now setting up a housing advisory panel – made up of council leader Steve Reed, Ms Peck and a third Labour councillor Sally Prentice – which will keep a close eye on all aspects of the housing department. And Mr Reed was recently handed the housing brief at lobby group London Councils.
Mr Lee believes the future is brighter. ‘Now we have got the HRA stabilised and the temporary accommodation budget, we are much more confident about the future. You can’t go anywhere without a sound financial position, and now that is sorted,’ he says.
But Lambeth promised to improve before – most notably after the 2005 fraud – and most tenants will be watching out for results, not words.
Lambeth’s council chamber looks a lot like a criminal court, and when Ms Kerrigan spoke at January’s meeting, it was as if councillors were on trial. ‘Tenants will certainly remember [the rent rise] next time they cast their vote,’ she warned.
The tenants in the full public gallery above cheered, applauded and waved their placards. Come the local elections next year, Labour must show it has made dramatic improvements – or it could be going down for a long stretch.