Rent refunds for overcharged tenants could reach £3.5m
Crawley Borough Council is having to return overpayments
Refunds to council tenants overcharged on their rent could see Crawley Borough Council handing back some £3.5m.
The figure, shared by deputy CEO Ian Duke, is only a rough estimate and it will be a couple of weeks before firmer numbers are made available.
Some 1,700 council tenants are thought to have been overcharged by around eight per cent since the rent system changed from a 48-week year to a 52-week year in April 2014.
The refunds will be paid from the Crawley Homes housing revenue account and will not affect any services offered by the council or lead to any need to make cuts or savings.
Mr Duke said: “Crawley Homes has a separate finance for their housing revenue account. Each year there is a surplus which we then use to purchase or develop new properties.
“It’s not going to affect repairs, maintenance or anything else.
“There will be a little less money in there – but it’s money we shouldn’t have had.”
As well as receiving a refund, the affected tenants will see their rent reduced to the correct amount.
The refund only applies to people who became council tenants after April 2014 and are living in homes built before 2014.
It does not apply to those who were tenants before 2014 or those living in new builds such as Forge Wood, Bridgefield House, Lonsdale Court and John Brackpool Court, as no error was made in working out their rents.
Mr Duke explained that the error came about when Universal Credit was introduced.
Before then, tenants paid their year’s rent over 48 weeks rather than 52 to give them ‘rent holidays’ during the summer and at Christmas and Easter.
This had to change when Universal Credit came along, to make sure the rent system and the credit system could work together properly.
Mr Duke said: “All the actuals were done right – but there is a separate calculation on our housing system called Target Rent, which is something the government insists on because they are trying to keep rents consistent across each region.
“When we made the change, the Target Rent figure wasn’t changed to the 52-week year rent.
“What that meant was that the new rent was set at 52 weekly payments but at the 48-week rate, which meant that there was an eight per cent increase.
“It was simply that one change which has accrued over time. It was just not seen.”
Mr Duke said the problem came to light earlier this year after the council underwent a mandatory data check by the Regulator of Social Housing ‘for the first time in many years’ and one of the things looked at was the Target Rent.
When asked if there would be any fall-out on the council due to the error, he was confident this would not happen, especially given that the authority was voluntarily putting things right.
Mr Duke added: “We’ve been working actively with them. Everything we have had says they are really pleased with how we’re doing it – they recognise the challenges involved.
“We’re having to do things that no one has designed before to put this right.”
The regulator is keeping a ‘watching brief’ on the council’s progress and receiving regular updates.
Letters have been sent out to every tenant affected – and the council will also make efforts to track down former tenants who may be due a refund.
Another letter will be sent during the week commencing November 15 including details such as the size of the refund and whether tenants need to take any other action – though most won’t.
Mr Duke said the council was working with the Department for Work and Pensions regarding tenants who receive Universal Credit.
And housing benefit will be taken into account before any refund are given.
He added: “For most people there won’t be anything for them to do. But any steps that are needed for some will be laid out very clearly in the next letter.”
The first refunds are expected to go out from Monday, though more complex cases will take a little longer.
The council has around 8,500 tenants and ‘the whole focus from the word go’ has been on putting things right for the 1,700 or so who have been paying too much.
It has apologised unreservedly for the error.
Ian Irvine, cabinet member for housing, said people would be ‘working their socks off in the coming days and weeks’ to put things right.
An automated phone line has been set up – 01293 438288 – but all information needed by tenants will be in their letters.
Tenants have also been urged to beware of scammers who might possibly attempt to target them about the refunds.
A report into the overcharging is due to be put to a meeting of the cabinet on November 24 and then to a meeting of the full council on December 15.
Both meetings will be held at the Charis Centre, West Green Drive, starting at 7pm and 7.30pm respectively.