How Landlords are Siphoning Millions in Unearned Service Charges from the Welfare State
A new investigation by SHAC reveals a systemic failure in the Housing Benefit system, allowing landlords to overcharge the taxpayer by millions of pounds while the government looks the other way.
Download the report:
It is a common myth that service charges — those extra payments for services like communal cleaning, lighting and heating etc. — only affect leaseholders. The reality is that many full tenants also pay these fees, either as a discrete payment or bundled into their rent.
For approximately half of the households facing these costs, the bill is picked up by the local authority through Housing Benefit. But who is checking the figures?
To find out, SHAC submitted Freedom of Information Act (FoIA) requests to over 200 local authorities asking how they verify these charges. The results are a damning indictment of a system that is wide open to abuse.
A License to Overcharge
We already knew that service charge abuse is endemic. Our 2025 review of First Tier Tribunal decisions found a staggering 63% overcharging rate. When the landlord was a housing association, this jumped to 66.7%.
Download the report:
Despite this, the government remains fixated on reducing the benefits paid to individuals — particularly disabled claimants — while ignoring industrial-scale abuse of the system by landlords.
SHAC and others have submitted a mountain of evidence to the Ministry of Housing (MHCLG) and the National Audit Office (NAO), yet the seep of public funds continues unabated.
The Scrutiny Gap
In 2025–26, the government spent approximately £37.8 billion on Housing Benefit. Our research shows that while councils check if a service is eligible for a claim (for example, communal lighting is allowed but personal heating is not), they almost never check whether the service actually exists or whether the price is fair.
A council might reject a claim for a tenant’s private boiler, but it will not check for an illegitimate charge for lift maintenance in a building where no lift exists.
Why the System is Failing
The current framework is (deliberately) built on a series of false assumptions. The first is the myth of the ‘honest landlord’. Councils assume that landlords are ensuring accuracy. They aren’t. In one case study at Goldpence Apartments, residents found that 54% of expenditure (totalling £592,432 in charges) had no supporting invoices.
The second is the regulatory black hole. Councils assume that the Regulator of Social Housing (RSH) oversees service charges. It doesn’t. The RSH looks at corporate accounts, but there is currently no service charge standard against which landlord performance on service charge accuracy is measured, or by which landlords are held to account. The RSH also only covers social housing tenants, not private landlords or leaseholders of any tenure.
Thirdly, we have the disincentive trap. Councils expect tenants to scrutinise the items the landlord is charging for and report any that are factually inaccurate or overstated. However, for tenants on benefits, the system is rigged against them.
If a tenant reports an overcharge to the council, their benefit payment might be reduced, but the landlord may still demand the full original amount. This leaves the tenant to cover the shortfall out of their own pocket for a service they never received.
Disgracefully, and particularly highlighted in Michael Savell’s case study which is used in the research, there is no legal mechanism forcing landlords to pay back the overpaid public funds to the council. His landlord, Southern Housing, claimed at one point that the council needed to formally request the money from them, even after Southern had admitted the overcharging.
SHAC Calls for Action
Scrutinising even a single set of accounts for a single year involves a significant investment of time and resources. It is unreasonable to expect overstretched council employees to detect every instance of fraud or overcharging. Instead, the burden must shift to the government.
SHAC is calling on the National Audit Office (NAO) to launch a full investigation into service charge abuse within the Housing Benefit system.
We need decisive action to end this systemic financial abuse. The government must stop penalising the vulnerable and start recouping the millions of pounds being siphoned off by non-compliant landlords. See more about SHAC’s End Service Charge Abuse campaign here.
13 April 2026
If you have a WordPress account, get notifications about new articles by subscribing below:
Our block is mostly shared ownership, while most of us are not on benefits, we are not even able to obtain the invoices for what we are charged. Even with the ombudsman involved, there is no possibility for us to even access where we are overcharged. It‘s a completely reductions system! We are paying our Estate Manager enormous amounts with no clue what so ever what we are paying for. What business would be allowed to do that? – only Estate Managers Are allowed to be not accountable. I would really appreciate it if you could add that point.
You left out the part where the council ARE the landlords.
The article is relevant to all landlord types, rather than being specific – you are right that the scandal applies to all. At least when the council is the landlord, the money is recycled back into the public purse, unlike when it is a housing association or private landlord. That’s the main difference.