Unscrupulous landlords are costing taxpayers millions of pounds by fraudulently claiming housing benefits for so-called ‘ghost tenants’, it has been revealed.

According to a report in The Guardian, criminal gangs are among those acquiring low-cost properties with a view to converting into housing for vulnerable people, in some cases claiming welfare payments for tenants who do not live there.

Police have said that owners of a collection of these properties are making up to £500,000 a month by providing supported exempt accommodation for people such as care leavers and domestic abuse survivors.

It has now emerged that some landlords are also claiming housing benefits for people who have moved out of the property, or never existed in the first place, known as ‘ghost tenants’.

It has been reported that on one street in Birmingham almost a quarter of the properties had been converted into exempt accommodation for vulnerable people, yet at least three were found to be ghost tenancies and a fourth was a cannabis farm.

Shabana Mahmood, the Labour MP for Birmingham Ladywood, said: “Rogue providers have found a new way to defraud taxpayers of cash – by inventing ‘ghost’ tenants and claiming enhanced housing benefit for supporting them. In one property in my constituency, housing benefit was being paid in support of a property growing cannabis. Taxpayers were paying criminals to grow drugs. This scandal must be stopped.”

Supported exempt accommodation refers to properties housing people who require care or supervision and can include care leavers, homeless people, refugees and those fleeing domestic abuse. Those who operate this accommodation are able to claim a higher rate of housing benefit for their tenants in order to provide this support. However, concerns have been raised that some providers are exploiting the system and leaving vulnerable residents with no help.

Birmingham city council said it had recovered £4.9m in wrongly claimed housing benefit from supported exempt accommodation landlords. More than 3,000 housing benefit claims have been cancelled in the city after being paid when they should not have been.

In recent years Birmingham has become a hotspot for exempt accommodation and this type of benefit fraud, but experts have said it is difficult to obtain a national picture because of a lack of data.

The number of exempt accommodation claimants in the city increased from 3,679 in 2014 to nearly 22,000 last year.

Matt Downie, chief executive of housing charity Crisis, said it hoped a private member’s bill by the Conservative MP Bob Blackman would help close the loopholes in the system.

He commented: “It’s an abhorrent practice, taking advantage of a system that’s in place to support people who might have complex mental health needs or fleeing domestic abuse. We’re looking forward to the day – hopefully very soon – where these rogue landlords are ousted from the system.”

A cross-party group of MPs raised the alarm about this “gold rush” of taxpayers’ money last October, saying rogue operators were getting rich while putting vulnerable people at risk.

West Midlands police said in evidence to MPs last year that it had seen an “explosion” in supported accommodation in Birmingham.

It said there were 22,500 beds in these houses of multiple occupancy, costing the public £5m a week if all were occupied, and said operators were “providing very little in terms of support, and in fact contributing to various forms of harm and abuse”.

There were an estimated 153,000 households in Britain living in exempt accommodation in 2021, according to the housing charity Crisis, although government figures from 2016 put the figure at 233,000.

Guy Chaundy, the assistant director of housing strategy at Birmingham city council, said: “Ghost tenancies are yet another reason why the government needs to commit to urgent reform of the sector and we are looking to the social housing regulation bill and Bob Blackman’s private members bill to provide that.”

A government spokesperson commented: “It is unacceptable that unscrupulous landlords are trying to profit at the expense of vulnerable people and exploiting the housing benefit system. That is why we are backing legislation that will give councils more powers to enforce higher standards and, where needed, ban poorly performing landlords.

“This is backed by a £20m investment, including more than £3m for Birmingham, to drive up quality in the supported housing sector and protect the most vulnerable in society.”