COUNCIL house fraudsters who let out their homes at a profit could face a tougher crackdown under new Government powers.

Oxford City Council has welcomed Housing Minister Grant Shapps’ announcement that he wants to make sub-letting council homes a criminal offence, saying it had only “scratched the surface” of the problem in the city.

Since March 2010, 15 council-owned properties have been taken off their tenants and put back on the market, after investigators found they were being sub-let.

Currently, another four tenants have been notified of the council’s intention to take action, and in four other cases investigations are about to come to an end.

And the council said it was investigating another 40 cases of possible fraud across the city.

While sub-letting council flats is not currently a crime in its own right, tenants who do it are likely to be committing fraud and breaching their agreement with the council.

The cost to the taxpayer of denying genuine claimants a council house by sub-letting it is estimated to be between £37,000 and £75,000 a year.

There are 6,000 people on the housing waiting list, but just 600 social housing properties become available in the city each year.

The average weekly council rent for a three-bedroom house is £85.62, compared to about £290 privately.

The city council’s investigations manager Carol Quainton said that in half of the cases they investigated, tenants were also scamming the benefits system.

She said: “A typical situation would be people claiming benefits as if they were living in the property, but actually sub-letting it.

“The issues we have as a local authority is that everything is being labelled as tenancy fraud, but there are lots of different types within that.

“We are coming across situations where there tenant is no longer resident, but their relatives, grown up child or offspring are living there.

“We are scratching the surface at the moment.

Council investigators cross-reference their records with utility companies, the Royal Mail and online property agencies when suspected fraud is reported to them.

They can also use surveillance powers under the Regulation of Investigatory Powers Act.

Ms Quainton added: “The announcement the Government has made is definitely a way forward, and will mean the prosecution of more people.”

Mr Shapps also announced that council home tenants earning more than £100,000 a year would be forced to pay closer to the market rent.

This follows criticism of rail union boss Bob Crow, who still lives in a council flat despite earning an estimated £140,000.

But the council’s deputy leader Ed Turner said cutting down on fraud and making rich tenants pay more were Government “red herrings.”

He said: “Illegal sub-letting is a serious issue.

“It should not distract from the fact that the real issue is the shortage of council and other social housing.”