A Newham Council staff member “manipulated” its housing system to give 35 homes to people ineligible for them, the Town Hall has revealed.
The council says it uncovered the “serious internal housing fraud” thanks to a whistleblower.
It said the housing officer suspected of the fraud “immediately resigned” after being confronted.
A council spokesperson said it was now “working with the police to pursue a criminal investigation”.
However, the Metropolitan Police said there was “currently no active polive investigation”.
The council spokesperson said: “We can confirm that after our fraud team was contacted by a whistle-blowing member of staff reporting apparent malpractice by a housing officer, an internal fraud investigation was launched by the council.
“When the housing officer was confronted, they immediately resigned.”
They added: “The council is working with the police to pursue a criminal investigation.
“In the meantime, the council is seeking to recover 35 social homes that we believe may have been inappropriately let. This is a live legal case, and we cannot comment further.”
The allegation of “serious internal housing fraud” was revealed in a report on the council’s anti-fraud work.
The report alleges the member of staff “manipulated housing allocation systems to improperly assign 35 properties intended for use as temporary accommodation to ineligible individuals”.
The discovery comes as the council faces a temporary accommodation crisis.
Temporary housing is allocated to families and vulnerable people to prevent them becoming homeless. The council has seen a sharp rise both in the number of people seeking such accommodation and in the cost of providing it.
Newham has the highest number of people in temporary housing in England – more than 7,500 households – costing the council some £100 million a year.
This is expected to grow by £12.8m next year and rising to a total of £140m by 2028.
The council also said the availability of suitable, affordable homes in Newham was “insufficient”.
Council leaders agreed last month to house more people seeking temporary accommodation outside the borough.
The new policy says people with “a clear need to remain within commuting distance of Newham” could be placed up to 90 minutes away by public transport.
Others could be placed even further afield, including outside of London altogether.
Homes within the borough, or within 30 minutes by public transport, will be allocated to those “with a strong need to remain within Newham or the immediate local area, including residents with health issues or with vulnerable children in the household”.
