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Housing benefit and ethnic cleansing

Losing your home is never niceThe problem

Reading the press this weekend we learn that

  • Boris Johnson has likened it to “Kosovo-style social cleansing” in the capital and has vowed to resist it.
  • An analysis prepared for him predicts a “50% increase in homelessness acceptances in the first year of the changes”.
  • Labour MP Chris Bryant talks about the poor being “sociologically cleansed out of London”, and
  • Local authorities of surrounding areas (for example Slough and Southend) are apparently braced for mass influxes of tenants unable any longer to live in the capital.

This is of course all about the forthcoming housing benefit changes. lt sounds a bit scary. Is it really going to be that bad?

Some of it is probably journalist scaremongering (anything to sell the papers), but it does look as if there are going to be big problems. I am only a residential landlord and tenant solicitor who writes a bit and has done a lot of eviction work, but here are a few thoughts that have occurred to me. Make of them what you will (and why not make a comment if you have a view of your own?)

The options

If the housing benefit rates are going down, many tenants will no longer be able to pay their full rent. This will mean that landlords will have a choice. Either

  • They will have to evict the tenants for non payment of rent, or
  • They will need to reduce the rent to a level where the tenant will be able to afford to live there.

This last is not as unlikely as it sounds. A known good tenant can be a very valuable thing. After all regular rent and someone caring for the property properly is considerably better than someone who comes in agreeing to pay a high rent and then defaults, either because they cannot afford it, or because they have lost their job. Or, of course, because they are feckless anyway.

Some landlords with high mortgages will have no alternative. If their rent does not cover their outgoings they will not be able to survive. So their benefit tenants will have to go

However, I suspect that not all properties currently let to benefit tenants will find a market among the ‘young professionals’ able to afford the high prices. They (ie the properties) may be too scruffy for a start.

So the landlord will go bust, and his properties will be repossessed, and doubtless bought at knock down prices at these auctions where they are all sold. After which perhaps the new landlord (having lower mortgage payments) may be able to afford to let them again to benefit tenants, at a rent they can afford.

But what if the ‘social cleansing’ takes place and there is a mass exodus of housing benefit/low earning tenants from the capital? Who then will do the low paid jobs? The cleaners and the restaurant workers, the shop assistants and the low level admin staff? London (and other big cities which may have similar problems) will still need them. Their services are vital.

So far as I can see there will have to be one of three alternatives:

  • They will have to travel in from the suburbs or wherever they can find a home they can afford (assuming they can afford the fares), or
  • Landlords will have to reduce their rents, or
  • Their employers will have to raise their wages

Or I suppose they will have to live in illegal overcrowded accommodation with a criminal landlord.

The Solution?

I suspect that (and no doubt the government is banking on this) the rents will go down. What do you think?

Photo by Kevin Dooley

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10 Responses to Housing benefit and ethnic cleansing

  1. Wow Tessa, that’s a real mindmap of an article LOL. I think maybe all of the above will happen at the same time.

    I am intrigued by your suggestion that good tenants will be valuable. A lot has been said about licensed landlords (not least by me) but maybe good tenants could have a qualification too, like the banding system used in Choice Based Lettings.

    We’ll have to wait and see I suppose. I am an optimist at heart but a large bit of me does forsee a rise in rent arrears and homelessness as a result. I think the more creative solutions will grow from that……which is another way of saying i reckon it will get worse before it gets better. But for once Landlords AND tenants are in same boat, in terms of working out how they are going to continue with each other

  2. Cheers Ben! Good tenants ARE valuable. Most landlords probably don’t realise quite how valuable until they have all the bother and expense of evicting a rubbish tenant who is not paying the rent.

    I hope landlords will try to help their good HB tenants to stay. In the long run I don’t think it will do them any harm, and could do them a lot of good. People don’t forget that sort of thing, if they are decent. Who knows, the tenant may be in a position to do the landlord a favour one day?

  3. Hi Tess- whilst i agree with m any of your ponts – i would add that the situatoin is much worse than this.. LHA rates will now be calculated on the 30th percentile of local rents (as per the Valuation office’s research data); JSA claimants will have their housing benefit cut by 10% after a year; and the VO is to be disbanded so that LHA levels can accord with the CPI index…. bad news comes in threes…

    i do have to take issue with your statement that all LHA props are “scruffy” -this is not the case.. there are many many very tidy “benefit properties” – just like there are many many different kinds of benefit tenants… they are not all alcohol-drinking-drug-comsuming-chavs……

    i will have to reduce the number of LHA tenants i have for sure….

    A sad day as many of them are brilliant tenants

  4. I can see both sides of this issue. On the one hand it’s highly undesirable to have a split between the wealthier living completely separately from the poor, as it increases division, and reduces the opportunities for less fortunate people to move on. But on the other hand the enormous sums of money paid out in LHA to families to live where they choose seems out of control, and unfair on working families.

    Over the last year or so I’ve run pay-per-click advertising, looking specifically for good LHA tenants. I’ve seen several who have put in the box for “Desired Location” something like “Kensington & Chelsea”. It is completely absurd that someone on benefits should be able to choose to live in any area they like without a cost to themselves and that is clearly demonstrated by the fact that many working families around London would probably love a nice house in Chelsea but will never get it. Benefits should be there to provide support, to ensure people are safe and warm and can maintain themselves physically and emotionally, but it should not, in my view, provide enough to live in very expensive areas, provide a beer & fag fund, nor pay for large flat-screen TVs and Sky+.

    Some LHA tenants are just brilliant – they stay for the long-term, they pay on time, they look after the house, and are easy to talk to. But unfortunately some aren’t. I would hope if we do have a landlord register in future that we do have a tenant register too. Banks have a right to credit-check people before giving credit, but landlords cannot tenant-check before we hand over the keys.

    I hate it, but I’m now forced to require guarantors from all LHA tenants, a full deposit, and we do extensive checks, including poring through 3months’ bank statements. I’d rather not do any of it, but unfortunately it’s entirely necessary so the process is fair to me, as well as fair to the tenants.

    I’m very glad these issues are being discussed, that is certainly long-overdue. As to whether they’re the right decisions, I do not know, I suppose time will tell.

  5. I would have agreed with Tessa’s view that it might be worth reducing the rent to keep a good tenant, until I did this myself a few months ago. Unfortunately, four months after signing a 12 month contract at the reduced rent, the couple split up and I released them from their tenancy.
    I now realise that financial problems can put a strain on any relationship, and the resulting relationship breakdown will leave the landlord having to find a new tenant anyway. So, it’s probably better to be realistic, not reduce the rent, and find a tenant who can pay the full rent.

  6. Thanks for all your comments. Collette I didn’t say ALL LHA props are scruffy! But I’m pretty sure that some of them are.

    Tenant checking is essential I agree, although it cannot be foolproof. Not sure about a tenants register, what do others think? Sounds a bit ‘big brother’ to me, but I suppose if we ever get a landlords register, whats sauce for the goose ….

  7. I am all in favour of a tenant register too. I dont think it’s a big brother thing myself Tessa , I would suggest a voluntary scheme. If you were a good tenant why not register and let prospective landlords know your worth to them?

    They could have a visual band rating like EPCs, that show things like paying on time, tidyness etc. It would be a more realistic version of reference checks.

    Many people with good credit scores turn out to be the proverbial nightmare tenants, conversly people who may, for instance have gone bankrupt 5 years ago but are otherwise totally solvent get knocked out when the computer says ‘No’. I treat tenant referencing with a great pinch of salt and prefer to rely on instincts.

    Ollie what about rent protection insurance? There are loads of products out there for well under £100 per 6 month period for £2,500 cover

  8. Tenant referencing could be done without appearing big-brother, by making it voluntary. There’s also the Landlord Referencing Service, though my view is it’s only appropriate to give them any information about a tenancy if the tenant agreed to that in the tenancy agreement.

    Ben, yes, I could use rent protection insurance, but across a portfolio it becomes very expensive, and it’d only be viable at all for the first 6months. I’m self-insuring, and doing what I can to reduce the risks, primarily by intense use of gut-feel on tenant selection, backed up by a very detailed application form, £ checks, deposit, guarantor.

  9. Ollie I obviously dont know your personal circumstances intimately but I would have thought that £100 – £140 per year per property, knocked off the annual rental income for each property would be a small price to pay. I suppose a £5,000 annual bill (based on around 50 properties) does seem daunting. How does the maths work on that for you? I would imagine you have to offset the outlay against how much money you lose each year to rent arrears.

    For that insurance fee you not only get the rent cover but with most companies you also get legal services in there too, namely a lawyer to represent the case in court for you if it comes to it, that would normally cost you a fortune. Maybe you could insure for the first 12 months as a backup or until your gut instincts kick in.

  10. I agree with you Ben, that there’s certainly a choice here. My sense at the moment is that self-insuring works out better than buying policies, as we’re pretty strict with pre-tenancy checks now, but I accept I may end up needing a policy to cover the first 6-12months at some point. We shall see!



About the post author:

Tessa Shepperson

Tessa is a lawyer and specialises in creating products and services which help landlords and letting agents learn and understand landlord & tenant law. For example, she runs the Landlord Law website (now in its 14th year) and is a director of Easy Law Training Ltd and Your Law Store. Tessa also sits on the Property Redress Scheme Council. When not working she enjoys reading, cooking and messing around on the computer. You can also find her on Google

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Tessa is an English lawyer specialising in residential landlord and tenant law.

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