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Why should landlords rent to tenants on housing benefit?

HousingWelcome back to the Landlord Law Blog after the Christmas break.

The big landlord related story over the past few days is that of the Wilsons (who rent out some 1,000 properties in the Ashford area) sending out eviction notices to all their housing benefit tenants and stating that they are not going to take on any more.

I am not surprised.

I interviewed Fergus Wilson in 2003 and he told me then that they always have rent guarantee insurance for all their tenants.

From the newspaper articles I have seen it appears that their main reason for turning against HB tenants now is that rent guarantee insurance is no longer available for them. Hence the eviction notices.

The whole question of housing those on benefit is a tricky one. Although there are many, many excellent tenants on benefit, overall they tend to be more problematic:

  • They have less income than most working tenants and so finding money to pay rent is inevitably going to be harder
  • The housing benefit received is generally less than the market rent – so either the landlord has to accept a lower rent (and why should they do that?) or the tenant has to make up the difference – which will not be easy for them
  • Rent is not paid direct to landlords by the benefit authorities in most cases
  • Benefit Offices are not known for their efficiency and landlords often have long waits before payment is received
  • Benefit tenants as a group contains more people wth some sort of personal problem – these are after all people who are unable to get or hold down a job
  • It appears that rent guarantee insurance is not available

For an example of a well meaning landlord renting to a single Mum on benefit, coming unstuck look no further than Kate’s Story on this blog.

Given that there are many working tenants looking for property to rent – why, all things considered, would any landlord choose to rent to tenants on benefit?

Sending eviction notices to existing HB tenants sounds rather harsh but it is understandable. Being a landlord is after all a business. It is not the job of private individuals to house the homeless

If a landlord is willing to rent without rent guarantee insurance, there are things that can be done.

Insisting that tenants have their benefit paid to a Credit Union which offers ‘jam jar’ accounts is one, or using the Tasker Payment service is one.

It is arguable that this is a better option than having benefit paid direct to the landlord, as then the benefit office is unable to ‘clawback’ the benefit from the landlord if it later turns out that there has been an over payment.

Another option is to take a personal guarantee from a family member – making sure that this family member owns their own home and is in employment. Then, if there is ever any need to get a CCJ, there is some chance that it will be paid.

However the government’s apparent belief that lower benefits will result in landlords reducing rents, does seem to be extraordinary.

The only way that would happen would be if there was an oversupply of rented property on the market, Whereas as we all know this is far from the case.

Another reason why the government needs to start building.

What do you think?



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18 Responses to Why should landlords rent to tenants on housing benefit?

  1. Tessa said, “The only way that would happen would be if there was an oversupply of rented property on the market, whereas as we all know this is far from the case.”

    There is an oversupply in some parts of the north, with private rents being a lot lower then housing benefit rents in some areas. Houses that professionals would love to rent in the south, can only be rented to benefit tenants in some part of the north – nice “two up town down” a short walk from the tram stop, yet no demand from people in work, that can pay a deposit and a month’s rent in advance.

    —–

    I will only choose to rent to a none disabled person on benefits if it gives me a much better yield to make up for the increased risk, or if they have a home owning guarantor and I expect them to remain for a long time.

    I have two main issues:
    a)It takes far too long to evict a problem tenant.
    b)You can never force someone on benefits to pay up after you have got a CCJ on them.

    Both of these could be solved by the government if they truly wished private landlords to take people on benefits.

  2. Hi Ian, yes there is an oversupply of property in some areas but those are not the areas of big demand. I think overall there is a massive shortfall.

    The question of quicker evictions can only really be solved by government. However landlords can protect themselves by taking decent guarantees from responsible relatives with assets. Then getting a CCJ WOULD be worth while.

  3. If you’re lucky, all these folk on benefits will just disappear huh? Or “get off their lazy arse” and find a job huh? If only, they would stop needing housing and bothering you with their phonecalls huh? After all, you landlords have all got a proper job to be getting on with huh?
    .
    If you’ve been paying any attention to the economy you’ll see that workers’ rights are being ever eroded, and the words “fixed term contract” are ever so trendy now. As are the words “zero hours”. Oh if only all these benefit claimants would get a proper job huh, and learn to hold it down, the shirkers.

    • Another rant from the misinformed who see all landlords as greedy Rachman types I guess.
      No one is requesting these folk on benefits disappear or calling anyone lazy. Can you point out where that is said or are you just shouting and screaming misinformed nonsense?
      What is being discussed is that there are inherent difficulties in dealing with DSS tenants which are often no fault of their own. E.G. the change in rates the government want to pay, the inefficiency of housing benefit departments and the unlikelihood of a landlord ever being able to recover money from a tenant on benefits who has defaulted or caused damage to a property in excess of the security deposit, but don’t let the facts get in the way of your little tirade huh?

      • Did I put it in quotes? Nope. Sarcasm is the best medicine when I have to read divisive posts like this one, tarring everybody with the same brush (a whole heap of ppl claiming HB are employed, dont ya know) and forgetting to see the bigger picture about just why they might have got there. As long as you’re alright Jack..

        • @Just saying and @Albert Trotter – I have published your comments rather against my better judgement. I do not want any unpleasantness and abuse between commentators on the blog. So please can you try to be polite even if you have strong feelings about the subject matter!

          As a general comment, I don’t think anyone is saying that ALL benefit tenants are the same. There are good things and bad things to say about individual landlords and benefit tenants and it makes no sense to lump them all together. Everyone and every case is different.

          However overall it does appear that there are more problems involved from the landlords POV in taking benefit tenants. That is not really the landlords fault. It is the fault of the system.

  4. I have recently looked at the same question – http://www.legalnotebook.co.uk/housing/council-tenants-better-private-landlord-roi/ – whether ROI is better. My sample size is not huge but as said by Ian – it depends on the area. It can mean more money then private rented.

    The question of risk if on benefits is there but as they are on benefits they have more avenue’s of assistance open to them to help with arrears if they do accrue. (I have written a small guide in regards to the same on my site also).

    I have been on the hunt of statistics of rent arrears + tenant on benefits and subsection of the tenants who mostly result in arrears (ie higher risk)but haven’t found anything conclusive yet. Though I believe the lower end would be clients on ESA / DLA as it is more likely that their HB would not be effected.

  5. A private landlord in Kent has just issued 200 claims for possession against tenants on welfare benefits; as he said on Channel 4 news last night, he would rather rent to a group of EU nationals who are in work and all have earned income than a family reliant on state benefits.

    He felt he was entitled to increase rents high but would perhaps go just below the top level if he was able to gain an advantage over other landlords, the position of the tenant was irrelevant to him. The interviewer challenged him that he was worth £200 million and could he not take a moral position and have lower increases. He said it was not his problem.

    It is merely a matter of business that clearly indicates that there should be a mass expansion of affordable rent housing not only for families but also singles. It seems that he is quite happy for several adults to crowd into his properties as long as he gets paid. If this is the person I think it is, he specialised in buying up cheap former council properties.

    Not sure if it is possible, but it is worth a look if it can be found as a “catch up” programme. The item may be in the press today.

  6. We accept benefit claimants but I can fully understand why some landlords do not. It’s not necessarily because benefit claimants are high risk, it’s because it is such a royal pain in the backside dealing with local authorities.

    Every local authority has its own individual processes. They all pay at weird frequencies and insist on paying on certain days of the month (each one different from the next of course!). They all have different names for everything too. You advise a prospective tenant to speak to the local authority about their Deposit Guarantee Scheme, only to find out it’s actually called something completely different in this borough and is operated by a different department and no one has a clue what you’re on about.

    About the only thing they all actually have in common is that they pay in arrears which immediately causes a whole host of other problems.

    They are so inefficient and slow it’s maddening.

  7. Another example of the frustration with local authorities:

    We have an elderly tenant with suspected dementia in arrears. Landlord agreed to house him in a cheaper property in the same development (so the guy had some continutity) and reduce the rent, provided the local authority could increase discretionary payments slightly to help pay off arrears.

    But no. Even after explaining to the authority that the only other option is to evict and make this vulnerable guy homeless, they wouldn’t budge. This was seen as long term help and discretionary payments are only short term.

    So, it will take court time, landlord’s expense, more arrears and ultimately the local authority will have to find him expensive emergency accommodation which is probably much more expensive than his current rent and end up costing tax payers much more! But the homeless team is a different department of course and there is no joined up thinking at all.

    Arrrrggggghhhhhhhh!

  8. I think Mr Wilson’s approach is a good zeitgeist barometer and that we will be hearing more of this.

    The Wilson effect it should be called.

    Before I lay out my views let me make things clear. I work for a local authority in London, prosecuting landlords for harassment and illegal eviction. This doesn’t apply here and doesn’t make me pro tenant/anti landlord.

    Also, I’m based in a homelessness unit with 500 recorded people a month going through our doors, so I see the effects of benefit cuts and landlord wariness.

    I am fully aware that in areas of Britain, particularly the North the benefit cap isn’t the massive problem that it is in Cities, London and the South East, but these areas still encompass many million people.
    In London, where I work the difference between benefit caps and rents is off the scale and it affects both landlords and tenants.
    Recently I spoke to a landlord on the phone about his tenant who he likes and values, but the benefit cap means she is going to be £240 a week short of the rent, without having done anything worng.

    The trouble is her fixed term AST doesn’t run out for a while, leaving him in a difficult position and realistically speaking, by the time he gets full possession she will be £7,000 in debt and he will be struggling with his buy to let mortgage to the same amount.

    Jamie you just don’t understand how the system works. I agree if the council took a big picture view on things they could find a quicker solution that would help all parties but what you don’t account for are the laws that dictate what a council’s homelessness unit can and cant do.

    The law doesn’t allow a council’s homelessness unit to take a big picture view. They are in permanent blue-light territory, just trying to cope with the numbers of people coming through the door, which grows by the day.

    2 months ago my unit were in a situation where we had so many homeless applicants in our very large reception area, that we were breaching health and safety rules. Our security team had to let one out/one in, as if it was a popular nightclub.

    Homelessness units cant make decisions like that, it would be illegal. There are different categories of homelessness but taken overall a council can only pick up a person when legal parameters allow them to.

    Can you imagine what would happen if the council had to rehouse the 500 people who come through our doors for assistance every single week because they cant afford their rent? There aren’t enough B&Bs in the country to cope and by law we aren’t allowed to use them after 6 weeks anyway, this is also illegal.

    To my mind there are two places where the finger of blame needs to point.

    1;An unregulated rent system that is about to implode,

    2; The government seeing the failure of the system as being about benefit scroungers.

    I have always been very reluctant to blame the former, agreeing with landlords that the market is what it is but the way it is being handled is having as much effect on Landlords in high rent areas as tenants. The truth is rent arrears are on the increase in high demand areas and landlords suffer from this as much as tenants.

    Of the latter it has to be acknowledged that since the government decided the Housing benefit bill needs cropping HB claims have risen, not because of unemployment, not because of feckless, chavvy scroungers but because there are more and more people claiming HB who are working because wages aren’t keeping up with inflation. So is HB being used as a publicly funded support mechanism for small employers paying crap wages?

    The country is in a mess. I can only comment on the bit of it that I know, the rental market

  9. Ben I fully appreciate why homeless units have to make the decisions they do, I’ve read the code of guidance back to front.

    It was actually the benefits dept who wouldn’t budge. The homeless unit is where he will eventually end up.

    It matters not to a landlord/agent who’s fault it is. Ultimately if they accept benefit claimants they will have to deal with the local authority, either directly or indirectly, and it’s a broken system thats a pain in the arse to deal with.

    “So is HB being used as a publicly funded support mechanism for small employers paying crap wages?”

    Yes. It has been for years, ever since benefits were seen no longer as a minimum standard for getting by and more as a method for redistribution of wealth and ‘fairness’. It doesn’t mean we need rent controls though.

  10. I agree with Ben.

    I quite see that there is a moral argument which says that rich people should help out and house worthy people on benefit.

    However they don’t HAVE to and I think it would be wrong to make it compulsory. Philanthropy should be up to the individual.

    Landlords are running businesses. As Wilson says, they have their expenses to pay. All of their properties will carry a mortgage and they will also have the expenses of agents, maintenance, gas inspection fees and all the other things that landlords have to fund.

    I don’t know the maths of it but I suspect that these would not be viable with the sort of shortfall which is anticipated with the new benefit figures.

    I think the Wilson’s should at least be commended for being honest about it and bringing it out into the open.

  11. At the risk of thread hijacking, I discovered recently that it is only via the new Universal Credit System that benefit administrators can see the current employment/tax records of claimants. Can you believe it that up until now, adminstrators had no access to this information?!

    Claimants are now very shocked when the benefit administrator asks them if they’re working and they reply “no”, only to then be asked why their records show they have part time work at the local tescos.

    The new systems will at least make some things more joined-up.

  12. Until last year employers only told the government (HMRC – income tax office) how much someone had been paid in the middle of May for the last tax year.

    HMRC has now changed the law so employers have to tell them on-line each month how much someone is paid. The new system is still bedding in, with some employers not cooperating with it yet.

    A lot of employers are not very happy about the additional work this makes them….

  13. A lot of people say that people who are receiving housing benefit ‘don’t have a job’. This is not factual.

    Whilst you’d be automatically entitled to HB if you received job-seekers allowance or incapacity benefit, it is actually a benefit that is ‘income-based’. So, if you are in work and struggle to pay rent then you are entitled to an amount of housing benefit dependent on your income, number of hours worked, and the type of property.

    In fact, between 2010 and 2012 90% of new housing benefit cases were people who were in work. http://www.insidehousing.co.uk/tenancies/majority-of-new-housing-benefit-claimants-in-work/6521183.article




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About the post author:

Tessa Shepperson

Tessa is a lawyer specialising in residential landlord and tenant law. She runs the Landlord Law website (now in its 12th 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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