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Private Landlords Say 'no' To Tenants On Housing Benefit

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Searching for suitable and affordable private housing to rent is hard enough with five tenants vying for each available property, but if you’re in receipt of housing benefit, what are your chances?

Recent studies conducted by different organisations are indicating a serious flaw in government reform and housing benefit policy pointing towards a detrimental impact on the rented housing sector. Research from BDRC Continental, RICS (Royal Institute of Chartered Surveyors), Communities & Local Government and the NLA (National Landlord Association) are all painting a pretty grey picture. And as you would expect, yup, it’s the low-income households that will feel the impact more.

This month’s independent survey conducted by BDRC Continental suggests rent arrears have doubled in the past two years, hitting over a third of private landlords. Tenants falling behind with rent payments, accruing arrears have risen, affecting 34% of private landlords in the past 12 months.

The study implies that legislation changes to LHA and direct rent payments made to tenants rather than landlords is a major contributor to the increasing arrears. The picture is made bleaker for tenants claiming housing benefit as major cuts in rent allowance already enforced on new tenancies will be introduced nationally on existing tenancies next January.

Mark Long of BDRC Continental said:

“Although there are indicators in this quarter’s research that suggest the private rental market is stabilising, it is too early to refer to this as a recovery. Britain’s private landlords still have to cope with uncertain economic conditions and arrears are at the highest level since the research began in 2006.

“There is a strong correlation between the instigation of LHA and arrears.

One in four of the landlords we surveyed have tenants on LHA, and they are much more likely to be in arrears.

“Landlords are telling us that the new system of direct payments to tenants is the key barrier to them offering tenancies to people in receipt of LHA.

“The research also shows that two-thirds of landlords don’t intend to change the price of the rent charged to tenants in the next three months.”

BDRC are not alone in their research, an NLA survey this month revealed 58% of private landlords are withdrawing properties from the LHA sector, refusing to reduce rents that fall in line with new local authority rent caps. According to the report, 90% of landlords stated they could not afford to reduce their rents for LHA claimants due to buy-to-let mortgage repayments and rising running costs.

Chairman of the NLA, David Salisbury said:

“These findings by the National Landlords Association are concerning as they indicate that cuts to LHA benefits are forcing landlords out of this part of the rental market.

“The private rented sector is playing an increasingly important role in providing accommodation to housing benefit recipients in the UK. The Government is implementing cuts, which this survey tells us, is likely to lead to an increasing number of people struggling to pay their rent.

“The NLA believes there is a risk that the Government’s policies will result in fewer affordable rental properties available to vulnerable families across the UK, especially as the number of people claiming benefits continues to rise. Benefit payments must ensure that LHA tenants are not left at risk and that landlords providing this much-needed housing can cover their costs.”

Eviction specialist, Miles Turner of Turner & Howard is concerned on the impact this will have on tenants who cannot afford the rising rents.

“Eviction action is usually due to tenants refusing to pay rents or through breaches in their agreements. Current research and housing benefit legislation suggests that the private sector could see a huge rise in tenants who cannot meet rental commitments through no fault of their own.

“Unemployment, housing benefit reductions and a higher cost of living are adding to the strain. Demand for housing in the private sector has pushed rents up dramatically and pushed tenants on housing benefit out of the market.”

In their research covering the first quarter of the year, the Royal Institute of Chartered Surveyors reported not only further demand for rented accommodation but further increases in rental values. And it’s not likely to remain at present levels, with 33% more surveyors predicting further rent rises.

James Scott-Lee, spokesman for RICS said:

“Although we are beginning to see more mortgages aimed at first-time buyers, many potential homeowners are still restricted from getting a foot on the property ladder, leading to increased demand in an already oversubscribed rental market.

“There has been a small uplift in supply, but the imbalance between demand and availability can only mean rents will continue to rise.”

Impacts on a serious housing shortage are already affecting social sector landlords as figures released by Communities and Local Government reveal. Compared to the first quarter last year, the number of applicants considered by local authorities as homeless increased by a whopping 18% for the same quarter this year. The number of applicants local authorities processed under homelessness duty procedures rose by 23% when compared to the 1st quarter last year.

Until the full extent of housing benefit legislation and it’s impact can be seen next year, when existing tenancies fall into line with the government’s caps, only then will a true picture of the affects of the reform be revealed.

Gizza flat....

1263930447.jpg

Hmmm. Unplannledlords turning down what is essentially free money... Strange times we live in.

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Gizza flat....

1263930447.jpg

Hmmm. Unplannledlords turning down what is essentially free money... Strange times we live in.

BDRC are not alone in their research, an NLA survey this month revealed 58% of private landlords are withdrawing properties from the LHA sector, refusing to reduce rents that fall in line with new local authority rent caps. According to the report, 90% of landlords stated they could not afford to reduce their rents for LHA claimants due to buy-to-let mortgage repayments and rising running costs.

Now unless my logic is very much off the mark, LLs pulling out of the LHA sector would increase the number of available homes in the non-LHA sector, right? So supply and demand and all that, rentals in this sector will fall. So in other words - squeal all you like little piggies, your snouts have been pushed out of the trough :lol::lol::lol:

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Now unless my logic is very much off the mark, LLs pulling out of the LHA sector would increase the number of available homes in the non-LHA sector, right? So supply and demand and all that, rentals in this sector will fall. So in other words - squeal all you like little piggies, your snouts have been pushed out of the trough :lol::lol::lol:

There are going to be big regional variations, I suspect. I suspect that the bottom line to this article is that in cases where LLs have a choice between a housing benefit tenant with higher rent but higher risk (that they won't pay, trash the place or whatever), they'll increasingly go for the lower paying but more reliable private tenant. But in areas where there the market consists of lots of housing benefit tenants but very few private ones, or vice-versa, that will define what the market will bear. Faced with a choice between a housing benefit tenant or a void, what do you think most LLs will choose?

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Now unless my logic is very much off the mark, LLs pulling out of the LHA sector would increase the number of available homes in the non-LHA sector, right? So supply and demand and all that, rentals in this sector will fall. So in other words - squeal all you like little piggies, your snouts have been pushed out of the trough :lol::lol::lol:

Yup.. The party is over

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Why the hell did they change it so that the tenant gets paid who is then trusted to pay the landlord ?

Edited by exiges

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Why the hell did they change it so that the tenant gets paid who is then trusted to pay the landlord ?

Because landlords used to get screwed over by the previous system.

If the tenant made a claim for housing benefit, the LL would get paid. However, if there was a problem with the benefit claim (e.g. a mistake on the form, fraud, etc.) the landlord would be required to repay the money + penalties + interest immediately that the error came to light, even many years after the rent was paid. In cases where years of fraud had gone undetected, LLs were suddenly confronted with demands for £10s of k, quickly followed by a trip to the bankruptcy court.

Because the tenant never saw the money, just the house, fraud was rampant. LLs were in the difficult position of never knowing if the money that they had received was actually theirs, or whether it would have to be given back with penalties.

At least, with the current system, if the LL gets the money, they can at least trust that the money is actually theirs.

Under the old system, the LL was financially liable for the tenant's benefit claim, even though they were not required (and indeed, due to data protection laws, unable to) check the accuracy of the tenant's statements.

Edited by ChumpusRex

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Why the hell did they change it so that the tenant gets paid who is then trusted to pay the landlord ?

I think the idea was that it was supposed to make people more responsible for their housing: empowerment, that sort of thing, so people got used to running their own budgets. The idea was that you could overpay a bit with your own money and get a nicer place, or underpay and get a bit extra (I think the leeway was around £15).

Great intentions that, sadly, didn't really work in many cases.

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Also the theory was that LHA tenants would negotiate on rents, motivated by the ability to keep the surplus. This would dampen the effect of LHA providing an artificial floor to the rental market (remember it was set at the average cost for a particular type of property!)

Didn't work great, though I sympathise with the idea.

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Also the theory was that LHA tenants would negotiate on rents, motivated by the ability to keep the surplus. This would dampen the effect of LHA providing an artificial floor to the rental market (remember it was set at the average cost for a particular type of property!)

Didn't work great, though I sympathise with the idea.

Maybe we need a tenants union.

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Oh dear. Spin from a pressure group.

Predictions:

  1. Most private landlords will continue to say No HB. A minority will say HB Welcome.
  2. Many of those saying No HB will accept HB tenants in preference to a void or a 'too-low' rent.
  3. General noise of pressure groups campaigning, and journos seeking out stories.

In other words, no change to the reality, only the language. And mild downward pressure on rents in some areas.

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Oh dear. Spin from a pressure group.

Predictions:

  1. Most private landlords will continue to say No HB. A minority will say HB Welcome.

  2. Many of those saying No HB will accept HB tenants in preference to a void or a 'too-low' rent.

  3. General noise of pressure groups campaigning, and journos seeking out stories.

In other words, no change to the reality, only the language. And mild downward pressure on rents in some areas.

I get the impression that certain landlords specialise in HB. (Relatively) cheap properties in cheap areas, done up with the cheapest old k&bs etc. but looking OK*, cheap-ish to do again if they get trashed.

You've only got to look at HUTH now and again to see the yields some of them get on such properties (oop north, darn sarf is a different matter) and they've so often got tenants waiting or have already let by the end of the prog.

*EA giving rental value will usually say something like, 'Adequate finish for the market' - bit of a giveaway IMO.

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Because landlords used to get screwed over by the previous system.

If the tenant made a claim for housing benefit, the LL would get paid. However, if there was a problem with the benefit claim (e.g. a mistake on the form, fraud, etc.) the landlord would be required to repay the money + penalties + interest immediately that the error came to light, even many years after the rent was paid. In cases where years of fraud had gone undetected, LLs were suddenly confronted with demands for £10s of k, quickly followed by a trip to the bankruptcy court.

Because the tenant never saw the money, just the house, fraud was rampant. LLs were in the difficult position of never knowing if the money that they had received was actually theirs, or whether it would have to be given back with penalties.

At least, with the current system, if the LL gets the money, they can at least trust that the money is actually theirs.

Under the old system, the LL was financially liable for the tenant's benefit claim, even though they were not required (and indeed, due to data protection laws, unable to) check the accuracy of the tenant's statements.

Seems like there was an obvious fix to the old system that didn't involve giving the tenant the money directly.

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I think the idea was that it was supposed to make people more responsible for their housing: empowerment, that sort of thing, so people got used to running their own budgets. The idea was that you could overpay a bit with your own money and get a nicer place, or underpay and get a bit extra (I think the leeway was around £15).

Great intentions that, sadly, didn't really work in many cases.

Yep. Yet another "good idea" that comes from a naive and rosy coloured vision of the reality of humanity.

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Why the hell did they change it so that the tenant gets paid who is then trusted to pay the landlord ?

It has always been an option. I was told by the benefits people to tick the box that says I want the money to be paid to me and in the box to explain why explain that the LL doesnt accept housing benefit tenents so I need to pay him directly.

It has always gone on. LL say wont take HB. HB say they will pay you directly instead then. They want to keep roofs over peoples heads.

edit to add ...

and the LL dont wont HB tenants because they cant afford all the delays the system causes.

Edited by i wanna house

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There's a website called homecheck.co.uk, by searching using your postcode you can find out the make-up of housing in your borough. Mine has just under 30% of total stock as private rented accommodation. In spite of what local EAs say about professionals being the main customers in this sector there are 2 housing benefits tenents in my building of 6 flats alone. One has not worked for 10 years and both have told me after the cap changes come into effect in January they will no longer be able to afford to live in their flats (apparently the landlord has already refused to lower the rent, confident he will get new tenants I guess) so I'm sure this will have some effect, but I don't know how you find out how benefits-dependant the private rented stock is in your area.

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When I was looking for a new rental 6-8 weeks back in the Slough area , I looked at a place up for

£995pcm offered £900 and was told I had no chance as the local council was so short of properties

it had written to all the local EA's and told them to offer LL's over the odds for their houses,

this woman(LL) had been offered £1100pcm but didn't want 10 Somalis living in there (EA's words not mine)

So not only was I competing against other potential renters , I had Slough BC to compete with

as well, so we moved slighty

further out to the Royal Borough to a much nicer place. B)

The whole system is joke , when they drop the allowance in London all it will do is spread the

people out to surrounding areas and push up rental prices there. :angry:

If you walked down Slough high st. these days you'd be lucky to hear

an English voice , we are at breaking point , don't know what the answer is..........

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The whole idea of LHA is flawed. There should be an inclusive benefits package pegged at no higher than the average income. Why should you get 70k in benefits because you choose to live in London? The rest of us earn an income based on our job and then have to make decisions based on this...including where we can afford to live.

LHA has just given landlords an easy ride in BTL. A guaranteed income stream. A subsidised income from the taxpayer. It doesn't need to be changed. it needs to be stopped.

edit: I have let to LHA claimants in the past, and it was the easiest let ever. No negotiation on price needed. Prompt payment every month. House looked after. It was obvious that costs were not a consideration for the tenant. It was nice for the family and for me....but in the real world life isn't like that. This can only happen when you have an unlimited budget and somebody else is paying.

Edited by ingermany

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Yup.. The party is over

True, but I think it's going to take a long time for all the guests to leave. There's a lot of inertia IMHO, particularly when it seems the banks are doing everything they can to keep the lid on it all.

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When I was looking for a new rental 6-8 weeks back in the Slough area , I looked at a place up for

£995pcm offered £900 and was told I had no chance as the local council was so short of properties

it had written to all the local EA's and told them to offer LL's over the odds for their houses,

this woman(LL) had been offered £1100pcm but didn't want 10 Somalis living in there (EA's words not mine)

So not only was I competing against other potential renters , I had Slough BC to compete with

as well, so we moved slighty

further out to the Royal Borough to a much nicer place. B)

The whole system is joke , when they drop the allowance in London all it will do is spread the

people out to surrounding areas and push up rental prices there. :angry:

If you walked down Slough high st. these days you'd be lucky to hear

an English voice , we are at breaking point , don't know what the answer is..........

Slough is by far the most popular destination for immigrants. I've no idea why, but it is.

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Why the hell did they change it so that the tenant gets paid who is then trusted to pay the landlord ?

I think it was changed because there were huge scams going on. So bad that even Labour had to bring down the guillotine on it. I think it was something like LL's not informing the authorities when people had left their flats, and still claiming the money, something like that. I am sure someone knows more than me

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Current research and housing benefit legislation suggests that the private sector could see a huge rise in tenants who cannot meet rental commitments through no fault of their own.

Huh? The only way that payments are not met, is if people willfully spend the money elsewhere, like down the pub.

If the benefits changes really have teeth, there could be a lot of people who may struggle to find somewhere to live. There are probably millions of people in this country who because they work, cannot afford the accommodation that they deserve through their efforts. If they get to increase their living space as a result of this, those on benefits are going to have to forfeit the balance.

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There are going to be big regional variations, I suspect. I suspect that the bottom line to this article is that in cases where LLs have a choice between a housing benefit tenant with higher rent but higher risk (that they won't pay, trash the place or whatever), they'll increasingly go for the lower paying but more reliable private tenant.

Often it isn't even like that. In areas where there is boyant demand from private tenants they will be the ones paying higer rents. So the choice is high rent, low risk or lower rent, higher risk.

It's not surprising that LLs say no HB in their ads.

tim

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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