Very Serious Problems For Btl Landlords

[homeless]

Housing benifit is the bread and butter of the renting buisness, very few landlords dont depend on some housing benifit tenents.Infact council housing benifit rates have been accused of being guilty of setting the going rate for rent increases, pressure coming from landlord groups to press councils to up the amount they will give out for benifit tenents.

Now its all about to change

In my town blackpool and i believe there are a couple more areas in the country and pilot scheme has been in progress for a year now, where the housing benifit cheque goes directly to the tenent, this scheme is soon to be brought out across the whole uk.

I know loads of landlords i do work for some and even my own family have flats ect the rent out, And the obvious is happening.The tenent is recieving the cheque and they are spending it, This is very wide spread, tenents all over here are doing it and housing benifit tenents are then using there rights to stay in the property for 6 month or more before being evictied.

The problem is housing benifit tenents are the poorer sectors of society and its just to tempting for many to run into arrears, they only need to fall behind by just one month to cause an inevitable decline to serious default.

This problem is starting to cuase wide ranging problems, firstly i estimate if you had 10 btl properties at least 2 of these at any one time would be defaulted on, Secondly because of these problems landlords are reluctant to accept housing benifit tenents and will actually give discounts to people that pay cash, this is pushing rents down, as people that need to pay out of there own pocket are more likely to want a better deal.

When this scheme is implimented across the whole country its going to be one of the worst things for the btl industry ever, it is going to be a worse problem than high intrest rates, it will also cause many more empty properties as btl refuse more and more to accept benifit tenents which for a large amount of them is there bread and butter.

[Smell the Fear]

I reckon most "new" BTL landlords wouldn't touch these tenants with a bargepole. Most of the housing benefit tenants will be concentrated in a small proportion of the landlord population (say 20%), and that segment of landlords will be hit particularly hard. They may be large scale professional landlords, and may be able to weather the storm more easily than Johnny-come-latelies.

It may be good in that the pain won't be spread across all landlords (allowing them to better weather the storm), so those who are affected will be wiped out. The properties in question are likely to be towards the bottom of the market, so it would improve affordability for FTBs if it materialised.

[Casual Observer]

I reckon most "new" BTL landlords wouldn't touch these tenants with a bargepole. Most of the housing benefit tenants will be concentrated in a small proportion of the landlord population (say 20%), and that segment of landlords will be hit particularly hard. They may be large scale professional landlords, and may be able to weather the storm more easily than Johnny-come-latelies.

It may be good in that the pain won't be spread across all landlords (allowing them to better weather the storm), so those who are affected will be wiped out. The properties in question are likely to be towards the bottom of the market, so it would improve affordability for FTBs if it materialised.

Wouldn't professional landlords mop these up though?

[Smell the Fear]

Wouldn't professional landlords mop these up though?

I reckon the professionals are the ones who rent to housing benefit tenants. They may have portfolios big enough to take the hit, given that they probably have tons of equity and low debt servicing costs. If they decide not to rent to council tenants, it will increase availability to the rest of the rental market, drive down rents, and therefore drive down house prices. (and create a crisis for those on housing benefit, unable to find any where to live).

I find it hard to believe that this could be a major driver of the market. Housing benefit tenants will learn that if they don't behave, they will be homeless.

[GCS15]

But it will be just one more thing that makes BTL a pain in the ar--

[SarahBell]

Have a look in your evening paper and see how many to let properties accept dss.

Not many I bet.

However if you're stuck for tenants then even the lower rents that you'll get (Cos of caps on amounts) will be better than none. This does potentially sound like trouble if you might really get none and have to take them to court.

[Starcrossed]

homeless,

why ever would the government send the cheque straight to the tenant? This seems like a spectacularly stupid idea.

[Smell the Fear]

homeless,

why would the government send the cheque straight to the tenant? This seems like one of the most foolish ideas I have ever seen.

I like to think there is a good reason, but what would it be?

Empowering the tenant to make their own choices about where they live and how much they pay probably.....i.e. more of Tony's "market knows best" crap.

[homeless]

Have a look in your evening paper and see how many to let properties accept dss.

Not many I bet.

However if you're stuck for tenants then even the lower rents that you'll get (Cos of caps on amounts) will be better than none. This does potentially sound like trouble if you might really get none and have to take them to court.

btl is mostly concentrated in the cheap end of the housing market, ie flats, terraced houses ect.Most landlords have at least some people on housing benifit, whenever they like it or not.People move in while working than lose jobs get ill ect.

There are millions of people in the uk in reciept of housing benifit, also the amount the councils are paying for it is setting the rent rates everywhere.

all the people recieving working tax credits if they dont own there house are also in reciept of it(including my labourer).the only landlords not affected by housing benifit are the ones at the top end, the rest depend on it.Infact most prefer it as they know they will get the rent(or at least did till this new scheme)

[Elizabeth]

I know loads of landlords i do work for some and even my own family have flats ect the rent out, And the obvious is happening.The tenent is recieving the cheque and they are spending it, This is very wide spread, tenents all over here are doing it and housing benifit tenents are then using there rights to stay in the property for 6 month or more before being evictied.

The problem is housing benifit tenents are the poorer sectors of society and its just to tempting for many to run into arrears, they only need to fall behind by just one month to cause an inevitable decline to serious default.

Actually, I do feel sorry the the landlords in the case, but in the end the only way to teach some people is if they feel the hard edge of their own lack of responsibility. Now if the courts could be brought up to date enough to evict them after the first warning, instead of this soppy sentimental judiciary that keeps giving people who are taking the pee another go for a good sob story. People go there because "I can't be evicted cause I've got kids". Well yes you can! Call me harsh if you want to.

Yes Housing Benefits ARE the poorest sectors of society. But constantly pandering to a lack of responsibility only feeds the problem. I 100% support Housing Benefit for those who need it, but I don't support those people being constantly coddled. Take responsibility. You hardly ever see the old folks getting into arrears!

Its the values these day. Promiscuous!!!

[mad'un]

homeless,

why ever would the government send the cheque straight to the tenant? This seems like a spectacularly stupid idea.

You answered your own question!

They would do it because it is a "spectacularly stupid idea"

[2005]

I think they have tried this method of paying direct to he tenant for a couple of reasons

First: Not everyone who gets HB gets full rent paid. There is a sliding scale so some people will be getting, say 1/3 or 1/2 of their rent paid. Paying it direct ot the tenant may make it easier (in theory) for the tenant and the landlord.

Second: I think their is a move to merge all benefits into one. If the pilot works (which I doubt) then I think the government would aim to merge a housing benefit allowance into tax credits/income support.

If this goes through then I doubt the outcome will be higher rents - I think it will be lower rents. Most LL will not currently take HB but it may become more difficult to distinguish between DHSS tenants and others in the future. What with HB and TAX Credits being merged it may be difficult to tell who is who. Indeed if the government had their way all benefits, including income support would all be paid the same under 'tax credits' and this is already happening.

The result will be that people will shop around for the lower rents and this will drive the market down because there will not be a specified HB amount paid - just an allowance within other benefits. It will be up to the tenants how much of that they are willing to pay on rent.

[selkirk]

Housing benifit is the bread and butter of the renting buisness, very few landlords dont depend on some housing benifit tenents.

homeless

I'm afraid that in the world outside Blackpool, the above is simply not true.

I know, because I'm a landlord in another part of the country, who happened to grow up in Blackpool.

Blackpool is a strange place. There's no culture. There's no industry, apart from the tourist trade.

And that's the whole point really. There are many thousands of people who only work for 6 months a year. In winter they sign on, and in summer they work.

selkirk

[BuyingBear]

homeless,

why ever would the government send the cheque straight to the tenant? This seems like a spectacularly stupid idea.

Because the poor BTL wont know his lovely new tenant is DSS funded. If the tenent pretends to be a 'young professional' no doubt there is a wider choice of housing out there.

[deus ex machina]

Housing benefit is available to anyone who qualifies and is administered through local government, a safety net which indemnifies low income recipients who experience difficulties with their costs whether mortgage based or otherwise. By its very nature it distorts free market conditions and encourages a state dependency in which the individual is protected from the consequences of a capitalist system. If it were to be scrapped, together with the absurd incapacity benefit, the impact upon the lower end of the housing market would be such that FTBs might access accommodation at a price commensurate with their income. The rest of the market would inevitably correct itself in line with prevailing forces. An unlikely scenario I grant you but in an age when no one is allowed by law to be poor we must expect the consequences, one of which is of course this bizarre debt driven bubble.

[2005]

What a bad idea!

Giving the cash to irresponsible people, will just encourage irresponsible behaviour (ie not paying

rent). I wonder what labour genius came up with that?

erm...generalisations again....why does poor = irresponsible?

A few years ago I came across a case where landlords were taking HB/DHSS claimants into their property. They would buy a house and put in a tenant then just not pay the mortgage. Of course the landlord was pocketing the HB money all this time. The first the tenant knew was when they arrived home to find the house boarded up with a repo notice pinned to the door!!!

This happened a number of times. The Landlords were a family group who did this over and over again - I don't know exactly how they did it but I knew the property manager and she said there was a lot of cash buying and money/houses changing hands in dubious ways.

It works both ways

[Take me to the cleaners]

Its called Single Local Housing Allowance - its been discussed already on this forum. The other point to it is that housing benefit claimants will receive a fixed amount depending on the size of their family and how many rooms they need - the fixed amounts are regardless of the rent actually paid so if it is more than the rent the tenants get to keep the difference - that is one reason for giving it direct to them. It is an rather odd attempt to keep the stalls on the rental market.

It has also been piloted in a number of other LA areas and will be rolled out to the rest of the country shortly.

No major ripples felt in Leeds so far.

[2005]

Its called Single Local Housing Allowance - its been discussed already on this forum. The other point to it is that housing benefit claimants will receive a fixed amount depending on the size of their family and how many rooms they need - the fixed amounts are regardless of the rent actually paid so if it is more than the rent the tenants get to keep the difference - that is one reason for giving it direct to them. It is an rather odd attempt to keep the stalls on the rental market.

It has also been piloted in a number of other LA areas and will be rolled out to the rest of the country shortly.

No major ripples felt in Leeds so far.

I can see the reasoning behind this as HB has always been a difficult benefit to administer.

Do you know anything about it? If so do you know what would happen if:

1) kids leave home thus reducing the benefit - would this mean that the parents/parent would then have to move to a smaller home if they couldn't top up the original rent.

2) Are there any regional differences built into the allowance e.g will those living in London get a higher allowance than those living in the North East (assuming things return to normal at some stage and the whole country isn't paying near London prices)

3) Would landlords charge per person rather per property. I can see a situation where a landlord would charge a family with two kids more than a family with one child for the same property knowing that they have a higher allowance - have you noticed this happening at all?

I think this will drive down rents not increase them. There is a market for DHSS tenants and those landlords have been able to charge more than the property is really worth on the open market because they know the HB will just pay it. That won't happen now and I can also see tenenats demanding better quality. I have seen some DHSS property that would put student houses to shame.

[eurows]

Housing benefit was always the tenants money to give to the landlord.

It was only with permission from the tenant that the money went straight to the landlord.

My father in law had a string of properties throughout the 90's all dumps that were rented to the dhss. He was always in constant battle with them about sending the cheque straight to him.

He now only has the one property and the money goes straight to the landlord apart from the two weeks every year he classes as a void when the tenant goes to Jamaica and the dhss refuse to pay the rent for those two weeks.

[London Landlady]

I have never rented to DSS - many BTL landlords do not - it is one of the conditions of a BTL mortgage.

[homeless]

Housing benefit was always the tenants money to give to the landlord.

It was only with permission from the tenant that the money went straight to the landlord.

My father in law had a string of properties throughout the 90's all dumps that were rented to the dhss. He was always in constant battle with them about sending the cheque straight to him.

He now only has the one property and the money goes straight to the landlord apart from the two weeks every year he classes as a void when the tenant goes to Jamaica and the dhss refuse to pay the rent for those two weeks.

i dont know a landlord that didint demand the cheque went straight to them, and i know loads of landlords.A pre-requisite of letting them rent was that this would be the case.Now it will go straight to the tenent whenever they were mad enough before to let this be the case or not.

[mercsl]

Dream on..this will have zero effect....most landlords would not touch DSS and those that do probably have a few heavies to sort them out

Edited November 29, 2005 by mercsl

[Father Fred]

Whether they are employed or DSS you want good people in your property. The trouble with landlords receiving rent direct from the DSS is that the DSS have the right to claim back something like 6 years of HB from the person they paid it to if they find out that it was paid in error (eg fraud by the tenant). If you, the landlord, have received this money direct then you have to cough up. If the tenant has received it and paid you then the tenant is the one the DSS will chase.

I know of landlords who will not take money from the DSS direct for that reason.

[London Landlady]

I posted this a bit earlier but a bit vaguely! All of my BTL mortgages have a very specific clause about who you can rent to. I know a number of |BTL landlords and absolutely none of them rent to DSS.

[Realistbear]

What a bad idea!

Giving the cash to irresponsible people, will just encourage irresponsible behaviour (ie not paying

rent). I wonder what labour genius came up with that?

The same one who thought irresponsible lending would perpetuate the economic miracle.

I posted this a bit earlier but a bit vaguely! All of my BTL mortgages have a very specific clause about who you can rent to. I know a number of |BTL landlords and absolutely none of them rent to DSS.

In theory its hard to disagree with you. However, given that the economy is slowing down as evidenced by Gordon's revision of GDP, rising unemployment and increases in CCJ's (repossession rate up 60% yoy), more renters will be turning to the DSS for help to pay for rented accomodation. The economic cycle is moving back toward the conditions that prevailed before the commencement of Gordon Brown's economic miracle of unlimited credit, low interest rates and hyper-inflation in housing costs.