A report released recently by the Royal Institution of Chartered Surveyors (RICS) has suggested, worryingly, that some of the country’s most vulnerable tenants are being excluded from the private rental market due to adverse market factors meaning that better off applicants are being preferred to low income families.
The report is timely as debate over the housing crisis rages on and constantly switches its focus on the issue of who is to blame. Depending on where you get your information the blame could lie with the government, landlords or tenants themselves, but what is the reality of being a landlord with tenants who receive state help?
According to the Citizens Advice Bureau, Housing Benefit helps people pay their rent. You could get Housing Benefit if you are on other benefits or if you’re working. You can’t get Housing Benefit to help with the costs of a mortgage or home loan. To get Housing Benefit you must pay rent. It does not matter if your landlord is the council, a housing association or private landlord. You can also claim Housing Benefit if you rent a room in a hostel, or are a boarder. You can claim it if you share a flat or a house and can get Housing Benefit as a joint tenant or a sub-tenant. How much Housing Benefit you can get depends on how much rent you pay, what income you have coming in and where you live.
The rules around housing benefit changed in 2008 so that the benefit is paid directly to the tenant and the tenant doesn’t legally have to declare to their landlord whether they are receiving the benefit. This in itself means that landlords may realistically already have tenants on housing benefit and not be aware of the fact. However, if a landlord does have a tenant who has declared that they are receiving housing benefit they can request direct payment from the local authority if they can prove their tenants are eight weeks in arrears. Landlords can also request direct payment from a local authority if they reduce the rent on their property in order to help tenants on low incomes.
“Worryingly our figures show that as a result of a combination of economic pressures, more and more vulnerable tenants are being pushed out of the private rented sector,” Sean Tompkins, the chief executive of RICS told BBC News.
However, he went on to say, “if the government were to put in place additional support measures through the introduction of help to rent schemes, the door to the rental market may once again be opened for Britain’s most vulnerable.”
So are there downsides or realistic reasons for landlords to avoid tenants on benefits? Or is this simply a lingering stigma and preconception that housing benefit recipients are risky tenants? Well let’s look at the facts.
According to the most recent government figures, which are accurate up to April 2015, housing benefits paid to people who already work are at 21% in 2012/2013, up from 11% just 10 years earlier. A near doubling in benefits claimants who are in work in ten years is quite an astonishing figure. If we are to apply the same increase margin up to today it’s not outside the realms of possibility that this year will see a third of all housing benefit recipients in paid work.
Rent as a percentage of income is steadily increasing too which means that the rises are unlikely to stop anytime soon. The most recent figures show that wage growth has slowed to 2.2% in comparison to some reports by Halifax indicating rental income increases of similar or higher rates.
Clearly, the days of the stereotypical ‘DSS’ tenants are over and the housing crisis is ensuring more people than ever are going to be looking for rental accommodation in the coming years. This number is set to grow in a similar fashion to the proportion of benefits recipients who are in paid work, meaning that landlords who have long term investment strategies could reasonably expect a tenant to have a 50% chance of paying their rent with some form of benefits.
The reality of the situation, in light of these figures, seems quite clear; the days of benefits stigma should be over, and with demand for rental property set to soar higher than it ever has before can landlords really afford to subscribe to out of date stereotypes anymore? The support and mechanisms exist for landlords to recover arrears for tenants who abuse the system and the chances are that you may not know whether your tenant is claiming benefits anyway, so the statistics suggest landlords are better off treating tenants on an individual basis rather than by other assumptions.
If you are a landlord looking for more advice on this matter, please give us a call and we would be happy to discuss it with you.