The issue of renting to housing benefit tenants is one that has been in the headlines a good deal recently, particularly since news broke that Newham Council would be looking for accommodation outside the borough for some families. But why are landlords sometimes reluctant to rent their properties to housing benefit tenants? Here are some of the key reasons:
1. Cash flow. Local Housing Allowance rents are paid in arrears. Private renters, however, pay in advance, which improves a landlord’s cash flow substantially.
2. Negative view of housing benefit tenants. There is a minority view, difficult to back up statistically, that housing benefit tenants will miss rental payments or take little care of the building.
3. Insurance problems. Some insurers increase premiums on properties that are rented to housing benefit customers. Insurance can sometimes be refused altogether.
4. Regular changes to the benefits system. Housing benefit has undergone many changes in recent years, which can sometimes confuse landlords. This, along with an often plentiful supply of private tenants, has made renting to non benefit reliant tenants more attractive.
5. Mortgage restrictions. As some of our buy-to-let insurance customers may know, some buy to let mortgage agreements insist that no one on benefits can reside in the property.
6. Red tape. There is a great deal of form filling with housing benefit, and payments can start and stop without notice. Councils can also retrieve payments if tenants are found to be claiming fraudulently.
Arguably, most or all of these issues could be addressed by the government, opening up a new, profitable market to many landlords.