The DWP has recently published a research report titled RR 689 Private landlords and the Local Housing Allowance system of Housing Benefit.
The study is based on interviews with 60 private landlords and letting agents and is not intended to have statistical signifance. The interviews were based in six different locations (Bradford, Cornwall, Coventry, Edinburgh, Newham, Sunderland) and interviewed parties who had experience in letting to Housing Benefit claimants under the LHA rules
The interviewees were asked about their letting preferences, their experience with housing benefit claimants, how they dealt with rent collection and rent arrears, the safeguards built into the LHA provisions, and their plans for the future.
Some answers come as no surprise: e.g. why do most landlords prefer tenants who work? Because they can pay the rent. Why do some landlords target the Housing benefit market? Because of good rental returns, healthy rental rates, and the general idea that housing benefit tenants stay longer in properties.
But some answers make interesting reading, especially in the light of recent media coverage. For example in the areas subject to the LHA, most agents still set rent by finding out the market rent and then undercutting by a small amount, the reason being that this will allow the agent to widen the pool of applicants. Such a process flies in the face of accusations that landlords inflate rents for Housing Benefit because they know that the Local Authority will pay, and that the proposed cap will lower rents throughout the private rental sector.
If a significant number of landlords are already renting to Housing Benefit claimants at below the market rent (albeit by only a small bit), the proposed cap on housing benefit will not lower market rents in the manner suggested by the Government.
The interviewees’ main complaint about the LHA process was that rent had to go to the claimants, and that the claimants had to be eight weeks in arrears before the Landlord can apply to have the rent paid directly. Serial non payers were cited (mainly young single people who could “hop” from tenancy to tenancy every eight weeks and never pay anything). Once the Local Authority has arranged to pay the landlords directly, often the landlords have gone without three months’ rent, and the general feeling was that this was never going to be recovered fully.
There are safety nets in the LHA provisions. Landlords taking on a tenant whom they believe will have difficulty paying their rent or be unlikely to pay their rent can apply for rent to be paid directly. However the report noted that many landlords were not aware of these safeguards.
Most respondents said that they planned to maintain their property portfolio for the future. Since the LHA has been introduced there has actually been a drop in the preference for non housing benefit tenants. The overall impression was that landlords in the private rental sector have good economic reasons to let to housing benefit claimants.
Finally we note that the housing benefit reforms will see more people taking HMO accommodation : there are plans to extend the single room rate to individual renters under the age of 35 ( from the current age limit of 25). This could leave landlords in the paradoxical situation of having to cut down housing benefit portfolios on the one hand, while jumping through local authority hoops to get an HMO licence.
So at a moment when the recession is causing more people to enter the rental sector and claim housing benefit, landlords are being squeezed between increased regulation in the shape of HMO licensing, and decreased assistance in the shape of a sudden cap ( and ensuing fall in revenue) on Housing Benefit claims.