John Stewart, RLA policy manager and landlord, on the real reasons landlords are reluctant to house benefits tenants.
Today’s report from Shelter and the National Housing Federation, pointing the finger at agents and private landlords for discriminating against tenants claiming benefits has infuriated many working in the sector.
Just like statistics that claim the ending of private tenancies, not the rent arrears that led to serving notice, are the leading cause of homelessness, rather examining the underlying causes, we get a sensational headline that fails to scratch the surface of the issues.
Worst still, it offers no solutions, other than seeking to prosecute agents and landlords and have the practice outlawed as indirect discrimination.
So, what is the reality of the situation?
In truth, there a host of reasons landlords and agents are reluctant to take on tenants claiming benefits.
The first is obvious – affordability. Benefit levels rarely cover market rent.
Whether it’s the four-year freeze of Local Housing Allowance rates, the capping of Local Housing Allowance or the so-called bedroom tax, there are very few private rented properties within the financial reach of benefit recipients.
‘No DSS’ is a short-cut to prevent tenants spending time and money applying for properties they could never pass referencing for.
And there’s another issue.
Many referencing companies will also routinely reject benefits income when assessing potential tenants.
So, tenants (or after the fees ban, landlords and agents) will needlessly pay referencing fees, only to fail the check.
Other service providers also get in on the act.
Rent protection insurance? Not of your tenant is claiming benefits. Or a much higher premium.
Mortgage providers? A surprising number still have terms that prevent landlords letting to tenants on benefits, despite the claims of UK Finance.
And they resolutely refuse to address historic restrictions.
There are hundreds of thousands of older mortgages with these restrictions.
I’ve yet to hear of a single lender who has written to customers to confirm such clauses are no longer valid.
The repossession process does little to help. The time taken to recover a property, whether through a s8 or s21 notice is excessive.
And despite the Homelessness Reduction Act placing new duties on councils, we continue to hear about cases where the local authority tells tenants to stay put until the bailiffs come.
Little wonder that landlords want tenants with reliable income and a good payment history.
And if the tenant is evicted or otherwise leaves the property, landlords are left with little hope of recovering any arrears, as deductions from benefits can only be applied while they remain in the property. Arrears do not follow the tenant.
Finally, there is the operation of the benefits system itself – not helped by Universal Credit.
Direct payment of housing costs to tenants means money intended for rent may never find its way to the landlord.
Even where the landlord can secure direct payment, if the tenants claim is fraudulent, or there has been overpayment due to DWP miscalculation, it is the landlord who is pursued for repayment, not the tenant.
Under Universal Credit payment in arrears means almost certainly starting a tenancy two months in arrears.
Perhaps the most galling part of the report is the involvement of the National Housing Federation – effectively the union for social housing providers.
The same social housing providers who routinely reject prospective vulnerable tenants by applying strict affordability tests.
Who shout about the billions in housing benefit paid to private landlords, but who receive twice as much themselves – and who now complain the private sector isn’t housing people on the very benefits they resent we receive.
Who have moved into the market rental sector, often in partnership with big, build to rent corporate investors to provide high end housing to working professionals, but complain that they can’t build social houses any more.
While there may be some truth that vulnerable tenants are struggling to find social housing because of a lack of Government support for the sector, the hard-nosed business practice of many housing associations must carry its share of the blame.
But what about solutions? Apart from an aside about lenders’ terms, the only solution is to take agents and landlords to court, claiming indirect discrimination.
This only perpetuates the ‘them and us’ attitudes within private renting between landlords and tenants.
Private landlords see tenants who are claiming benefits as a group, as a higher risk.
The key to widening access to the private rented sector for these tenants is to reduce that risk.
This is something that is understood by the homelessness charity Crisis.
Their rent guarantee and bond schemes help many people into private rented accommodation by taking on some of that risk.
The success of such schemes, and landlords willing ness to engage was confirmed by research carried out by Crisis and Sheffield Hallam University, in partnership with the RLA.
More councils could adopt or fund third parties to deliver these schemes. It would be cheaper than providing temporary accommodation
Shelter have been strangely silent on welfare reform. Perhaps they have taken their foot off this campaign pedal, in order to get their other foot in the door of Downing Street?
But it has been clear for some time that both levels of housing benefit and the system processes are real deterrents for landlords, when it comes to renting to claimants.
Lifting the LHA cap and unfreezing LHA levels would be a start and bring more private rented properties within reach.
Revisiting the dogmatic adherence to paying housing costs direct to the tenant as default and restoring tenant choice about payment to the landlord would go a long way to changing landlord attitudes.
Where landlords are paid direct, a different approach to clawing back payments where there has been a mistake by DWP, or the tenant has made a fraudulent claim could make a difference.
Recognising the complex nature of private renting businesses, the restrictions imposed by service providers and products that landlords and agents rely on could have changed the entire tone of discussion.
Shelter could have highlighted the constructive alternatives.
Instead we have yet another attack on private renting, demonising agents and landlords and polarising the debate.
If we should have learned anything from Brexit and Trump, it is that constant attacks lead only to entrenchment of positions on both sides. And that will help no-one.
Want to learn more about longer term tenancies and welfare reform? Come along to our Future Renting conference on 13th September in London. Join over 200 property professionals and hear from an unmissable line up of speakers as they discuss the key issues that matter to your lettings.