Why Landlords Are Reluctant to Rent To LHA Tenants

The story that Newham council is looking into sending families in receipt of housing benefits to other parts of the country brought a lot of media interest to the issue of housing benefit payments. The controversial move to house tenants outside their communities is, however, unnecessary. There is much that could be done to improve the way the Local Housing Allowance (LHA) system works.

The LHA rate is set at the 30th percentile of local rents, so three out of ten properties in any area should – by definition – be available. Indeed, critics of the Newham plan were quick to point out that there are many properties are on the market to let in Newham at cheap rents.

But the real issue is that many of these homes are not readily available to LHA dependent applicants. There are seven main reasons why landlords are often reluctant to let to tenants who are on LHA:

1. Payment in arrears

When letting to tenants who depend on the allowance, assuming the LHA can even be paid direct to the landlord (which is not always the case following changes to the system in 2008), the payments are nearly always made in arrears. This compares unfavourably with a private letting where the rent is paid a calendar monthly in advance, which means a better cash flow for landlords.

2. Deposits

Tenants who are dependent on housing benefit often do not have a deposit they can hand over to the landlord to protect. And even where local government can help with a deposit, private landlords often tell us that council schemes are cumbersome, slow to administer and claim against in the event of damages caused by tenants.

3. Red tape

The administration of housing benefit can be slow and involve lots of form filling. Payments can start and stop without notice, and councils retain the right to try to claw back past payments from landlords if it later emerges that their tenant was claiming fraudulently – even if the landlord was unaware of a change in the tenant’s circumstances.

4. Attitudes

However wrongly, a minority of private sector landlords still believe that tenants claiming housing benefit are more likely miss rental payments or to not look after properties properly. We are working to change that perception.

5. Insurance traps

Buildings and contents insurance premiums are often higher where a landlord lets to people dependent on the Local Housing Allowance. Sometimes insurance is refused to landlords altogether. Central government must challenge the insurance industry on whether such inflated premiums are justified by claims records.

6. Buy-to-let mortgages

Scandalously, some buy-to-let mortgage loan terms and conditions do not allow landlords to let to tenants on any kind of benefits or income support. Government should challenge the lenders on this.

7. Constant change

Finally, the array of changes to the housing benefit system, rates of payment and rules over the last four years has left landlords feeling confused. Rather than trying to understand something that keeps changing, many private landlords simply opt out instead.

In London and other large cities where there is a large market of tenants who are not dependent on the allowance, growing numbers of private landlords are simply avoiding housing benefit lets.

Instead of moving people to other boroughs and cities, government – both councils and the cabinet – must look again at how the housing benefit system works, and can be made to work better.

Reinstating the option for all tenants to have their benefit paid direct to landlords would be a good place to start, but tackling the seven reasons I have highlighted would also help.

David Lawrenson is head of the private rent consultancy Letting Focusand author of Successful Property Letting

Source: The Guardian Housing Network

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