One
of the questions we hear from tenants most often is
where can I find a landlord who'll let to tenants
on housing benefit? As many as one in ten renters
may be receiving benefit, so when these tenants represent
such a huge proportion of the market, why do so many
landlords state "no DSS" in their adverts
– and are they right to do so?
For some, it's because they
have no choice. Some buy-to-let mortgages and some
landlords' insurance policies state that they cannot
let to tenants where the rent will be paid by the
benefits system. So if you'd like to keep your options
open, check for this before you sign on the dotted
line.
For other landlords, though,
it's more about the perception: "too much hassle,"
as one told us recently, "too much paperwork,
and tenants who don't look after the place."
Not
true, says James Davis, Upad's CEO, who's been renting
to housing benefit tenants for more than a decade.
Tenants on benefits tend to stay longer: there isn't
nearly the same churn, which in turn saves on lost
rent and re-advertising your property. Tenants on
housing benefit make the place their home, rather
than just seeing it as one step on the road to buying
their own place. People having their rent paid by
benefits are no more likely to not pay their landlord
than people who are working: bad tenants come from
all walks of life. Key to successfully letting to
housing benefit tenants is referencing them as you
would anyone else, and understanding how the system
works.
Know
the system
The current system of housing benefit payments changed
quite dramatically from 7th April 2008: we'll be assuming
your tenancy began after that date.
Your tenant will be in receipt
of local housing allowance: unlike housing benefit
previously, this is paid directly to the tenant, who
is responsible for paying the rent themself. LHA is
calculated at a flat rate, based not on rent payable,
but on the geographical area and on the size of property
the household is calculated to require. For example,
a single person already renting 3-bedroomed accommodation
would be assessed for LHA as needing one bedroom only.
In
the event of a shortfall between LHA receivable and
rent payable, the tenant will have to either cover
the difference themselves, or move to a cheaper property.
It's in your interest, therefore, to know what maximum
LHA rates are for your area: the website https://lha-direct.voa.gov.uk/
will help you to calculate what might be payable for
your prospective tenants.
In
April 2011, this will change again, with LHA being
capped at £250 per week for a one-bedroomed
property and £400 for a four-bedroomed property.
The current five-bedroom rate will be scrapped altogether.
Obviously this is going to hit some landlords harder
that others: those in London and the south-east are
most likely to be affected, but landlords from all
parts of the country have told us that their current
rents are above the proposed caps. Before you take
on social tenants now, you need to check what the
position is going to be from next April.
