How will changes to the benefits system effect landlords?

The future of the Private Rented Sector

There is a lot of uncertainty and worry about the future of the bottom end of the private rented sector. The prospect of the universal benefit and the cuts to the housing benefit are causing a lot of concern amongst private landlords.

Housing Action, as a nationally recognised expert in this field, is at the centre of the debate and in the consultation with the coalition government. What is certain is that the drop from the 50 to the 30 percentile will happen to all new tenancies from April 1 2011. This is effectively a 7% cut in the level of Housing Benefit or Local housing Allowance tenants will receive. Most professional landlords we know accept that they will have to reduce their rents by 7% this coming April as a result.

What is less clear are the exact plans the coalition have for the future of rent subsidies to people dependent on welfare benefits to pay their rent. We are getting mixed messages from various departments – on one hand the private rented sector is being held up as a solution for the housing shortage – and on the other hand we know that the overall budget on welfare rent payments will be under a lot of pressure to be cut. It is very difficult to achieve both at the same time though and something will need to give. The give, maybe to providers, such as Housing Action who are recognised for the quality of service and properties, that rogue landlords are so often criticised for not providing, yet still taking the housing benefit payments for the tenants housed in these sometimes sub standard properties.

As a charity, Housing Action is exempt from some of the current legislation and we understand that this exemption will continue with maybe some additional exemptions to protect the work we do. This means that landlords signing leases with us will continue to benefit from guaranteed rental payments and no voids. For all other landlords the exemptions do not and are very unlikely to apply. We know that all private landlords do not like the uncertainty of this situation and the potential to be stuck with a tenant who cannot pay the rent is increasing, be it through letting agents or direct lets. For us the solution is simple – sign a lease with Housing Action and we can at least guarantee certainty of payment.

We will of course update this page with further developments as and when they are announced.