Buy-to-let landlords shun benefits tenants

The proportion of landlords renting to tenants on benefits has dropped from 34pc to 27pc as welfare reforms began to kick in.

The number of landlords renting to tenants on benefits has dropped sharply, according to an industry survey, giving the first sign of how welfare reforms are affecting the buy-to-let market.

The proportion of landlords with tenants who receive local housing allowance (LHA) had fallen to 27pc last month, down from 34pc in March when the poll was last conducted.

Under changes to welfare In April, the amount of housing benefit was capped at £500 per week for families with children and £350 per week for individuals.

The rule was introduced first in the London boroughs of Bromley, Croydon, Enfield and Haringey in mid-April and is being widened out to the rest of the country in stages across the summer.

The policy was expected to have the biggest impact on the capital where rents are far higher than elsewhere and mostly affect large families.

Millions of Britons have sunk money into buy-to-let, attracted by high income yields which have been buoyed by fast-rising rents.

The NLA, which estimates that one million renters receive help with housing costs, found rising concern about the effect of changes to benefits. Its research showed 38 per cent of all landlords, regardless of whether they have tenants on benefits, are worried about the impact of Universal Credit and 51pc are actively choosing not to let to benefit claimants.

Universal Credit will replace a whole range of benefits so that a single monthly payment is made to claimaints, which will include housing benefit. Currently, this is usually paid directly to landlords.

The changes are being trialled this year with Iain Duncan Smith saying he wants to “forensically understand how everything is working” and see “what might need to change”.

The National Landlord Association says its members are concerned that with recipients receiving money monthly, rather than weekly or fortnightly, could lead to budgeting problems and that payments to landlords will be a low priority.

Landlords with smaller portfolios or single properties were most concerned: six in ten have ruled out letting to benefits tenants.

Carolyn Uphill, NLA chairman, said: “Our research highlights how worried landlords are about the impact of Universal Credit and that they are choosing to withdraw from the local housing allowance market.

“This concern is understandable, particularly with the uncertainty that the changes to the benefit system bring. Quite simply, they are worried the rent won’t be paid and that they will not have the system of direct payment to fall back on. However, the Government relies on the private-rented sector to support the provision of housing for those in receipt of benefits so it needs to act quickly to restore landlords’ confidence, showing it grasps the practicalities of renting.”

She added: “Renting is a business and landlords must balance their needs with an understanding of the pressures experienced by their tenants. It is essential that they work with tenants in receipt of housing support to ensure they are aware of the forthcoming changes and are seeking advice on budgeting for monthly payments.”

Article courtesy of The Telegraph

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