It is a well-known fact that tenants on benefits find it more difficult to secure a rental property than those who are not. Often the accusing finger is pointed at the landlord.
However, there are significant underlying factors that make it difficult for landlords to rent their properties to those on benefits. It’s not necessarily a matter of choice for landlords but more often stipulations from banks, insurance companies and council operations that affect their tenant selection.
Mortgage Distributor 3mc recently conducted market research for The Residential Landlords Association (RLA). The findings showed that two-thirds of the largest buy to let lenders (almost 90% of the market) prohibit landlords renting to tenants who receive benefits. Some of these key lenders included NatWest, TSB and Virgin.
Director of 3mc, Doug Hall stated: “Some of the reasons given for not lending to those renting to claimants include concern about rent not being paid and historic data which calculates the risk of tenants falling into arrears or facing repossession.”
Discrimination driven by the banking system – not landlords
Alan Ward, RLA’s chairman, made a key point in defence of landlords: “Discrimination against tenants receiving benefits is not driven by landlords but by the banking system. If the private rented sector is to house more people then barriers to landlords making fairer decisions over who they must rent to must be removed.”
“We need a system which gives tenants, landlords and lenders the confidence they need that rent will be paid on time and in full. All political parties need to trust tenants to know what is best for them and give them the opportunity to choose, without having to get into arrears, to have Universal Credit and benefit payments made directly to their landlord.”
Local authority systems
The way in which benefits are paid appear to be an additional concern for landlords to contend with. They are paid in arrears directly to the tenant, and often as 4 weekly arrangements rather than monthly cycles which can cause cash flow difficulties for the landlord.
A Glasgow landlord stated further concerns with the system: “Various changes over the years to ways in which benefits are paid have made me reticent renting to people receiving such payments because I feel there is too much financial risk for me as a landlord.”
Conditions of some landlord insurances add to the complexity when selecting long term tenants. Certain providers feel tenants who receive benefits are a higher risk and therefore make their premiums more costly if a landlord intends to rent to all income groups. Some landlord insurance companies simply do not allow the landlord to let to tenants on benefits.
It appears that something needs to change, particularly in a time where so many people are struggling to find a home. Systems have been put in place to help those receiving benefits, however these very systems designed to help actually appear to be hindering them in the long run.