Banning benefits tenants could be counter-productive for landlords

The recent story of landlords Fergus and Judith Wilson, who own nearly 1000 properties, banning tenants on housing benefits has rightly received widespread media attention. Rentify is in a good position to understand the difficulties that housing welfare reforms could bring, but we urge all landlords to consider the implications of such blanket bans. Not only could they significantly limit your chances of finding new tenants, they could also lead to public outcry, a backlash against landlords and further regulation. That is to say nothing of the negative social impact. Rentify has produced a helpfulĀ guide on Housing Benefits, which is free to download (along with our other guides).

Under the current Housing Benefit system (i.e. not Universal Credit), the amount a tenant can receive is based on the cheapest 30% of properties in the area. This means that 1/3 of homes in your area should be affordable to those on benefits. If your property is in that bracket you should have a large market of benefits tenants available to you. Of course, this becomes more cloudy under Universal Credit where the tenant receives one lump sum for all of their benefits and must budget accordingly. The big worry is that landlords (generally) will not receive rent directly from the council, creating more uncertainty. But there are still many things you can do before bringing in a ban on benefits tenants and each case must be judged on its individual merits. Consider making the setting-up of a direct debit for rent a condition of the tenancy agreement. Move the rent payment day closer to the day the tenant receives their Universal Credit payment. Encourage your tenant towards a jam jar account, which allows them to budget easily and keep their rent money separate from spending money. Finally, look into credit unions: these could be a big help and should have accounts which transfer the money directly to you without the tenant having to worry about budgeting the rent.

It is of course understandable that people who have had bad experiences with benefits tenants in the past will be wary of the introduction of Universal Credit. All Rentify wishes to highlight is that there are other options which could really help you out. Furthermore, if there was to be a widespread rejection of benefits tenants, the Government would almost certainly react. They rely on private landlords to help ease the housing shortage. A significant reduction in the number of properties available to benefits tenants would make them less inclined to promote the sector, especially in the face of the negative press coverage that would be sure to follow.

4 thoughts on “Banning benefits tenants could be counter-productive for landlords

  1. David Stanton

    You do not mention a very real disincentive to having LHA tenants – the arbitrary nature of the area boundaries. One in five of the tenants I have receive one form of housing benefit or another but the housing benefit they receive is between a third or a quarter lower than the rents I achieve on tenancies let on the open market. This is because my property portfolio sits on the border between “Inner South West London” and “Outer South West London”. Rents in Mortlake are on average lower than rents in Kew but the arbitrary lines drawn by the Valuation Agency mean I am losing at least 25% of rental income on a fifth of my propertiese

  2. David Stanton

    I have found benefit tenants reliable and 25% of my tenants are in receipt of benefits for their rent. My council is also very flexible about direct payments. But in my area rents are some 40 to 50 % higher than the LHA rates. I will not take new LHA tenants because they cannot pay the rents because of the arbitrary definition of Outer SW london for determining LHA rents. One mile up the road the benefit levels would cover rents comfortably even though it is an area where rents are lower

  3. George Painton Post author

    Hi David

    Thanks for highlighting this issue: it’s a really good point and one I had not considered. Of course, there will always be properties which are unaffordable to those on benefits but there could be a very interesting investigation into whether restructuring the boundaries could improve the situation.

  4. jenny booth

    one BTL mortgage we held some years ago stated that we could not take tenants who were wholly supported by benefits. We were also refused building insurance by a well known company as the tenant was unemployed. I didn’t ask what would happen if a working tenant lost their job but wonder if the insurance would then be invalid. Read your mortgage and insurance documents carefully


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