Will landlords benefit from housing benefit increases?

The Department for Work and Pensions estimates that the housing benefit bill will reach a new high of £25bn a year by 2017. It also predicts the amount of housing benefit spent specifically on privately rented accommodation will rise to £10.8bn by 2018-19, compared to £9.5bn for 2014-15. 156,000 new benefits claimants are expected to enter the private rented sector over the next four years. In the words of the Guardian, this essentially ‘makes the increase solely attributable to people living in the private rented sector’. What does this mean for private landlords?

Well, it’s good news in that it shows the government needs private renting to be a viable option for those on benefits and is actively planning for this. People on benefits make up a large market full of good tenants. If your property is affordable to them – as 1/3 of properties should be under the Local Housing Allowance – it should be encouraging that the DWP is supporting the sector (even if it has no other option…). It may even help to alleviate some of the bad feeling surrounding Universal Credit.

So, in terms of the bread and butter of running a private rental business, these figures are good news. But the bigger picture may not be so rosy. The trouble is that people read these headlines and think of “greedy landlords”. If there is enough of a backlash, we could see greater regulation further down the line. Critics of buy to let assume landlords are lining their pockets with taxpayers’ money. Alex Hilton of tenant lobby group Generation Rent said, ‘Because landlords know the taxpayer can pay off their mortgage, this cash perversely fuels the housing bubble, which drives up rents, forcing more people to seek housing benefit.’ Such criticisms fall short in their targeting of landlords as the problem. Rents are not being ‘driven up’: they are staying steady as landlords prefer to keep tenants for long periods on even and fair rents.

The real trouble lies with Parliament and the lack of social housing. In fact the general housing shortage is what is fuelling the surge in house prices. However you interpret the government’s lack of action on this front, the fact remains that the private rented sector helps house people on benefits and landlords are not charging exorbitant rents to do this. Fortunately, the government seems to be fully aware of this, despite uninformed calls for much greater regulation in the private rented sector.

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