Benefit tenants victimised by mortgage lenders? We investigate…


Whether tenants receiving housing benefit are being discriminated against by landlords is a contentious topic, and one that’s been much talked of in the media recently. Why? Because recent research by the Residential Landlord’s Association has given a shocking new insight into the world of private renting.

As many of our clients are on benefits or tax credits, the subject of housing is one that frequently comes up. Our clients often voice their frustration at the fact that council properties are so hard to come by given the increasing demand, yet they find it incredibly difficult to secure privately rented accommodation too, turned away due to their benefits status.

Our clients come to us for guidance and advice during a difficult time, so no matter what their circumstances, we want to help in any way we can. It’s only understandable that they vent their frustrations about a system which is seemingly so unfair, but we felt it important to bring these new developments to your attention, which could drastically alter your viewpoint.

What’s the story?

Most of the criticism by benefit tenants up to this point has been aimed at the landlords of these private properties, thinking that they’re simply discriminating against them. However, according to recent reports, the Residential Landlords Association (RLA) have announced results from a survey conducted within the letting sector, which show that it’s actually the banks who are to blame.

The research found that two thirds (66%) of the largest buy to let mortgage lenders such as TSB, Virgin and NatWest, which represents around 90% of the buy-to-let market, don’t even allow landlords to rent property to tenants receiving housing benefit.

Alan Ward, Chairman of the RLA, explained: “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 fair decisions over who they 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.”

The survey was conducted by mortgage consultancy 3mc, an affiliate of the RLA, and Director Doug Hall commented: “Some of the reasons given for not lending to those renting to claimants include concerns about rent not being paid and historic data which calculates the risk of tenants falling into arrears or facing repossession.”

One of the major debates currently is that benefit claimants should be given the option to have their rent paid directly to the landlord via the government, rather than take the full payment themselves when they may not be used to managing money and can fall behind, leading to arrears. This is a movement supported by the RLA, but currently it’s not the case, so landlords, or more accurately money lenders concerns grow.

Why else would I be rejected?

Of course, we understand that although landlords may be under terrific pressure and restrictions via their mortgage lender, they can also simply choose not to lease their properties to those receiving housing benefit. For example, one landlord made headlines only a couple of years ago when he evicted every tenant currently on his books who was receiving welfare assistance.

Fergus Wilson and his wife Judith owned nearly 1,000 properties around the Ashford area of Kent at the time. They had issued eviction notices to 200 tenants, and his reason for doing so? He claimed that he preferred eastern European migrants who default less frequently on payments compared to other groups, and that it was a decision based purely on economic probability.

He told the press: “Rents have gone north, and benefit levels south. The gap is such that I have taken the decision to withdraw from taking tenants on housing benefit. From what I can gather, just about all other landlords have done the same. Our situation is that not one of our working tenants is in arrears – all those in arrears are on housing benefit.”

“Tenants on benefits are competing with eastern Europeans who’ve built up a good credit record to rent privately. We’ve found them to be a good category of tenant who don’t default on the rent. With tenants on benefits, the number of defaulters outnumbers the ones who pay on time.”

While this may sound harsh to those receiving housing benefit, we have to remember that it’s in their interests as businessmen and women to act in whatever way they feel will protect their businesses. However, Wilson also highlighted that it’s almost impossible to obtain insurance for a tenant on housing benefit too, supporting the findings of the RLA.

So, what are some of the other reasons why housing benefit claimants could be considered a risk? Here are just a few:

  • Even when payments can be made directly to the landlord, payment is in arrears and usually every four weeks rather than monthly, which is not in sync with rental payments. This then causes cash flow problems which, although not the fault of the tenant, leads to rent arrears.
  • Housing Benefit departments can be slow to start payments and it requires a lot of lengthy paperwork. If payments stop without warning, there’s no protection for the landlord.
  • Landlords often don’t receive any deposit for any property damage, and even where a local authority provides one, they can be incredibly difficult to claim against.
  • Thanks to years of constant amends, the Housing Benefits system is as complex as ever, and making the decision to accept such tenants can often mean consulting a legal professional first and incurring costs.
  • Insurance premiums are usually higher for lets to housing benefit claimants.

With years of experience and having dealt with thousands of benefit claimants, not only do we understand this area of tax law intricately, but we also understand these kinds of frustrating situations and challenges that you come up against.

If you’ve had your housing benefit stopped and you’d like to know your position as a tenant, or if you’ve received a letter regarding an Interview Under Caution, do not hesitate to get in touch. Our dedicated team is always on hand to give you advice, and you can call us on 020 7381 8111, or email us at law@hylton-potts.com.

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