Pros and Cons of Letting to Tenants on Housing Benefit
LHA tenants get a bad press - often unfairly so. Here are the advantages, and disadvantages, to renting out your home to this type of tenant.
1. According to research, LHA tenants stay in properties for twice as long compared with non-LHA ones. 2. You can apply to the council to get housing benefit paid directly to your account if you have a good reason (like a failed credit check). 3. It can be harder to evict an LHA tenant.
The type of property you need for this type of rental is a two to three-bed flat or house, big enough for a couple and between one and three kids.
Post-housing benefit capping, this type of rental makes sense in areas of London where the typical rent isn’t too high - so it’s unlikely to make you money if you're renting to LHA tenants in the prime areas of the capital.
Your tenants are likely to stay put longer, and they are more likely to view the property as their home rather than a short-term stop. This means less hassle, and tenants who are more likely to treat the property well.
There may be increased hassle - your tenants may not speak English very well and there is more forms the local council require you to fill in. It can be harder to evict tenants when a local council is involved.
Should your tenant fail the credit scoring, or they don’t have a bank account, you can apply to the council to have the rent paid directly into the bank account of the landlord.
One approach to due diligence is to organise a conference call with the tenant and the local council, checking that all the tenants’ claims are up to date and no payments have been missed.
You can buy rent guarantee insurance tailored for LHA tenants. Traditional rent guarantee insurance doesn’t cover tenants who fail their credit checks, but this specialist insurance will do (at a higher price).
"James Davis, our founder, CEO, and long-term landlord to LHA tenants comments. “It’s a high maintenance type of rental, but, in my view, it’s ultimately worthwhile."