Will the benefits payment changes scare off private landlords?
When the coalition came to power in May 2010 one of their key aims was to reform the benefits system and reduce the annual £22 billion housing benefit bill, but will the changes affect private landlords? Here’s our summary...
Overview: The cuts are to be achieved via three policies; making tenants more responsible for their own money via a single, universal benefit payment that includes their housing; the end to payments for ‘spare rooms’ for claimants; and housing benefit caps and other entitlements cuts.
Many experts believe these changes, although good for national debt cutting, will scare off private landlords from signing up tenants on benefits as the risks of rent arrears and evictions escalate. Also, consultant David Lawrenson of LettingFocus.com recently highlighted how buy-to-let mortgage lenders are now inserting ‘no DSS tenant’ clauses in their mortgage agreements.
The universal credit system This is due to go live later this year following trials and wraps many benefits into a single payment. But this is unlikely to affect private landlords; it is aimed at tenants in the social sector e.g. those living in housing association properties.
This is already the case in the private sector where benefits are paid direct to the tenant. The system whereby payments go direct to the landlord after eight weeks if a tenant goes into arrears will be retained as confirmed in a government memo in April. But benefits will also now be paid monthly back-dated rather than the current fortnightly – leading to worries that this will make it hard for tenants to manage their money and lead to greater rent arrears and evictions.
Spare room tax This began in April and will reduce housing benefit by 14% for claimants with one spare room and by 25% for two or more extra rooms, and once the cuts bite many experts believe this will increase rent areas and evictions.
Benefits cap This is being tested out in four London boroughs at £350 a week for individuals and £500 a week for families. That will mean a total benefits limit for tenants – i.e. if their housing benefit, which is included in the total, doesn’t cover their rent then they’ll have to find the money from somewhere else – or move out.