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Landlords vs tenants on benefits debate

Posted on 2014-01-30

There’s been much discussion in the media recently about renting properties to tenants who are in receipt of benefits.

This appears to have been instigated when one of the UK’s largest landlords, Fergus Wilson, announced he is going to evict all of tenants who receive benefits. Migrant workers are now his preferred choice - who he believes are less likely to default on their rental payments.

Mr Wilson has defended his actions by saying this was a financial decision, and that other landlords across the country have already made the same move. He has also mentioned the unavailability of rent guarantee insurance for tenants in receipt of benefits was another determining factor.

His tenants and a number of industry bodies see Mr Wilson’s actions from a different perspective. Dan Wilson Craw, a spokesperson from Priced Out – a national campaign for affordable house prices – believes this could lead to tenants not claiming benefits even if they’re entitled to it, for fear of losing their home. You can read more about this story here.

The whole discussion links to Universal Credit, and the looming increase of rental arrears that many experts believe will happen once introduced.

The Universal Credit programme merges six benefits into one and is intended to simplify the system. As part of this tenants will need to pay their landlord directly from this amount – which has raised fears this will lead to widespread increased rental arrears.

Arrears rose from around £20,000 to £140,000 among council tenants in Torfaen, Wales, just seven months after a pilot of the new system began. Housing associations in some trial areas have also had to hire new staff to chase up residents in arrears.

There are a number of reasons why experts believe Universal Credit will not be sustainable, including, as reported in the New Statesman:

  • Claimants will have to manage benefits online
  • Tenants will pay their landlords directly
  • Claimants will receive the benefit monthly
  • Officials are unprepared for difficult cases
  • The cost of living has not been addressed

The Government has tried to mitigate these potential issues. Most recently – as reported by the BBC - information about Universal Credit has been made available via the red button on cable and satellite TV or via Nintendo Wii games consoles. The Department for Work and Pensions hopes this will help reach the estimated seven million people in the UK without internet access.

However, concern remains and the subjects of rent arrears, and the issue of renting to tenants who are in receipt of benefits, continues to be discussed.

According to the Money Advice Trust, rent arrears are becoming the fastest-growing debt problem in the UK. In the first nine months of 2013, its telephone helpline received nearly 20,000 calls from people behind with their rent. That represents a 37% increase compared with the 2011 figure, the charity said. Read full story here.

As a landlord, it’s important to remember that it’s not just tenants who are in receipt of benefits who fall into rent arrears – so making sure you have the necessary provisions in place to deal with this, if the situation arises, is vital.

HomeLet has been one of the UK's leading providers of tenant references and insurance solutions to the lettings industry for over two decades, which means we’re aware of the potential risks you face as a landlord - and how important it is to be confident in the checks that are carried out on your tenants.

For more information about our tenant referencing service click here.

HomeLet also offers a Rent Guarantee product called Prestige that will protect your rental income, should a tenant fall into arrears. For more information click here.

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