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I read recently on a landlord forum a suggestion from one disgruntled tenant that landlords should be forced to accept housing benefit tenants and tenants on Local Housing Allowance (LHA). The premise of their argument was that private landlords shouldn’t be able to discriminate against housing benefit tenants, turning them away purely on the basis that they received a government hand out.
Thankfully we live in a society where discrimination is outlawed. This makes it illegal for landlords to refuse to let out their property on the following grounds: race, colour, nationality, ethnic or national origin, religion or belief, sex, sexual orientation, disability or age (that is of course unless you are a 'ginger' in which case discrimination appears to be rampant & acceptable!) Read more on Discrimination in housing
So is it right that landlords should be able to turn away a tenant just because they are in receipt of a financial handout from the state?
Housing benefit tenants
“All housing benefit tenants are good for nothing, lazy, rubbish.” This is the view of many landlords. Is this kind of prejudice warranted and if so should landlords have the right to turn away perfectly legitimate tenants purely on the basis that they are in receipt of housing benefit?
Before I turn to the moral issues, I want to examine some of the positive and negative aspects of renting to this group of tenants.
The pros & cons of housing benefit tenants
Many landlords have made a fortune out of letting to tenants receiving housing benefit or what is now the Local Housing Allowance (LHA) so don’t knock it. Here are some points for and against letting to tenants in receipt of Local Housing Allowance. Maybe you can think of some more, if so feel free to post them below.
FOR
1.You can let property in less desirable areas. Capital costs and rental yields are therefore correspondingly lower and higher
The returns available can be phenomenal and many landlords have made large fortunes out of letting to tenants receiving housing benefit or it’s LHA replacement.
2. Tenants on benefit, if they are good ones, will often rent for much longer than private tenants as once they have their rents paid by the council they are then reluctant to leave. That is if they are good tenants. If you get a ‘badden’ then they will disappear very quickly without paying and with most of your fixtures (see AGAINST)
3. Depending on the Local Authority since the amendments made to the Local Housing Allowance (LHA) in 2011 allows councils to make direct payments to tenants provided that they are at affordable levels i.e. below those outlined by the Chancellor as the capped level in the budget. This means rents are paid by the government straight into your bank account every month (so no sleepless nights over rents!)
4. Higher yields mean healthier cash flows and correspondingly greater purchasing power giving landlords the ability to build up a larger portfolio quicker.
5. Higher cashflow means greater opportunities to take a living wage faster. For many aspirant professional landlords this is the way to get away from the drudgery of the 9 to 5 and become the boss of your own property business.
AGAINST
1. Lets face it, the flipside of letting property to those on benefits is that you could spend a lot of time going to the parts of town you’d normally avoid, Having to deal with some of the world’s great unwashed (there are of course some lovely tenants in receipt of benefits!)
2. Greater management time is involved when you are running a property portfolio letting to tenants receiving housing benefit. This is because that often properties in this sector of the market are older and require greater levels of maintenance.
3. The complexity of dealing with tenants on Local Housing Allowance is much greater because you are effectively dealing with two bodies. There are the tenants themselves but then there is also the council as the ‘pay master general.’ Often the two don’t communicate and you are left in the middle – “confusing and frustrating”.
4. Any dealings with the council will lead to a fair amount of frustration and complexity – housing benefit is no exception. Do you really want to work your way around pages of government guidance on the LHA claims process? Knowing it could change on the whim of a Governement minister.
5. Investing in property to let to LHA tenants might bring you higher income in the short term, but will your investment deliver less attractive capital and income returns in the longer term? This is because capital appreciation of up market property has generally outperformed less expensive property. Just look at the stellar performance of Londons ‘super prime’ property.
Should landlords be forced to let?
So returning to my original premise “should landlords be forced to let to tenants on benefits?”
At the heart of the argument lies economic power.
If you accept the fundamentals of capitalism that money gives you spending power and choices, then the seller in this case the landlord should retain the right of choosing who they let to.
Fundamentally I would love a 10 bedroom listed Tudor Hall in the Peak District. The fact is I can’t afford it and even if I could any seller would not have to accept my bid should they prefer to sell it to somebody else. It frequently happens that buyers will accept less if they think that an under bidder is likely to deliver on their promise to pay and they prefer to deal with them.
So why should renting be any different?
Renting rights sacrosanct
Aside from the practical difficulties of enforcing a system that would police whether or not a landlord had wilfully discriminated against a tenant on benefit. The right of a landlord to let to whom they want should be sacrosanct. It’s a fundamental right of ownership. What’s more good landlord and tenant relationships are as much about partnership. If you don’t feel comfortable with working with your tenant; then the chances are that it will be a “shotgun” wedding that won’t work for either party.
Got a view? Place your comments below.
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I had a tenant on benefit and she never paid rent for four months due to her benefit being put on hold by the council, this was due to a delay in her receiving her visa/residency order, she was supposed to stick it out until the matter was resolved by the council and the home office, however she dissappeared overnight from my property leaving it in a mess and state of disrepair, as well as owing £2450 in rent arrears. ahe absolutely refuses to communicate with me and I've had no end of problems through this, is there anything you may be able to advise me on.
Many thanks for your help.
Kind Regards.
Paul Deakins.
It is discriminatory practice to disregard all potential tenants on the basis that they are in receipt of benefits therefore it should be against the law to do so.
On the flip side landlords should retain the right to rent their properties to who they so wish - The answer is for landlords to continue to check prospective tenants by way of personal impression, references and credit checks and by return a tenant should be able to meet other tenants with the same landlord to get an impression of their suitability as a landlord.
To advertise a property as being unavailable to benefit claimants is no less discriminatory than saying no blacks allowed. People got away with such appalling discriminatory practice against ethnic groups for years that discrimination is now hidden, as its against the law.
I personally hope the law is changed to pull landlords into line so they cant descriminate against any groups of people and to stop using derogatory terms such as "the great unwashed" and in return they may get decent rent paying tenants in return.
It is discriminatory practice to disregard all potential tenants on the basis that they are in receipt of benefits therefore it should be against the law to do so.
On the flip side landlords should retain the right to rent their properties to who they so wish - The answer is for landlords to continue to check prospective tenants by way of personal impression, references and credit checks and by return a tenant should be able to meet other tenants with the same landlord to get an impression of their suitability as a landlord.
To advertise a property as being unavailable to benefit claimants is no less discriminatory than saying no blacks allowed. People got away with such appalling discriminatory practice against ethnic groups for years that discrimination is now hidden, as its against the law.
I personally hope the law is changed to pull landlords into line so they cant descriminate against any groups of people and to stop using derogatory terms such as "the great unwashed" and in return they may get decent rent paying tenants in return.
I deal with three local authorities and none say that. Indeed, one had a meeting of landlords in 2010 and said the law would change in 2011 so that all LHA tenants would be paid directly to themselves NOT the landlord including ones renting from the LA. Can you clarify please?
Discrimination - as with everything it is the minority which ruin things for the majority. One of our tenants got a letter saying his benefit would be reduced by £10-20 a week until the 'overpayment' (which had occured because he hadn't sent a form back) was repaid. He didn't take any notice of it - because it made no difference to him. It was deducted from what they pay me but I didn't find out until weeks later because they pay in arrears, and then they wouldn't tell me why, just that the tenant knew! This one is being paid direct to me because he was over 8 weeks in arrears. I haven't been paid the arrears, and have reduced his rent by £7-50 a week to match what the LA pays.
Another lady had £800 paid into her account by the LA for rent - she just went on a spending spree! Eventually, I evicted her but she had had 6 cats in the bedrooms just left and when the house was empty, there was one cat still there starving and so thirsty. The carpets, which had cost £2000 for her to move in, were ruined - I had to cut them up with a stanley knife and cart them to the tip because of how the cats had wrecked them. She owes far more than the £800 and I have had letters from lots of different companies and baillifs for her.
Another,who was definitely part of the unwashed, eventually was persuaded to leave, owing a small fortune, and said someone might contact us for a reference and it had better be a good one or he wouldn't go.He was in a multi-occupancy house. Another in that house left faeces on the carpet, in the bathroom, and on clothes put in the washing machine, so everyone else left. I was moving 6 large empty whisky bottles a week besides rotting food all over from him and we have eventually got him to move out today!! Now that will be totally refurbished and we will have another go to get decent people in.
So,to the people who think it is discriminatory, please see a little of the other side. We also have several other housing benefit people who keep everything excellently, pay rent absolutely on time, if there are any problems with the houses we put them right straight away so everyone is very happy and, if any of their friends and family are wanting to rent, they always ask if we have anything because they know it will be good.
To the lady who is semi-invalid, try getting a reference from a previous landlord and perhaps deal with a smaller, local letting agent who will know the landlord and might be better able to help you. There are lots of good properties out there and landlords looking for good tenants - we just need to get together!!
So if the over riding theme here is about discrimination, how come mortgage lenders are allowed to?
I'm a respectable woman employed full time for over 10years in the same company. I supplied a guarantor and 6 months rent in advance and yet after waiting 2.5 months, I've been told that I cannot have the apartment. I feel this is directly down to me having an IVA. I've addressed my debt problems, I now have no credit cards or loans etc, I'm in a better financial position than others that bury their heads in the sand yet I feel discriminated against. What can I do? this apartment ticked all my boxes and I earn over £40K a year, the rent was only £850 a month. I've budgeted up to £950. I would just like to move in and live a normal, quiet life while I re-build my credit record before buying again.
At the moment very few tenants are aware of this but hopefully that will change very soon when councils begin to make housing applicants aware of their rights and advocate for them in the courts.
I would strongly advise landlords to always accept LHA tenants even if bank statements etc are not what the landlord would like to see (basing a decision on this criteria is also indirect discrimmination in most cases too)
I have no doubt a lot of landlords will get away with discrimminatory behaviur for a while to come but eventually they will be caught out and could in some instances even get a criminal conviction if they display signs of covert hatred on a regular basis against these groups of people
I have found LHA tenants to stay longer, {10 years at present} My five tenants are all over 50 years and dont party or play load music and always pay the rent on time every week. I have had problems with much younger tenants who have been employed and would rather spend their rent money on binge drinking and being sick on my carpets each weekend.