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.
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.
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.