Most landlords who have been renting property for a while will have been asked this question – my staff get asked on a daily basis whether a given property will accept people who are receiving benefits, or not! Quite simply that’s because there’s big demand for properties that will accept benefit claimants – Local Authorities in Northampton and Rugby have ‘waiting lists’ running into the thousands which continue to grow. Demand is such that some of our competitors have started to specialise in this market, and specifically offer tenants in receipt of benefits, to landlords.
We haven’t gone that far! Whilst we do have a number of housing benefit tenancies, they account for less than 10% of our total portfolio, and that is ticking rather than growing. These tenancies can work well, but it’s really important that the landlord understands in advance how these tenancies work, and what the pro’s and con’s are. I’ll go through these below.
Should I, shouldn’t I?
The main question Landlords should ask is ‘do I need to accept Housing Benefit Tenants to rent my property’?, For the vast majority of Landlords, the answer to this question will be no – there will be a large enough supply of good quality private tenants happy to pay the rent you want. As such you’ll stick to the private market as it is, statistically, less hassle. Landlords generally need to consider a tenant on benefits :
1. if their property is in an area where there’s low demand from private tenants, or
2. if the local market is such that there’s a shortage of private tenants generally.
What are the pro’s?
There are certainly some. I have housing benefit tenants in one of my own properties, and after an iffy start, things have settled down and the tenancy works well.
1. You can get a premium rent for your property – Local Authorities have a set ‘scale’ they pay against, based on the size of the property, and not based on the area. As such if you’ve got a property in one of the poorer areas of town, you’ll get more for it with a Housing Benefit tenancy than with a private one.
2. In many cases the Council will provide a guarantee bond instead of a deposit. This is usually capped at 1 months rent, but in certain instances can go as high as £6,000.
3. Housing Benefit tenancies statistically last longer – if you’re claiming benefit and you want somewhere nice to live, the world is by no means your oyster! As such when tenants get somewhere nice, they tend to stay longer.
4. In certain areas of town, a housing benefit tenant may be a safer bet than a private tenant – a single parent with children is always going to be entitled to funds, whereas a private tenant on low income and in / out of work, may struggle more to pay.
What are the con’s?
Housing benefit tenancies are much maligned. It’s really about understanding the way they work, so you don’t end up disappointed.
1. Rent is generally paid in arrears, not in advance.
2. Local Authorities make 13 rental payments a year instead of 12. You still get the same amount of rent, only in smaller chunks.
3. Local Authorities like to pay the tenant, leaving them to pay the money on to you. Paying the tenant doesn’t happen in 100% of cases, but when it does it can go wrong, often because the tenant simply isn’t capable of managing their finances. If this continues the Local Authority will make a direct payment to yourself as landlord.
4. Local Authorities aren’t geared up to communicate with landlords, and very much see the tenant as their ‘customer’. If the tenants entitlement to benefit changes, you can bet they won’t tell you – the first you’ll know is when the money stops coming in. As such Housing Benefit tenancies can take a lot more management.
5. If you want to / need to get rid of your tenant, you can bet the Local Authority won’t help you – you’ll very much have to rely on the court process unless your tenant is happy to play ball!
6. As an agent we lose a little bit of flexibility on which tenant we let to – the Council doesn’t like to see us making arbitrary decisions.
The secret to success is hence understanding the above and managing it. If you get a reliable tenant, and a relaxed landlord, it can work really well and deliver a great yield for the landlord. If you get an unreliable tenant and an inflexible landlord, problems can ensue!
In the vast majority of cases Belvoir Landlords don’t need to consider tenants in receipt of Housing Benefit. Where we think it’s in your interests to do so, we’ll tell you when we appraise your property. We’ll explain the process clearly, and it’s your decision whether this is the route you go down.
