London landlords “jumping ship” from benefits sector

Redbridge, a London borough council has said that because of hundreds of private landlord’s quitting the benefits sector, they now have 223 of their households having to stay in bed and breakfast establishments.

This number of families is now a “key priority” for the council and will increase as hundreds of landlords asked for their properties back.

Cllr Michelle Dunn, Cabinet member for housing said: “I am very concerned about the number of families in B&B accommodation and it is a key priority for me. The problem has come about after a high number of private sector landlords have taken back several hundred of their properties, which we have used successfully for many years.

“It appears they give them out to more attractive private renters and we just cannot compete.”
The figure of 223 households in B&B accommodation was taken from the number of nightly B&B lets at the end of June.

PIMS Comments and related content

Sadly many landlords have become tired of the repeated attrition they are encountering with revision after revision of renting to the benefits sector. In recent times we have seen
 
  • Reduction in longer term rent yields from LHA sector - Housing Benefit increases are now linked to Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI). The RPI includes mortgage interest payments and housing depreciation, while the CPI does not. As of Nov CPI inflation was 3.1%, whilst RPI 4.6% in effect Housing Benefit will reduce by 1.5% below the inflation measure previously used. see How is it determined what Housing Allowance a Tenant will receive read more  What Housing Allowance 'Rent' can my tenants claim (or charge) for my property read more
  • Universal Tax Credit - where securing direct payment from probablematic Tenants will become more cumbersome - Universal Credit is the unification of the benefits system (payment of Housing child benefit unemployment etc direct to the Tenant) read more
  • Revisions in the Wefare Reform Act that has seen Landlords encountering more problems with Overpayment suspension and repayment of LHA Housing Benefits
  • Introduction of rent caps, revisions to rooms allowances and increase in age to 35 for single person allowance see current LHA rates that are payable
  • Entitlement rules changed 1st April 2013. A tenant will only be paid per a bedroom based on the LHA allowance not how many rooms the property has - see Eligibility for Housing Benefits
  • Many landlord will continue to abondon providing housing to DSS but at the very least they are advised to review their Vetting Benefits DSS LHA Tenants processes
  • Tenant claiming dissrepair - then you require the council to undertake a HHSRS inspection See Council Inspections.

The counter side

  • If you have invested in a property where the catchment area is the lower socia demographic the mainstay of your tenants may be low income/DSS you may consider long term rental schemes direct to the council and hopefully your assett value will increase. These schemes can be effective but often fraught with problems for you lose control of who the council or housing association place in your property and if the property is trashed you have little chance of recouping your loss