Thursday, 24 July 2014

Give tenants the choice

From: What's the benefit?

Alan Ward, chairman of the Residential Landlords Association, claims the government’s housing benefit policy will hurt private landlords and their tenants.

In their foreword to the coalition agreement, David Cameron and Nick Clegg committed the government to enabling people to ‘make better choices for themselves’.

This is a principle which the Residential Landlords Association supports, which is why it is calling on the government to remain true to its word and extend the principle of choice to private sector tenants in receipt of housing benefits. This would enable them to decide who should receive their benefit, themselves or their landlord.

According to the government, paying housing benefits direct to tenants works to support and promote financial responsibility. The only problem with this is that many tenants feel it would be more responsible to have their benefits paid directly to their landlord. In 2009, for example, data from a survey of LHA claimants by Shelter found that of those claimants who would choose for payments to be made directly to their landlord, 95 per cent were struggling to manage their finances.

The government’s decision to allow councils to pay housing benefit direct to landlords who cut their rents fails to take account of the real world in which cuts are simply not viable. Landlords have seen average yields fall from 6.8 per cent in 2002 to 5 per cent currently. They also now pay tax on their rental income at 40 per cent.

Small-scale landlords constitute the life-blood of the private rented sector. If we are to grow the sector to meet increasing demand, forcing further cuts through the benefits system will do little to attract new investment from landlords.

Surely the people who should make the decision as to how best they are able to manage their finances are the tenants themselves.

More broadly, the government’s changes to housing benefits are beginning to show a worrying lack of joined-up thinking across Whitehall, and we urge DCLG and DWP to work more coherently together better to support the private rented sector to meet the needs of those for whom the sector provides the only hope of meeting their housing needs and aspirations.

Take for example the decision to increase the age limit at which benefit recipients can claim only for a room in a shared house from 25 to 35. Government estimates suggest that this could affect 88,000 tenants, although the RLA believes this is a gross underestimate given there are 1.16 million private tenants between 25 and 34.

At the same time as DWP is forcing many more people into shared accommodation, many local authorities are using new planning powers to restrict the growth of houses of multiple occupation. A recent survey found there is already a shortage of suitable shared accommodation.

Implementing tenant choice is a cost-free move that would help many tenants to avoid rent arrears and, if it is not willing to reconsider the increase in the age threshold for the shared accommodation rate, the government should repeal the article four regulations that enable councils to restrict the growth of shared housing.

Readers' comments (6)

  • Sidney Webb

    Whilst I appreciate this may be the big issue to the RLA for the rest of humanity a safe and decent affordable home is a more pressing one. Is there any mention by the RLA how they are going to provide additional homes as the government's private sector solution (excluding the purchase and relet of existing homes, of course.)

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  • PRS landlords are very good with old property - 40% of the sector is pre-1919. But lending facilities are still tight and few landlords are actually developers on a scale which would create the numbers of new homes required.
    The tax regimes currently do not encourage sale and reinvestment and the RLA has argued strongly for roll-over tax relief.
    The best hope in the short-term is for corporate investment, but that will create aspirational new homes when we need affordable ones.
    The RLA believes Government should consider encouraging first-time buyers to buy ex-PRS rental stock releasing capital-gains exempted funds for landlords to re-invest and regenerate more old property.

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  • Sidney Webb

    Why not use the government funds to enable first time buyers to rennovate derilict homes themselves and so cut out the middleman, or parasite? - yet another successful scheme cut by the 1980's Tories.

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  • Sidney Webb

    Whilst your around Alan - any incling on PRS initiatives to provide new homes rather then recycled ones. The country needs more housing not just changed tenureship.

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  • You know as I do we are short of 100,000 homes a year - and although the PRS funded over a million in the last decade that sort of money isn't around now. Hence my pointing to the corporate investment market.
    In your previous comment - which government funds do you have in mind? The culture has all changed.
    That's why the RLA is arguing for incentives. And yes I agree the empty homes situation is a disgrace.
    The PRS is also being encouraged to work in partnership with local authorities who simply don't have the stock - and RLA has solutions for accreditation standards which major councils are already using.

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  • Sidney Webb

    All very good Alan, and the renovated and sub-divided housing units are all valuable homes; but how many new homes will the PRS be expecting to provide. Reletting former local authority stock that has been privatised and made more expensive is all well and good but what I'd really like to hear is how many additional (not recycled) homes will the private rented sector be providing over the coming year.

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From What's the benefit?

The blog for our What’s the Benefit? campaign, which is calling on the government to find a fairer way to reduce the £21 billion housing benefit bill than its current proposals.

Isabel Hardman writes about

housing benefit, welfare

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