Property News

Rents have gone North and Benefits South

Em Morley - January 8, 2014

A husband and wife who own about 1,000 buy-to-let properties have reportedly told letting agents that they will not take any more tenants on housing benefit.

Fergus and Judith Wilson, whose housing empire is based in the Ashford area of Kent, have issued eviction notices to all of their tenants on welfare.

Fergus Wilson explains his decision: “Rents have gone north, and benefit levels south.

Rents have gone North and Benefits South

Rents have gone North and Benefits South

“The gap is such that I have taken the decision to withdraw from taking tenants on housing benefit. From what I can gather, just about all other landlords have done the same. Our situation is that not one of our working tenants is in arrears; all of those in arrears are on housing benefit.”

Landlords are having problems getting rent guarantee insurance for tenants on the benefit, and this is stated to be one factor behind the issue.

Wilson goes on to say: “Tenants on benefits are competing with Eastern Europeans who came to the UK in 2005 and have built up a good enough credit record to rent privately. We’ve found them to be a good category of tenant who don’t default on the rent. With tenants on benefits, the number of defaulters outnumbers the ones who pay on time.”1

Despite not all tenants on benefit being in arrears, there have been issues outlined as the reasons for problems with housing them:

  • People on housing benefit generally have less income than the majority of working tenants, and therefore paying rent is undoubtedly going to be more difficult.
  • Housing benefit received is often less than the market rent. This means that either landlords must accept lower rents, or the tenants have to make up the difference.
  • Rent paid by housing benefit is not paid directly to landlords, but by the benefit authorities. Benefit Offices can leave landlords waiting long periods before rent is received.

If a landlord is willing to let their property without rent guarantee insurance, there are a couple of options for them:

  • Landlords can require that tenants have their benefit paid to a Credit Union account, or use the Tasker Payment Service.
  • Landlords can also insist that a tenant has a personal guarantee from a family member who owns their own home and is in employment. If there is ever a need to take a County Court Judgement, there is a chance that money will be paid.

However, the Government believes that lower benefits will result in a reduction of in rent from landlords. This seems unlikely to happen, unless there is an oversupply of rented property on the market.