Increased risk for landlords with tenants on benefits

Published: 02/10/2013

With news that the unemployed will now have to work for their benefits, landlords who rent to tenants on benefits could be faced with an increased risk of rent arrears.

Chancellor George Osborne announced his plans during his speech at the Conservative Party conference in Manchester. Anyone who has been unemployed for three years or more will now have to do either thirty hours a week community service or attend a job centre every day to receive their jobseeker’s allowance.

The benefit system has already undergone significant changes in recent months; the new cap of £350 per week for a single adult with no children and £500 per week for a couple or lone parent, regardless of the number of children is estimated to be costing households up to £400 per month.

Under the new system benefits are also now paid directly to the tenant instead of the landlord.

Since these changes many lenders are now no longer lending on buy to let properties that are let to local authority tenants. This latest phase could prompt remaining lenders to follow suit.

“Many landlords and lenders are already hesitant about letting property to tenants on benefits. These latest plans will do nothing to bolster confidence,” comments Rob Denman. “As a result, the number of tenants on benefits looking for rented accommodation continues to increase.”

“Rent arrears are a landlord’s biggest concern and are already at their highest levels when letting to tenants on benefits; in the last year 71% of landlords have experienced rent arrears with tenants on benefits compared to 59% of those renting to blue collar workers and just 39% to those with student lets.

“These latest plans are only likely to make a bad situation worse.”

Any landlord who currently has tenants in severe rent arrears (of two months/eight weeks or more) or has tenants who are persistently late with their rent has sufficient grounds to evict them before the end of their fixed term. To do so they must serve a Section 8 Notice before obtaining an order for possession from the court and enlisting the help of a court bailiff if required.

Content correct at time of publication