None of us like to be discriminatory – for a start it’s against the law in many cases. It’s not illegal to refuse a tenant who is on housing benefit, even if it feels morally wrong.
That’s because as a regular landlord your main priority is to gather enough cash to pay the mortgage of the property you’re renting out. So, it makes sense to have a tenant who is in receipt of a regular salary.
But that’s not to say you should automatically rule out those who are unemployed and in receipt of housing benefit, also known as Local Housing Allowance (LHA). Why? Read on...
Advantages of having a tenant in receipt of benefits
- Market share. Sadly millions of individuals and families – through no fault of their own - are still unemployed today and claiming benefits That’s a huge chunk of the rental market. By choosing to ignore it you’re cutting of a lot of potential tenants.
- Direct payments. LHA legislation states that a council can pay rent directly to the landlord if a tenant’s rent is two months or more outstanding. After a couple of dodgy months then you’d be guaranteed rent at a set time every month. According to the National Landlords Association 27 per cent of benefits tenants in England and Wales last year arranged for the council to pay their housing benefit directly to the landlord.
- Personal guarantee. A relative can act as guarantor to make sure the rent is paid every month if the tenants fall behind. See Shelter guidance under Rent Guarantors
Of course there is always another side to most arguments. The negatives for renting to benefits tenants include some mortgage companies not lending for benefits tenants and higher insurance premiums in some cases (see Parliament Briefing Paper, under 2.3) and the dreaded council ‘back claims.’ In the case of the latter this is when a tenant has been claiming benefit illegally or has unintentionally been overpaid. In order to claw back the money the council can deduct it from their HLA, leaving you as a landlord out of pocket.
As a landlord it’s obviously your choice who you decide to take on as a tenant. But we hope the above has made things a little clearer for you in terms of having a tenant on benefits.