Some Positive Changes for Private Landlords to Look Forward to

There is so much happening which has a negative impact on private landlords at the moment and so much in the pipeline. But it is important to keep an eye on the whole picture and balance the negative aspects of our business with the positive changes which will be good for the whole PRS.

I want to talk about those as we approach the end of a difficult year where we have dealt with huge increases in our mortgage payments, insurance premiums, more licensing and seemingly many landlords are making major decisions about the viability of carrying on.

Even those landlords who don’t actively seek tenants who are on benefits can end up with tenants whose circumstances have changed and who now rely on social security help to pay all or some of their rent. For this reason, we all need to be aware of what is happening in the benefit system, now called Universal Credit but once known as Housing Benefit or DSS.  We have now had the best news, but first the background.

How Housing Benefit Works

Housing Benefit is a means-tested social security benefit that is intended to help meet housing costs for rented accommodation. It is the second biggest item in the Department for Work and Pensions‘ budget after the state pension. According to a report by the BBC, the UK government spent £18.4bn on housing benefits in 2019-20 1. In 2022/23, the government is expected to spend £15.4bn on housing benefits, compared with £17.4bn in the previous year 

A housing benefit cap was introduced in April 2013  It was initially applied to Housing Benefit and subsequently to Universal Credit, as Universal Credit was gradually rolled out. The cap level was set initially at £26,000 per year, or £18,200 per year for single adults with no children. The element of housing benefit within the Universal Credit payment is based on what is known as the LHA rate (local housing allowance).  This rate was originally based on 50% of the average rents in the given area as provided by the Valuation Office (VOA) but From 1^st April 2011 this was reduced to 30% and there was a maximum cap put in place in an attempt to reduce the overall cost of housing benefits paid.  Each year the LHA rates were published and in line with rent increases in the area, the benefit paid was increased until April 2020 when the LHA rate was frozen.  This, of course, didn’t mean that landlords couldn’t increase our rents but what it did mean is that the tenant had to pay a ”top up” from other benefits/income to make the full rent payments.  This is where many tenants began to struggle. 

Rental Payments Became Difficult for Some Tenants to Manage

Many tenants had not been used to paying their rent to a landlord because, before Universal Credit, housing benefit was administered by local councils and usually paid directly to the landlord. Some tenants simply had no money management skills and got into difficulties (arrears) very quickly and at that point the option for landlords to apply for direct payment was made available, although it didn’t quite work as simply as the original direct payment system had and needed agreement from the tenant and at this point many landlords decided to refuse tenants on benefits. This was not a judgment of the tenant, it was to avoid rent arrears and subsequent financial difficulties for the landlord. This is where the controversial No DSS/benefits ads began to appear. There were, and are, of course, thousands of tenants who are financially responsible and prioritised their rent over other expenditures and these are the tenants who landlords welcome, because many of them plan a lifetime in their rented home and that works well for long-term investors and our tenants.  The big problem is those tenants who do not prioritise their rent and end up with big arrears. They are usually evicted, which puts them back with the local authority which usually has a legal obligation to offer them a home, even a temporary one which can mean a room in a budget hotel. Those hotels are costing the government millions of pounds and this pot was always going to boil over, especially if there was a reduction in the number of homes offered by private landlords as there is at the moment.

In a nutshell, these figures speak for themselves:

“4.4 Million

In the 35 years following the end of the Second World War, local authorities and housing associations built 4.4 million social homes

94,140 homes

In 1980, 94,140 social homes were built. But by 1983, supply had halved to just 44,240 new social homes

7528 homes

In 2021/22, just 7,528 new social homes were delivered – nowhere near enough for the 1.1 million people on the waiting list”

Source of stats: Shelter

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Done

As We Enter 2024

One thing is clear – to do nothing is not an option.

The government needed to take action because those landlords who are selling up are not likely to re-enter the market under the present financial conditions and if they did why would they risk taking people in receipt of benefits to pay their rent when there are so many working tenants who cannot find a home?

In his Autumn Statement, the Chancellor announced an increase in local housing allowance (LHA) to the 30th percentile of local rents in April 2024, putting an end to the freeze on rates that have been in place since 2020.

While the rates in payment have been frozen the information on what the current rate would be has continued to be collected and published. There is some useful background information, which might help to calculate the new rate but the rate for April 2024 will not be published until March 2024

 Local Housing Allowance (LHA) rates applicable from April 2023 to March 2024 – GOV.UK (www.gov.uk)

I found out a long time ago that the ability to pay doesn’t mean that a tenant will pay. Those under financial pressure often prioritise their rent and pay even when they are struggling because they want a long-term home. For this reason, we need to get back to the days when landlords chose tenants based on reasons other than their source of income and LHA rates have for the past couple of years excluded a lot of good tenants from the private rented sector.

If the government really want to encourage landlords to take these tenants, and they need us to, the other issue they need to address is direct payment to the landlord – whoever that landlord might be because I know that local authorities and housing associations have major problems with rent arrears too. It’s time we stopped being “PC” about empowering benefit claimants to handle their financial affairs and begin being realistic, especially where there are children involved – this money comes from the public purse to keep people from being homeless. All £15.4bn of it and it should not be an option for those who are helped in this way to spend that money on anything else because the public purse must pay again if they are evicted, and councils have the legal duty to accommodate them.

According to Shelter:

“Councils spent almost £1.2 billion providing temporary accommodation for homeless households between April 2019 and March 2020. This has increased by 9% in the last year and 55% in the last five years.

Spending on emergency B&Bs has increased by a staggering 73% in five years.”

I am not a political person therefore my comments are addressed to whoever has the power.

I do worry when I see that the “deck chairs are being rearranged on the Titanic”

Can private landlords refuse to let to benefit claimants and people with children?

Research Briefing

Published Monday, 30 October, 2023

Can private landlords refuse to let to benefit claimants and people with children? – House of Commons Library (parliament.uk).

When I shared this on social media there was a frenzy of concerned landlords. 

“Over the years, it’s been fairly common practice for private landlords and letting agents to advertise properties saying they won’t accept applications from people reliant on Housing Benefit (HB) or the housing element of Universal Credit to pay their rent.

Findings of unlawful discrimination

In what was described as a ‘landmark’ case, District Judge Victoria Elizabeth Mark sitting in York County Court, considered the case of a disabled single parent whose application for private rented housing was refused by a letting agent because she received Housing Benefit. In a judgment dated 2 July 2020 (PDF), which was widely reported in the media on 14 July 2020, the agent was held to be in breach of the Equality Act 2010. The judgment declared:

The Defendant’s former policy of rejecting tenancy applications because the applicant is in receipt of Housing Benefit was unlawfully indirectly discriminatory on the grounds of sex and disability contrary to sections 19 and 29 of the Equality Act 2010.

This was followed by a case in Birmingham County Court in which judgment was handed down on 8 September 2020. Circuit Judge and Acting Designated Civil Judge for Birmingham (now High Court Judge), Mary Stacey, held the letting agency, Paul Carr, had operated a blanket ‘No DSS’ policy which amounted to unlawful indirect discrimination against disabled people.

In 2023, the Property Ombudsman deemed a ‘no kids’ specification in the private rental market to be a breach of the Property Ombudsman’s code of practice on grounds that such a ban would breach equality rules because it would disproportionately affect women.

A commitment to end blanket ‘no DSS’ and ‘no kids’ requirements

On 1 March 2019 then Minister, Heather Wheeler said the Government was calling for “the end of housing advertisements which specify ‘No DSS’ tenants.”

The housing white paper published in June 2022 said the Government “will make it illegal for landlords or agents to have blanket bans on renting to families with children or those in receipt of benefits.”

The Renters (Reform) Bill was presented on 17 May 2023. It was expected to include measures on blanket bans in relation to benefit claimants and families with children. Those measures are not in the Bill. The Government said it remains “fully committed” to implementing these reforms and will bring forward legislation at the “earliest opportunity” to:

Make it illegal for landlords and agents to have blanket bans on renting to tenants in receipt of benefits or with children – ensuring no family is unjustly discriminated against when looking for a place to live.”

I am pleased that this, like other issues, has been put on the back burner and will not be pursued in the Renters Reform Bill because I firmly believe that if they address the issue of payments, that I’ve talked about above, the problem will be reduced massively.  And I honestly wonder how would a piece of legislation be worded that wanted to say:

“landlords will not be allowed to choose their own tenants”

because this is what it comes down to. 

In all my, soon to be 52 years, as a landlord I can honestly say that I have not ever told an applicant why I chose another applicant, what would be the point in that conversation? I also have not once discriminated against a tenant based on the source of their income, although I have taken a UK home-owning guarantor if everything else added up except the amount of their income or the fact that they were self-employed without 2 years accounts but that is simply good business practice. I let properties which are unsuitable for people with mobility issues (flats with no lifts) or young children (bedrooms on a mezzanine floor with no doors) and in those cases, I make it clear in my advertisements. But other than that, I cannot see any reason why an advertisement needs to specify anything about the tenant.  What cannot be changed is affordability and again I would like to see the wording in legislation which says:

“landlord must offer a property to a tenant who cannot afford the rent”

Totally ridiculous.

What we are left with is discretion and only sharing information which needs to be shared, especially when that information is in writing or the public domain. This is not a battle worth fighting because it’s over before it has begun and, like so much we read these days, its “appeasing the voters.”

One of the other issues that have plagued many landlords this year is the loss of section 21 (no fault evictions) Government has now pledged that this will not happen until the court system for dealing with evictions is “fit for purpose”.  Breathe easy as this will be a huge job and I doubt very much it’s near the top of any agenda at the moment. The lesson to take from this is not to take it for granted that any legislation will actually change until it happens and certainly not to make major business decisions until then.

2024 will be an interesting year because the Renters Reform Bill will surely become an Act by the end of the year and we can hope that the fact that there have been no increases in The Bank of England base rate since August, and with

inflation at the level that the government targeted, hopefully, it will not increase at the next review on 14th December and may even begin to come down in the new year

“Inflation, which measures the rate at which consumer prices rise, dropped to 4.6% in the year to October, down from 6.7% the month before.”

The government says its pledge to halve inflation by the end of the year has been met early.”

Inflation slows to 4.6% as government says pledge met – BBC News

 I wish you good health, peace and happiness for Christmas and 2024

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