After months of landlords and MPs voicing their concerns over the new welfare reforms, this Monday they officially came into effect, meaning that those that receive benefits are now facing a myriad of changes in the way that they receive benefits, as well as how much they are entitled to. Landlords have been concerned that the introduction of a cap on benefits will lead to many of their tenants falling into rent arrears, and without a landlord insurance policy with rent guarantee included many landlords could soon struggle to pay the mortgages on all their properties while making an income.
One of the most controversial welfare reforms is the Universal Credit scheme, which is changing the way that anyone who has applied for benefits will receive them each month. Firstly, instead of receiving payments for different types of benefits separately, recipients will now have all their benefits paid together in one lump sum. Landlords are concerned by this especially if they have tenants that receive housing benefits as it means that if their tenants don’t budget properly then they could struggle to pay the rent each month. Furthermore, housing benefits used to be paid directly to landlords, but under the new scheme they will be directly paid to tenants, meaning there is an even bigger risk of them defaulting on rent payments. Continue reading
Immigration is quite a complex subject in England, especially as the housing crisis is leading to more and more people throughout the country struggling to find accommodation or even becoming homeless. The recent news that millions of people from Romania and Bulgaria will soon be legally allowed to immigrate to England has also raised even more concerns as some feel that public services in the country are already stretched beyond their means.
This is why David Cameron announced the other day that he plans to introduce stricter rules on immigration including restricting the amount of access immigrants can have to public services such as social housing. Under his new plans immigrants would have to have lived in the UK for two years before being able to join a housing register or receive benefits. However, there have been concerns that these new plans will lead to rogue landlords housing the most vulnerable families in poor quality homes, charging unfair amounts of rent, and not protecting their homes with landlord insurance.
A chairman for the Residential Landlords Association (RLA), Alan Ward, said: “These measures will put extra pressure on the private rented sector and provide opportunities for low-grade landlords and criminal elements to exploit immigrants. The RLA has been calling for councils to enforce the many regulations that already exist against criminal landlords, and the Government’s announcement will increase the need to prevent overcrowding and insanitary renting. Local authorities can already discharge their responsibilities for homelessness in the private rented sector, but where they choose to do so, they must ensure the properties are safe, legal and secure.”
Local authorities are already introducing stricter criteria for those wanting to join a housing register, such as Hammersmith and Fulham who have recently stated that they will no longer allow people to join its housing list unless they have lived in the area for five years. The council made this decision due to the fact that last year they had 10,300 on their housing list, but only managed to house 470. Discussing the decision, cabinet member for housing, Councillor Andrew Johnson said: “While we welcome migrants with open arms, this country should not be a soft touch for people who think they can simply rock up at our housing offices and demand a heavily subsidised house.”
There are rising concerns from landlords as the benefit system is undergoing massive changes which could mean that many tenants could soon fall into rental arrears. Landlords that do not have a rent guarantee policy as part of their landlord insurance are concerned that they will end up having to pay for mortgages on their properties out of their profits, or embark on the lengthy process of eviction.
Today it was announced that benefits are to be capped with an annual rise of just one per cent over the next three years. This is causing concern as rent prices for both private and council accommodations are set to rise, such as in the Selby area in North Yorkshire where council rent prices are increasing by 4.6% up to £79.90 per week so that they are now in line with housing association prices.
Councillor Mark Crane, leader of Selby District Council said: “Whilst I have concerns about the national policy which dictates rent levels we can set, it’s important to remember that an average rent of under £80 a week still represents extremely good value for money and is considerably below the level of private sector rented accommodation, ensuring that we are able to offer suitable housing to those most in need.”
The fact that housing benefits are set to be capped means that more private rented landlords are becoming reluctant to rent their properties to those that receive housing benefits. Furthermore, the introduction of the Universal Credit scheme – where various benefits are now paid to recipients in one lump sum – is also causing concerns. Previously, housing benefit payments were paid directly to a tenant’s landlord, but now tenants have the responsibility to pay themselves, and if they are not good at budgeting this could mean that landlords will find themselves out of pocket.
The Government have been warned by a specialist lettings agency that the impending cuts in Local Housing Allowance are going to cause havoc in the rental market, with many tenants suffering unnecessarily.
Steve Perrons, the managing director of a lettings agency that specialises in providing people on benefits with good housing, believes the Government are making a big mistake in reducing the level of allowance for people who are often desperate to find dependable accommodation. He warns that good landlords who run their businesses in a professional manner and have the basics, such as landlord insurance on all of their properties, will not take kindly to suggestions they reduce their rents because the Government want to cut allowances.
He said “The cuts amount to a punishment of respectable private landlords who let to benefit tenants at a time when the Government, which does not have the funds to provide enough social housing, needs their help more than ever. The Government is cutting off its nose to spite its face.
“The result of the cuts will be that many landlords keep rents at the same level and simply slap a “No DSS” label on their properties, leaving rogue landlords as the only option for many tenants. Consequently, many people on benefits will find themselves either homeless or living in sub-standard accommodation.”
Perrons was addressing members of the British Property Federation at their annual conference and warned the Government that a bad situation may well get worse for many dependant residents if they do not reconsider their decision. A recent poll suggested that 4 in 5 landlords would not be dropping rents to facilitate the Government plans. Local Councils across the UK are reported to have started making contingency plans for a situation where people are becoming homeless because their benefits will not cover their rent.
A government minister has attacked rogue landlords for abusing the welfare system to line their own pockets.
Lord Freud, a peer of the realm and the Minister for Welfare Reform, has attacked what he calls ‘unscrupulous landlords’ for taking advantage of low income family units and at the same time manipulating the welfare system to their own advantage.
The hard hitting attack follows on from a report by the Department for Works and Pensions that revealed several startling facts. The report said that of the £21 billion paid out by the government, £8.5 billion found its way into the hands of private landlords who have bought properties, arranged landlord insurance on them and rented them out to tenants on Local Housing Allowance.
The report titled; Low Income Working Households in the Private Rented Sector, asserted that over the last ten years the cost of housing for claimants being housed by private landlords had increased by almost double that of claimants of other providers of social housing.
Lord Freud commenting on the figures said “This confirms what we have long suspected, that some unscrupulous landlords are charging benefit claimants over the odds to make a quick buck at the expense of the taxpayer.”
The report went on to say that there was evidence to show that private landlords provided worse conditions for social benefit claimants than other tenants yet appeared to charge them more. The study according to the DWP identified some landlords who were twisting the market for their own ends and said “Some private landlords specifically target the housing benefit sub-market because they know they can command higher rents from these tenants… causing a knock-on effect on rents in the area.”
It has been revealed that over £220million is being stolen from taxpayers every year by tenants, in what is becoming an increasing housing benefits scandal. Tenants receiving housing benefits are routinely stealing the rent money which is worth hundreds of pounds, given to them by the state and which should be then paid to the landlords.
They are, however, being allowed to pocket the money for almost two months before the debt ridden landlord is able to insist that the money is paid directly to them instead of the tenant. The Coalition Government promised to end the controversial Local Housing Allowance that has created the scandal and which was brought in during the last days of the Labour administration. Tenants in council or housing association properties have the allowance paid directly to the local authority but for private tenants it is they who are responsible for paying the rent to the landlord themselves. This has led to thousands of tenants stealing the money. Landlords can not ask for the rent to be paid to them directly until the tenants are eight weeks in arrears. For most landlords an eviction attempt is not always practical due to the cost of legal fees. And despite having cheap landlord insurance, eviction is a last resort.
Minister for Welfare Reform Lord Freud said: “We have launched a major reform of the housing benefits system to make it fairer and to make sure that tenants are motivated to act responsibly. The current structure allows people to rent homes that most hard-working families cannot afford and cannot maintain upon moving into work. As part of the changes we are making to the system we will review the way payments are made and direct payments to private landlords.”
The Local Housing Allowance, started in April 2008, has been blamed for making it easy for people on benefits to live in luxury. Now, research shows, it has led to a large amount of people failing to pay their rent to the landlord in the knowledge that it is extremely unlikely they will be evicted.