Many landlords refuse to take tenants who plan to pay their rent using housing benefit. There are several reasons for this. Some landlords are worried about frequent government changes to housing benefit rules causing delays in payment, and there may be worries about what happens if a tenant loses their benefit for any reason. The Local Housing Allowance rate may be lower than the amount landlords are willing to accept for their property. Many buy-to-let mortgages do not allow landlords to rent to benefit tenants. Some landlords also take the view that tenants on benefits are more likely to cause damage to a property, although this is often a view based on prejudice rather than evidence.
With all these difficulties associated with taking housing benefit tenants, and a booming market in general, it’s no surprise that many landlords are unwilling to take them on. However, there can be some advantages to taking tenants on benefits, which many landlords may not have considered.
Reasons to let
Letting to housing benefit tenants can be more complicated than letting to other tenants, but it is more than possible to find good quality tenants on housing benefits. Rather than having a blanket policy of refusing to let to tenants on benefits, it can pay to assess each potential tenant individually. With unemployment and housing costs high, there are many people who might in the past have been able to pay rent without claiming housing
Letting to tenants on benefits can mean that you are able to get a stable rental income by letting houses in less desirable areas, where you might struggle to let to other tenants. Yields on letting these properties can be higher than those in the desirable parts of town, as the cost of buying is lower. Tenants on benefits are often willing and able to stay in a property for longer than private tenants: a family on benefits is usually looking for a long-term home in which their children can grow up, whereas a young professional couple are likely to want to move on fairly quickly. The stereotype of benefits tenants being problematic is only sometimes true. As with any letting, it pays to make thorough reference checks to identify those tenants who may cause you problems – but they are certainly not limited to tenants on benefits.
Landlords do have some valid concerns related to housing benefit tenants, especially possible late payment of rent (whether because payments to the tenants are delayed, or because the tenant fails to manage their finances effectively). It is still worth keeping an open mind though, as of course, any tenant can pay rent late, however they usually pay their rent: circumstances can change very quickly due to unemployment or illness. Increasingly, councils are working to encourage private landlords to let to benefit tenants. If landlords do let to tenants on benefits, they should check their landlords insurance: sometimes a specialist policy is the best option, and can help protect against some of the specific issues related to letting to tenants on benefits.