As the cap on Local Housing Allowance (LHA) starts to impact on tenants in cities across the UK, companies specialising in tenant evictions are warning that thousands of court actions against non payers of rent could put the legal system and landlords under terrific stress.
Trio of events
It is feared that the closure of almost 50 county courts in England and Wales coinciding with the caps in LHA and a possible rise in interest rates could have enormous consequences not only for tenants who can no longer afford to pay rent for their accommodation but also for their landlords.
Landlords faced with difficult decisions
Figures suggest that tenants in four bedroom houses claiming LHA will lose on average £74 a week with the cap, which could leave landlords in the unenviable position of choosing to evict the client or lower the rent if the tenant cannot afford to cover the shortfall. With only around a quarter of a million out of almost 5 million claimants actually employed, the likelihood is that most tenants will not be able to afford the increase.
Many landlords will be examining their residential property insurance policies to find out exactly where they stand if they do evict a tenant. One problem they will encounter is a delay in the eviction process when it goes to court. The closure of the courts means eviction proceedings are now taking weeks longer than before, which means that landlords will then come under pressure to find the cash to pay their loans on the property.
Westminster could be a hotspot
It is reckoned that 22,000 tenants in the Westminster district of London will be in such a situation, which means that an awful lot of landlords will also be wondering if they should take out empty property insurance cover on properties they always thought would be good wage earners. The problem will come to a head over this summer and with no political solution in sight landlords and tenants may both find themselves in trouble.
Direct payments to landlords would help both sides
It has been suggested by many in the industry for a long time that paying LHA directly to the landlord rather than the tenant would certainly cut back on eviction rates, this action would find agreement with many tenants but there seems little political will to bring about the change even though housing minister Grant Shapps has in the past indicated that he was sympathetic to the argument.
It could well be a summer of discontent for many people in the residential letting sector over the next few months.