The 2 reasons why landlords say "no" to housing benefit tenants

From Phillip James Letting Agents in Worthing and Brighton & Hove.

Housing benefit tenants have it tough. There’s no denying that across East and West Sussex it’s hard to find a decent property to rent where the landlord would be happy to accept tenants claiming LHA. Why?

Partly, it comes down to inadequate supply in the rental market. Because of the current lack of supply in the rental market, there are far more tenants looking for property than there are properties to rent. The sales market is slow and the mortgage market is still very restrained; this means that many people who would have bought a property, are now renting. The rental market is flooded with tenants looking for quality housing.

Because there are more tenants around than properties available to rent, landlords and letting agents are quite rightly, selecting the tenants in the best position. And given the choice, landlords would rather rent their properties to people in employment.

Why? Isn’t the rent from a tenant on housing benefit pretty much guaranteed?

No. It’s not.

There are two fundamental flaws with the current LHA system and these are the primary reasons that most landlords will say no to housing benefit tenants. One concerns how the LHA is paid and the other concerns how many local councils treat landlords in the event that a tenant needs to be evicted.

1. How LHA is paid

Under the current system, LHA is paid direct to the tenant, the idea being that the tenant then pays the landlord. This was designed to give a higher degree of responsibility to the tenant as they became more involved in their own financial management.

A laudable aim. But in reality, this system has failed. Many tenants have found they have to ‘dip into’ their LHA funds in order to pay their bills and when the rent becomes due, they don’t have the money to pay.

The landlord then has to wait until the tenant is eight full weeks in rent arrears until the local authority will divert the payments from the tenant to the landlord or letting agent.

2. Evicting a tenant

It is normal practice for notice to be served on a tenant who repeatedly pays their rent late or not at all.

In the event that notice is served on a tenant in receipt of LHA, we have found that our local councils will advise the tenants to “stay put” until a court order for possession is granted. Only then will the council re-house the tenant.

Gaining repossession of a property through the courts is a lengthy and expensive process for landlords. It is unlikely that landlords having to go through this process will want to repeat it.

Summary

Demand is high and supply is low in the rental market. Landlords of quality housing currently have a wide choice of tenants available. They are choosing tenants who are paying the rent with their own means rather than tenants claiming housing benefit.

Although the intention is to benefit the tenants, the rules around Local Housing Allowance are actually harming the tenants by leaving them with far less choice than they would have otherwise.