welfare reform » Advice & Opinions on Property

At a time when cynicism of landlords and authority is everywhere, a story reported in the Guardian this week shows how common sense and decency still sometimes prevail.

Knowsley Housing Trust is to re-classify nearly 600 family homes as smaller properties from 1 April. Knowsley says that demand for the 2 and 3 bedroom flats and maisonettes had dwindled and that they no longer provided suitable modern accommodation for families with young children. Rather than leaving them empty, the housing association had offered them to single people and couples without children.

However, many of these tenants had been faced with the prospect of paying extra rent from April 2013 when the government’s under-occupancy rules take effect (the so-called “bedroom tax“). Having taken legal advice, Knowsley is to re-classify these homes as smaller properties, reducing the rent accordingly and exempting the properties from the effects of the welfare change. The re-classification will cost the housing association £250,000 a year in rental income.

Under the new welfare rules, anyone living in social housing with one or more spare bedrooms would have a suffered a reduction in their housing benefit payments. They would either have to downsize or pay the shortfall themselves. The government reforms are designed to (a) save money and (b) free up larger homes for families on the housing waiting list.

The bold action by Knowsley means that where there is little demand for larger homes from families on the waiting list, existing tenants can stay put without having a reduction in their benefit. The government saves money through the decrease in rent, the housing association does not have to re-house tenants and those living in the re-classified properties can sleep at night without worrying about how to pay the rent come April.

Knowsley Housing Trust is a not-for-profit organisation which owns and manages around 14,000 homes in Knowsley, Merseyside.

The cost of flatsharing in the UK is set to keep on rising, according to research carried out by Easyroommate.co.uk. Average room rents are expected to reach an almost unaffordable £448 per month by December 2013, compared with the present £430 per month. Regionally, the West Midlands has seen the biggest increase in rents, with room rates in Wales actually falling. The research found that the number of bedrooms available for rent has fallen by nearly half (44%) over the last 12 months.

Although many homeowners have turned to letting out a room to help them make ends meet, demand for shared accommodation has also risen significantly. Buying a property is now out of reach of many, driving up demand for rental property. As rents have risen across the board, those at the lower end of the market have increasingly been forced to downsize, renting a room only where previously they might have stretched to a self-contained property. Added to this, the government’s housing benefit reforms have put pressure on claimants to downsize. Single people under 35 who rent from a private landlord can no longer claim the housing benefit rate for a one bedroom flat; payments have been restricted to the rate for renting a single room in a shared house.

But one of the most significant benefit reforms has yet to bite. The so-called “bedroom tax” will cut the amount of housing benefit tenants can claim if they are deemed to have a spare room in their council or housing association home. The new rules come into force from April 2013 with an expected 600,000 people affected nationwide. Tenants with one spare room will lose £14 per week on average. The aim is to free up larger council housing, which is in short supply, and often under-occupied. It is expected that many tenants with spare rooms will struggle to meet the shortfall when their benefit is cut. They will essentially have two options: downsize to a smaller property, or rent out the spare room to make up the difference. Expect the number of flatshares advertised to increase from April.

The number of private landlords willing to let to homeless people on benefits fell by 20% in the last year, according to London Councils.

The umbrella organisation, which represents town halls across London, said that councils in the capital are being forced to house nearly 900 families in bed and breakfast for more than six weeks, contrary to government guidelines, because they can not source accommodation for them in the private rented sector.

Councils normally rely on the private rented sector for temporary housing and government guidance states that families should not be housed in bed and breakfast for more than 6 weeks.

London Councils has been meeting with officials from the Communities and Local Government department to try to find ways of persuading private landlords to rent to those on benefits. The measures discussed include offering tax incentives to landlords.

With the current shortage of rental property and recent rise in rents, many landlords are choosing to rent to those in work. Some private landlords also cite the fact that tenants will no longer be able to opt to have housing benefit paid directly to their landlords as creating greater uncertainty that rents will be paid.

Sir Steve Bullock, London Council’s executive member for housing said, ” While local authorities have been doing their very best to mitigate the impacts, we need a concerted effort by central government departments and councils to take action to ensure a supply of good quality, affordable homes in the private rented sector.Londoners deserve to have safe, affordable and secure places to live. We hope to work alongside the government to make this a reality.”

RentFair has recently introduced a dedicated search function for those seeking private accommodation where housing benefit is accepted.

r_seaman@hotmail.com Last night MP’s approved the government’s controversial Welfare Benefits Uprating Bill, limiting increases in benefits to 1% for 2 years from April 2014. Pensions and disability benefits are exempt from the cap but housing benefit is not. The bill, which still has to be approved by the House of Lords, was opposed by Labour but passed by 328 votes to 262.

According to LSL Property Services, nationwide rents increased by an average 3.4% in the year to November 2012, with a 6.9% increase in London over the same period. It is easy to see why the government wants to get a grip on the spiralling welfare budget but we can not help but wonder the effect of a 1% cap on those benefit claimants seeking to find a home in the private rental sector.

At RentFair, we receive more enquiries from people looking for private landlords who will accept housing benefit tenants than on any other subject. With the supply of rental properties in most parts of the country exceeding demand, landlords can afford to be choosy about who they accept as tenants. Most landlords, given the option, would prefer so-called “young professionals” to occupy their property as opposed to someone claiming benefit. And the point is that most do have that option. There is little logic to this: a single parent, pensioner or someone recently made redundant would not make a worse tenant simply because circumstances mean they have to depend on housing benefit. Logical or not, it is a fact that benefit claimants are excluded from the majority of private rental properties. Capping housing benefit payments to well below the level of rent inflation will presumably exacerbate the problem.

Some argue that housing benefit has been far to generous for too long and that capping payments to “greedy private landlords” is the only way to get rent inflation under control. There is some merit to this argument and certainly we are aware of landlords who have taken on benefit tenants and then simply raised the rent to the maximum claimable LHA rate. But in many parts of the country there is no shortage of working tenants who are willing to pay the asking rent and the fact that benefit claimants are priced-out of the market will be irrelevant to most landlords.

What are the likely consequences? A gradual exodus of benefit-claimants to areas of cheaper housing? Living with mum and dad? More homeless? The country can not afford to subsidise rents as it has done in the past but the transition is going to be painful.

Anyone who wants to see a change in the regulation of the private rented sector should submit their views to the Communities and Local Government Committee here.

The Committee is holding an enquiry into the private rented housing sector and has invited submissions of no more than 3,000 words by 11am on 17 January 2012. There is no guarantee that the report will bring about any changes but the Committee’s views will be influential and may be taken into account in deciding how to frame future government policy.

Views on all aspects of the private rented sector are welcomed including:

the quality of housing
the level of rents
regulation of landlords
regulation of letting agents
regulation of HMO’s
tenancy agreements and length of tenancies
how council’s are discharging their homelessness duty using private landlords

Now’s your chance to get those opinions off your chest!

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A Cheering Tale
At a time when cynicism of landlords and authority is everywhere, a story reported in the Guardian this week shows how common sense and decency still sometimes prevail. Knowsley Housing Trust is to re-classify nearly 600 family homes as smaller properties from 1 April. Knowsley says that demand for the 2 and 3 bedroom flats … READ MORE

Advice & Opinions on Property | the RentFair Blog

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