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Two in three lenders don't allow tenants receiving housing benefit

Thursday 04 May 2017

The current benefits system has been slammed as 'unworkable' after new figures show many of the biggest BTL mortgage lenders don't allow landlords to rent property to tenants receiving housing benefit.

Two thirds (66 per cent) of lenders representing around 90 per cent of the BTL market - including TSB, Virgin and the Natwest - do not allow properties to be rented out to those in receipt of housing benefit. 

The survey was carried out by the  Residential Landlord Association (RLA)’s mortgage consultant, Doug Hall, director of specialist mortgage distributor 3mc

He said: “Some of the reasons given for not lending to those renting to claimants include concerns about rent not being paid and historic data which calculates the risk of tenants falling into arrears or facing repossession.”

The RLA wants the next Government to urgently review the extent of lenders preventing landlords from renting to benefit claimants and to take appropriate action.

It is calling for measures to help provide security for landlords and lenders, especially giving tenants in receipt of benefits and universal credit the choice to have payments made directly to their landlord to cover rents.

RLA Chairman, Alan Ward, said: “This research shows that the current benefits system is not working for tenants or landlords.

“Discrimination against tenants receiving benefits is not driven by landlords but by the banking system. 

"If the private rented sector is to house more people then barriers to landlords making fair decisions over who they rent to must be removed."

He called for 'a system which gives tenants, landlords and lenders the confidence they need that rent will be paid on time and in full.'

"All political parties need to trust tenants to know what is best for them and give them the opportunity to choose, without having to get into arrears, to have Universal Credit and benefit payments made directly to their landlord,” Mr Ward added.

3mc contacted 58 lenders with a hypothetical enquiry about a two-bedroomed flat where the tenants were receiving housing benefits: 38 (66 per cent) said they do not allow properties to be rented out to those in receipt of housing benefit. 

While 10 (17 per cent) do allow properties to be rented out to those receiving housing benefit, one forbids renting to 'vulnerable tenants.'

A further nine (16 per cent) said they are prepared to 'consider' housing benefit claimants, while only one (2 per cent) indicated that it does not have a criteria related to housing benefit claimants.

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