by Richard Reed
15:13 PM, 17th October 2022, About 12 months ago 7
Landlords face a grim winter, with the risk of rising rent defaults as housing benefits fail to keep up with increases in rent.
Property owners struggling to cover the cost of increased maintenance bills and higher mortgage rates have little option but to raise rents.
This leaves less well off tenants who are struggling with the cost of living crisis squeezed between falling behind on utility payments or falling behind on rent.
At the start of 2022, one in four private renters in England – 1.2 million households – were reliant on housing benefit to keep a roof over their heads, according to the research by Zoopla and housing charity Crisis.
Yet housing benefit has been frozen since 2020 and is based on rents from 2018-19 – while the average rental increase outside London for existing tenants is more than 6% over the past two years, according to figures from Hamptons.
Meanwhile the cost of new rentals has risen by double that figure over the past two years, data from both Hamptons and Zoopla confirms.
Ben Beadle, chief executive of the National Residential Landlords Association, has called on the government to take action before it is too late.
“When many tenants are facing the impact of rising energy, food and other prices, the government needs to do all it can to help prevent rent arrears in the first place,” he said.
“Housing benefit support must resemble rents as they are today, not as they were three years ago.
“We are united with other groups in the sector in calling on the Government to unfreeze housing benefit rates as a matter of urgency.”
Zoopla’s research, which looks at new property listings for one, two and three-bed properties across England between May 2021 and April 2022 and their affordability compared to housing benefit rates, shows that average monthly rental prices are now 12% higher than they were before the pandemic.
In May, the government committed to increase other benefits in April 2023 in line with inflation, but has so far ignored housing benefit.
The growing gap means that thousands of tenants are being pushed to breaking point – and putting vulnerable landlords at risk.
The report also reveals that the shortfalls between housing benefit payments and rents are more than double what the most recent Government figures suggest – with low-income renters being forced to find, on average, an additional £648 for a one-bed, £1,052 for a two-bed and £1,655 for a three-bed a year compared to £313, £371 and £498, respectively.
The widening shortfalls come at a time when high inflation, soaring energy bills and a chronic shortage of rental accommodation is leaving the poorest households with little room for manoeuvre.
The situation is being aggravated as many landlords leave the sector, driven out by the loss of tax breaks such as being able to offset mortgage payments, and the ever-increasing burden of regulation.
Richard Donnell, executive director at Zoopla, said: “The gap between housing benefit levels and actual rents is widening as demand for rented homes outpaces supply.
“There is a greater supply squeeze in the rental market than the sales market. This is being compounded by a growing number of private landlords exiting the market in the face of tax changes and greater regulation, a trend that looks set to continue.
“The challenge for national and local government is to encourage more supply across all tenures and a policy environment that continues to attract new investment into the rented sectors.”
Matt Downie, chief executive of Crisis, said: “It is deeply troubling that the poorest households in England are being forced to fight over a meagre number of affordable homes or stump up thousands they simply don’t have in order to find somewhere to live.
“We cannot sit idly by as people are left to battle against an increasingly turbulent and suffocating rental market while housing benefit – the only lifeline they have – is patently insufficient and unable to meet their needs.”
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