Landlords face grim winter as rent defaults loom

Landlords face grim winter as rent defaults loom

15:13 PM, 17th October 2022, About 2 years ago 7

Text Size

Housing benefits haven’t risen since 2020 – and that spells problems for landlords this winter as tenants struggle to cope with rising rent and bills. 

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.

Action call

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.

Landlords at risk

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.

Widening gap between rents and benefits

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.”

Share This Article


Michael Johnson - Amzac Estates

9:34 AM, 18th October 2022, About 2 years ago

Unfortunately we now have a mindset in the UK that the government should step in for everything and every time they do things end up becoming worse. When a landlord takes in a benefit tenant they know the deal, why should the government pay more?
If a tenants circumstances change mid tenancy and they can’t afford the rent then it’s a decision the landlord has to make.
We really need less government intervention not more as it’s lead to where we are now, a basket case economy not dissimilar to the 1970’s . When will we ever learn?

Penny Lyon

10:54 AM, 18th October 2022, About 2 years ago

Reply to the comment left by Michael Johnson - Amzac Estates at 18/10/2022 - 09:34
I agree and if that means that it doesn’t make business sense to take on a benefits tenant then the fallout will be reduced supply to this sector. Discrimination of benefits tenants won’t even come into it, as they won’t pass affordability and credit checks.

Robert M

11:29 AM, 18th October 2022, About 2 years ago

I recently read that only 1% of advertised rental properties are now at or below the LHA rate (benefit rate).
Presumably this is due to the LHA rate being based on the 30th percentile of reported rents as they were back in 2018/2019.

The failure of the LHA rates to keep up with the market rents, together with the further reductions in Housing Benefit (UC Housing Element) due to the Overall Benefit Cap (OBC), means that most households now have to "top up" their rent from the benefit income (meant for other living costs).

The fact that the LHA rate does not give the tenant enough money to pay the rent (particularly if they are also subject to the OBC), means that virtually no landlord will let their property to the benefit tenant. - This also includes many "social" landlords, who also require the tenant to be able to afford to pay their rent.

The prolonged attack by government (at the behest of Shelter et al) on the private rented sector has resulted in many landlords selling up leading to a massive lack of supply. Those that remain have faced increasing costs and regulation which forces them to either raise their rents or face bankruptcy, AND be more selective by insisting on affordability checks and rent/damage guarantors.

Mark Butler

11:57 AM, 18th October 2022, About 2 years ago

I have this precise problem. For many years now I have put one large property aside for vulnerable LHA clients who are recomended and passed on to me by a local housing support association. The property is in studio flats and rent includes water and gas, gas only being used during winter time for heating. The tenants are all male and I am good friends with them all and known them all for years now. However things now are reaching a breaking point with the energy price rises and reluctancy of anyone to remortgage such a building for me. We have had a 'house meeting' to discuss this and I have laid out all the facts and figures out for them to look at. They all understand that their rent no longer covers 'rent - water - gas' and they have agreed to delay turning of the heating as long as possible. Some of them have offered to have family mambers pay an extra £50 a month but that becomes unfair as then the heating goes on and others are not paying.
Its a real problem.
My conscience will not allow me to end their tenancies due to arrears etc. As men they will simply pack their bags and go and sit on the kerb - nowhere else to go, no shelters for men, no B&B support for men etc etc.
I did hear whisperings of the Gov doing something to support tenants/landlords where energy bills are included in rent, has anyone any info on this??

Old Mrs Landlord

14:29 PM, 18th October 2022, About 2 years ago

Reply to the comment left by Mark Butler at 18/10/2022 - 11:57Mark, you illustrate the dilemma of landlords who have longstanding benefits tenants who moved in when the LHA covered the rent but who are now £100 or more a month below current market rent. There is no way our tenants, who have never missed or been late with rent and are otherwise good tenants can afford to pay more but we cannot indefinitely subsidise them. All white goods are included as well as designated parking, which do not feature in similar properties now being offered at much higher rents. I am thankful that at least we are not, like you, on the hook for heating costs.

Reluctant Landlord

18:50 PM, 18th October 2022, About 2 years ago

Reply to the comment left by Mark Butler at 18/10/2022 - 11:57
Ditto - I have one bed flats that in an area known for LHA recipients in the main and not private working people.

I simply can't offer the accommodation to match the rate.

The rent has to go up to counter maintenance, voids, damage, increase in gas certs, EICR checks and certs, fire alarm servicing etc. Deposits never fully cover damage and/rent arrears either or cost of court fees etc so I need to raise the rent so there's more in the deposit pot.

Not a greedy LL at all, just one that wants to run a business not a charity!

Robert M

12:12 PM, 19th October 2022, About 2 years ago

While the LHA rates are nowhere near keeping up with market rents (LHA rates are now around 4 years behind), then the affordability issue for tenants in receipt of benefits will continue, and they have no options available to them apart from paying a "top up" from their other income.

Landlords can assist tenants by signposting them to other services such as food banks, free furniture schemes, grants, Discretionary Housing Payments, etc, and these may provide some help temporarily, but the fundamental issue of LHA rates not keeping up with rents is not resolved.

For compassionate landlords who are reluctant to evict their LHA tenants who cannot afford the rent, this is a major dilemma, do they raise the rents and see their tenants get further into rent arrears or struggle more to pay the rent, or do they keep the rents low and face personal hardship as their mortgage and other running costs escalate?

While some landlords can afford to keep the rents low, most are dependant on the rental income and need it to cover their outgoings, and as such may have no choice but to raise their rents to the market rate.

The alternative may be to sell their properties, but that divests them of the asset and the potential future rental income, and it does not help their LHA tenants at all, as they may become homeless as a result of any such sale.

Another alternative may be to lease their properties to the local authority or a housing association (or charity), and while this may solve the problem for landlords in terms of their dwindling income from the property, it still does not help the actual current LHA tenant, (unless the LA/HA/charity, will keep the same LHA tenant).

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now