Local Authority rent guarantees could unlock PRS to UC tenants

Local Authority rent guarantees could unlock PRS to UC tenants

9:21 AM, 20th April 2021, About 5 months ago 7

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Rent guarantees and upfront cash payments from local authorities are most effective in opening up the private rented sector for people receiving benefits according to major new research from the Centre for Homelessness Impact, the Behavioural Insights Team and the National Residential Landlords Association.

The study found these approaches had the greatest positive impact on landlords’ openness to renting to people in receipt of benefits, however, the overall willingness of landlords to rent to those in receipt of benefits still remained relatively low, highlighting the need for policy changes to be made to drive change.

For many years, rising rents and shortages of social housing have put pressure on large numbers of people and families, significantly increasing housing vulnerability, especially for those receiving benefits. This has been compounded by the increase in Universal Credit (UC) claimants as a result of the coronavirus pandemic. Recent government figures show a doubling from 3 million people in March 2020 to 6 million today which has made finding solutions that work for tenants and private landlords more urgent.

The centrepiece of the new research was an online trial involving more than 2700 landlords across England and Wales. Each participant was asked about different scenarios to understand how they would react and respond, across two broad areas:

Whether disclosing additional information about a tenant has any impact on increasing landlord willingness to continue with the application of someone receiving UC. Landlords were sent information on:

  • Pre-tenancy training: A certificate of completion and schedule for a tenancy skills programme
  • Budget planner: A table of the tenant’s income & expenditure
  • Alternative payment arrangement (APA) leaflet: Information about APA, which is the process in England whereby housing benefit is transferred directly to the landlord (as opposed to being paid as part of the lump sum UC payment to the tenant)

And:

Which Local Authority incentives or support programmes are most effective at increasing landlord willingness to rent to someone receiving UC, considering:

  • £1000 cash upfront: a cash payment upon signing a tenancy agreement;
  • Rent guarantee: a written guarantee from the Local Authority that they will cover late or unpaid rent;
  • Deposit bond: a cash amount equivalent to one month’s rent set aside to cover any costs a landlord may incur during the course of the tenancy;
  • Support from a landlord liaison officer: a dedicated resource that acts as a single point of contact for private landlords who need support with a tenancy

Landlords who received information about budget planners, pre-tenancy training or APA reported very similar willingness to rent to potential tenants as those who received no additional information. This suggests that these are less effective at changing landlords’ attitudes than previously expected.

Significantly, the study indicates that the willingness of landlords to rent to people receiving UC remains low. Even with the strongest interventions, landlords’ willingness to let properties to people at risk of homelessness fell between ‘somewhat unlikely’ and ‘neutral’ (with neutral being the middle point of a 7-point scale).

The study was commissioned by the Centre for Homelessness Impact, a What Works centre that supports the use of data and evidence in bringing about a sustainable end to homelessness. The research was conducted by the Behavioural Insights Team, one of the world’s leading behavioural science organisations, in partnership with National Residential Landlords Association, the UK’s largest membership organisation for private residential landlords.

Dr Ligia Teixeira, Chief Executive of the Centre for Homelessness Impact said:

“Taking an evidence-based approach to unlocking the private rented sector for people in receipt of Universal Credit who were previously less likely to gain access, is just one way in which we might end homelessness sustainably by focusing on prevention instead of mitigation.

“By making sure more housing options, including the private rented sector, are available to people who are in receipt of Universal Credit and at risk of homelessness, these trials help us move towards an environment where both landlords and prospective tenants have their needs met.”
Ben Beadle, NRLA Chief Executive, National Residential Landlords Association said:

“The private rented sector can play a valuable role in providing longer term accommodation for those at risk of homelessness or struggling to maintain a tenancy. It is vital that policymakers heed the findings of this research to engage with landlords effectively and ensure they are confident that any risks they perceive will be addressed.

“As the research shows, the central element for landlords is continued rent payments. Government holds the key to this, through continuing to link local housing allowance to market rents, improving the administration of Universal Credit and better utilising guaranteed rent schemes at a local level. Without taking these vital steps, the Government will not tackle the homelessness crisis.”

Eva Kolker, policy lead for housing and homelessness from the Behavioural Insights Team said:

“This has been a great partnership with the Centre for Homelessness Impact and NRLA producing some really important results with policy implications for both central government and local authorities. Most research on reducing homelessness through the private rented sector focuses on tenant behaviour, but far less looking at landlord decision-making and behaviour. The participation of the NRLA in this partnership allowed us to run the UK’s first ever behavioural trial with landlords.”



Comments

by Ian Narbeth

9:42 AM, 20th April 2021, About 5 months ago

What nobody in Government says is: "We need to ensure that PRS landlords are not hung out to dry. We need to allow them to protect their income and assets. We recognise that when tenants default, landlords become involuntary creditors. We also recognise that a minority of rogue tenants cause a disproportionate amount of problems and that many PRS landlords are rightly fearful that if they are unfortunate to get such a tenant they may suffer and their livelihood and income may be destroyed. We will take steps to ensure that the interests of the millions of decent landlords are properly taken into consideration and protected."
Don't hold your breath waiting for a politician to utter those words.
A rent guarantee from a Council is a good starting point but it must be unlimited. If it takes two years to get a defaulting tenant out, limiting the Council's liability to two or three months' rent is useless. (As an aside, the moral hazard of landlords not taking action to evict non-paying tenants and simply taking the Council's money needs to be addressed.) Another factor is damage to the property. A rent guarantee won't cover damaged carpets, bashed-in walls, over-grown gardens turned into dumping grounds or the myriad other ways a minority of tenants find of damaging what is supposed to be their home.
We also need both major political parties to support a fair deal for landlords. As we have seen with the moratorium, even a "Conservative" government can stick it to landlords. Even if this Government helps landlords, will a future Labour government do so? If not, why should landlords take the risk? Politicians, both at Westminster and locally, need to realise that trust of politicians was low among landlords before COVID. It is much lower now.

by Gunga Din

10:05 AM, 20th April 2021, About 5 months ago

Excellent post by Mr Narbeth.

Of the four incentives:-

˚ The £1000 up front payment will have to be location-specific, and I'm not sure what the thinking is behind this anyway.
˚ The rent guarantee would be unnecessary if direct payments were authorised from the outset. Landlords shouldn't be the risk-takers for the gov't's social experiments (making citizens manage their own finances).
˚ A deposit should be paid to the landlord before tenancy commencement, not left to the tenant to arrange it as a discretionary payment as now. There should be a commitment to cover damage beyond the limit of the deposit.
˚ Liaison Officers will be busy! A major culture shock for the UC / LHA and we'll believe its effectiveness when we see it.

Additionally,
1) the current situation whereby UC won't do or commit to anything until there is a signed tenancy agreement, (thereby creating a legal tenancy) needs to change such that landlords can see what support they are going to get before signing.
2) rent payments and the deposit must be paid in advance as with the rest of the PRS, as opposed to in arrears.
3) UC / the local authority needs to sign a guarantor agreement for the tenancy as is the norm for the PRS.

by Michael Bond

10:17 AM, 20th April 2021, About 5 months ago

This may look superficially attractive but does not take into account the nature of local government and those who work for it. Who has not spent hours trying to find a telephone which someone actually answers only to be told that the only person who can respond to their question is: "in a meeting" (discussing last night's football at the coffee machine); "off sick" (decided to take the day off); "not in today" (can't be bothered to think of an excuse for not coming to work); etc?

by Peter G

12:18 PM, 20th April 2021, About 5 months ago

The council offer for my btl seemed attractive until it became clear that once a tenant was installed the council took no further responsibility for their behaviour, damages or other issues. I sadly declined so as not to be burnt again, so the Council lost another potential family home.

by Peter G

12:20 PM, 20th April 2021, About 5 months ago

The council offer for my btl seemed attractive until it became clear that once a tenant was installed the council took no further responsibility for their behaviour, damages or other issues. I sadly declined so as not to be burnt again, so the Council lost another potential family home.

by Paul Essex

9:11 AM, 21st April 2021, About 5 months ago

Perhaps this should be seen as an opportunity - come on NRLA make a standard 'lease to council' document which covers all of our concerns. Then we should all refuse to use a council's own agreement.

by Landlord Phil

10:27 AM, 24th April 2021, About 5 months ago

What seems to be constantly missed is my experience based problem. Its not that I don't trust the renter, I don't trust their paymaster. If they are to guarantee the the tenancy, they must act as a legal guarantor. That means they show up as such on the ast. If not, successive governments can change the policy mid tenancy, leaving us with no recourse in court. Its happened to me on the direct payments policy. It got changed mid tenancy & my payments stopped. Yes it was years ago, but there's nothing to say it can't happen again. Chucking money at creating a system is not the way. There is a simple solution there now in the form of the legal guarantor option, it just needs using.


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