More Benefits Caps – Implications to LHA Landlords?

More Benefits Caps – Implications to LHA Landlords?

10:50 AM, 9th July 2015, About 6 years ago 33

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More Benefits Caps - Implications to LHA Landlords

I am a landlord in the North East, most of my tenants are benefits claimants.

When the new £20,000 benefit cap comes (£3,000 pa reduction) who will be hit hardest?

How many LHA tenants will this affect?

When direct LHA payments to landlords are replaced with Universal Credit, will landlords get knocked for this £3,000 a year? I suspect they will and there’s nothing we can do about it other than take the negative cashflow hit of rent arrears and the expense of evictions.

Am I the only person who’s considered this effect of yesterday’s budget?

All talk seems to be about the tax relief on interest rate announcement but I’ve been hit at least three ways; tax relief on interest reduced, increased insurance premium tax and worst of all the benefits cap.

It’s like I’m on death row. I can’t sell up because we maxed out on remortgages before the credit crunch. The properties are in negative equity but even if the values recover by the time the budget announcements hit my cashflow I still can’t get out due to the CGT implications. I built my portfolio based on a leveraged finance strategy. In other words, even if the sale price is equal to the mortgage debt, CGT will still be payable because I originally purchased most of the properties for less than I now own on mortgages. Most of the larger landlords in the North East are in the same position.

Talk about being stuck between a rock and a hard place!

I had hoped that writing this would clear my mind and make me feel better but it hasn’t.

It seems clear cut it’s curtains for me and many of my tenants will become homeless. Employment is so bad around here it is highly unlikely that my properties will be sold to homeowners regardless of the price. Many other landlords will be in the same situation so where are all these LHA tenants going to live and what’s going to happen to all of these properties?

Does the Government have the funds to buy up all the properties that will become vacant and re-home all of the people who will become homeless back into them?

I will be sending this to my MP.

Steve – Landlord, North East



Comments

by Ian Ringrose

23:39 PM, 9th July 2015, About 6 years ago

Remember that LHA rates are also being frozen, so will not track market rent!

by Ross McColl

8:50 AM, 10th July 2015, About 6 years ago

Reply to the comment left by "Puzzler " at "09/07/2015 - 12:21":

You can pretty much guarantee that the entire amount will hit housing benefit. The 3 main benefits that claimants receive are Income Support/ESA/Job Seekers, Child Benefit and Housing Benefit. The first 2 will not be reduced which leaves only 1 other option. When the £26k cap came in a number of our tenants housing benefit went from close to £200 per week down to 50p per week. We evicted virtually all of them. We are now gearing up for the next round of evictions. A very costly exercise which will see a number of good people forced into bedsits and temporary accommodation. Not something we want to do but we will have no choice. In my area virtually all of the families that have more than 2 children will be hit hard. I'm concerned from a business perspective but I also have genuine concern for a lot of good people who have fallen on hard times, some of which have been our tenants for 10 years plus. Ultimately the tax payer will be picking up the bill for the bedsits and TA at a cost of between £35 and £100 per night, so who is the winner here?

by paul johnson

9:50 AM, 10th July 2015, About 6 years ago

Reply to the comment left by "Ross McColl" at "10/07/2015 - 08:50":

I agree Ross, I remember the days of Bed and Breakfasts making a fortune by supplying "emergency" accommodation and families sharing a room at inflated prices,ruining seaside towns in teeside, its a total false economy, We as a society wont allow kids to sleep on the street so the people who will be affected will be working poor.
BTW which area do you operate i'm in Teeside and i don't think it ill affect me as much,

Also do you know if under 21's with kids will be affected by the change?

by Alan Loughlin

10:19 AM, 10th July 2015, About 6 years ago

they could try something novel like working.

by paul johnson

10:24 AM, 10th July 2015, About 6 years ago

Reply to the comment left by "Alan Loughlin" at "10/07/2015 - 10:19":

obviously your a PHD sociologist Alan, your about as informed as the last post ranting about Landlords, life if you get out and experience it, is a little more nuanced than that.
Most of my tenants claim HB and most work, they will be the ones hit hardest
You should stop watching Benefit Street.

by Alan Loughlin

10:32 AM, 10th July 2015, About 6 years ago

the chancellor summed it up very well, in that the emphasis needs to be shifted from those who claim benefits to those that fund it, a very clever chancellor we have, we will go far as a country with him at the helm.
I was very unsure, but now very very glad I voted tory, this will rebalance the fairness in our society.

by Janet Carnochan

21:08 PM, 10th July 2015, About 6 years ago

I tend to agree with Alan. I have heard families say they are worse off working than not working, or if the second parent goes out to work again losing their tax credits makes them worse off. Work should always pay best.

by David Marshall

22:02 PM, 10th July 2015, About 6 years ago

Reply to the comment left by "paul johnson" at "10/07/2015 - 09:50":

With regards to under 21's entitlement to HB if they have kids this is the comment made by Gideon in his Budget speech to the house.

'We are also abolishing the automatic entitlement to housing benefit for 18-21 year olds.

There will be exceptions made for vulnerable people and other hard cases.'

I would guess that under 21's with dependants will be classed as vulnerable.

by paul johnson

22:07 PM, 10th July 2015, About 6 years ago

Thanks for that. I didn't think that the government would Penalise under 21s with children but mood their in at the moment you never know

by paul johnson

22:17 PM, 10th July 2015, About 6 years ago

I have to say regarding working tax credit's been cut for the poorest I do deal mainly with working people at the bottom end of society the vast majority do work and are claiming working tax credit. The benefit Street types that are t talked about are very small minority, usually very difficult to deal with but they are not representative of the majority of people who claim WTC.making The poorest poorer does not do anybody any good and just saying get a job is ridiculous to anybody who deals or works in the situation


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