No job + no guarantor = No Home and Crisis wonder why?

by Mark Alexander

11:25 AM, 25th December 2012
About 6 years ago

No job + no guarantor = No Home and Crisis wonder why?

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No job + no guarantor = No Home and Crisis wonder why?

Crisis LogoAccording to the housing Charity “Crisis” only 1.5% of private landlords across the UK are willing to rent to benefit claimants aged under 35.

Changes in benefit rules have meant that single people under the age of 35 can now only claim benefits which are sufficient to rent a room in a shared house. With increased demand though, Private Landlords are in a much better position to “cherry pick” their tenants in order to minimise risks and maximise returns.

The risks of renting to benefits tenants are three-fold and are set to increase:-

1) Housing benefits are paid directly to tenants, not private landlords. If a tenant chooses to misappropriate those benefit funds and spend the benefits on something other than the rent, that’s not a crime. Many landlords argue this should be treated as fraud but the authorities do not see it this way and believe that the recovery of unpaid rent should be dealt with via the courts. However, it stands to reason that if a person is claiming benefits they do not have the ability to pay even if a private landlord wins a case in court. The costs of pursuing rent are prohibitive and the minimal chances of recovery make the use of the legal system to recover debts futile.

2) If housing benefits are misappropriated and a tenant falls into arrears a private landlord currently has to wait at least two months before applying to have housing benefits paid directly to him. No such rules apply to Registered social Landlords at the moment, however, they too are going to become caught with a similar and much larger problem later this year called “Universal Credit”. When this kicks, the plan is to pay no benefits to landlords, whether they are private landlords, councils, housing association or charities.

3) No landlord can apply for possession until a tenant is two months in arrears. Technically a landlord can then serve a section 8 notice requesting a tenant to move out. However, once the two weeks is up, if the tenant does not move out no crime is considered to have been committed. The landlord then needs to apply to Court and that’s when the delay tactics and false defences begin to occur. Most private landlords have completely lost faith in this system based on experiences of the processes taking six month or more to recover possession. Therefore, they have been serving section 21 notices to gain possession which technically can not be challenged as the law allows the landlord to request possession of his property on this basis without having to prove a reason. The tenant is still not compelled to leave though and by the time this notice has expired could now be four months in arrears. To add insult to injury, the tenant is still not compelled to leave the property and continues to break no laws whatsoever if he chooses to stay there, even if he’s still not paying rent! Try getting away with that in a guest house or hotel. The only way a landlord can gain possession is to get a Court order and instruct bailiffs. This can very easily take another few months, sometimes longer.

Can you see now why private landlords don’t want to take the risk of letting to tenants claiming benefits unless those tenants have a financially sound guarantor who is worth litigating against if things do go wrong? I haven’t even touched upon anti social behaviour of tenants or damage to property. You’d be forgiven for believing that the Police would take more of an interest in those two things wouldn’t you? Think again!

The long and short of the matter is that there is a massive under supply of property. Private landlords are business people and like all business people they simply want to minimise their risks. Therefore, it stands to reason that they will let their properties to the lowest risk tenants they can find and for as much as they can charge. That’s business!

No shopkeeper is going to leave his door unlocked at night so that hungry people can take food. No bank is going to leave it branches open with no security and the safe wide open so that poor people can help themselves to money. Why, therefore, should private landlords to be expected to have a social conscience  and allow people to live in their properties without paying for them.

Oh, by the way, the Registered Social Landlords and Councils are also turning their backs of housing benefits claimants too. There is a growing trend for these organisations to provide properties only to working families too. They are not really known for building shared accommodation. These organisation are often Charities, if any group should have a social conscience, should it not be them?

Is all of this right and will things change?

Written on Christmas morning whilst my family are getting ready to go to visit friends.

Bah Humbug!



Comments

13:09 PM, 25th December 2012
About 6 years ago

In addition to the above 33 councils have adopted Article 4, some boroughwide, which prevents investors to set up any new HMO's.

17:50 PM, 25th December 2012
About 6 years ago

Some Lenders and also some Buy-to-let Insurers won't let you rent to persons claiming benefit, be sure to check all the small print of your mortgages and your insurance policies otherwise you could come unstuck.
I lost faith in the benefit system years ago when renting to benefit claimants.
Where will all these people find accomodation?
It's a disgrace, but I won't be picking up the pieces thank you !!
- That may sound very un-christmas-like, but I 've been bitten before by the tenants redirecting the rent back to themselves without telling me, and not again thank you!!
That only touches the tip of the iceberg of what is hidden beneath the surface of taking on "less than perfect" tenants - a bag of worms, I would say.
It is not surprising we, landlords, are steering clear of as much trouble as we possibly can.

PS. Mark is a fab guy, I've spoken to him once, dealt with a company he runs/ran, got some of my lending through it! - cheers Mark for all the hard work you put in !

4:58 AM, 26th December 2012
About 6 years ago

Very neatly stated Mark; encapsulates what I have been stating for months.

The answer though is staring us in the face.

Allow direct payment of rent with no clawback allowed unless the DWP and council can prove in court beyond reasonable doubt that the LL was conspiring jointly with the tenant to defraud the DWP or Council.

Instant removal by the police once 1 month an 1 day in rent arrears, if the LL so desires it.

Everything else can remain the same.

Just these 2 things will instantly restore balance to the whole system and you will then have LL willing to let to DSS as they now have the 2 items mentioned above able to be enforced.

Of course we know that these 2 most important factors will NEVER be addressed by the poiwers that be and as you mention DSS tenants will find it increasingly difficult to source rental property in the PRS

It's the old story of a bad minority spoiling it for the vast majority.

Most DSS tenants are good tenants.

The experience of LL with bad DSS tenants has been enough to put them off taking them as tenants because of the issues of rent receipt and then eviction problems.

It is as plain as the nose on one's face what needs to happen.

Why do the authorities continue to ignore these 2 major issue which everyone in the industry know about but seemingly the govt is not aware of amongst also the housing charities, who all seem oblivious as to what is going on.

It would also be help if the govt could take BTL mortgage lenders to task, to lift the restrictions they have on LL letting to DSS tenant.

If govt managed succesfully to resolve these problems i believe it would have a massive transformative effect on the whole letting industry.

It would encourage new entrants into the industry and would open up far more supply to ALL types of tenants

WILL IT HAPPEN!!!?????

NO, NO, NO,NO,NO,NO, think you get the message!!!!!?? ALL

Neil Robb

14:23 PM, 26th December 2012
About 6 years ago

Hi I had two bad tenants over the years. One a business owner the other DSS. Nearly all my tennants are DSS either I have been very lucky, so far alot of my tennants get paid direct them send it to me.

When I go to my properties I am very impressed at the way they have been looking after my properties often making improvments.

I look at the market rent, reduce the amount I charge sounds mad but works out a lot cheaper than voids. I try and get repairs done quickly result happy tennants that don't want to move win win for all.

If my tennant has a problem I listen and understand we can all be short of money normally with in th week we are all square.

I really like Paul Barretts idea if only the authorities would do it.

Merry Xmas to all and to Mark for his site I learn a lot on here.

Anthony Endsor

23:12 PM, 28th December 2012
About 6 years ago

I have fallen foul to this also, just recently. I took on a housing benefit tenant in May last year. I have not had any payment whatsoever for this property to date. The property needed some work doing at the beginning so rather than take a deposit I let the tenant's father do the work that needed doing. Since then, I have tried to pursue the rent over the months, and just had all sorts of excuses about problems claiming housing benefit etc. My response to each of them was 'I don't care what problems you may be having, the fact is the rent is owed to me and I don't care how it is paid as long as it is'. Sadly however it just doesn't work. The section 8 route is a no go as how can you prove the rent hasn't been paid? So it seems my only option is to issue a section 21 at the end of the tenancy in May. Great! 12 months without rent, and to add insult to injury the front door has since been kicked in, apparently by her ex-boyfriend. So come May, I'll have to apply to the courts to get her out, and then wait until I can get bailiffs involved as I doubt she will leave quietly. That's the reason we don't let to housing benefit tenants. I've learnt the lesson the hard way.

Mark Alexander

0:01 AM, 29th December 2012
About 6 years ago

I agree that we will not see a reversal and that Direct Payments are a thing of the past. However, I do think a change in the law is required to encourage investment into the provision of housing for benefits claimants, particularly under 35 year old singles. With the immense pressure that Charities can bring to bear this just MIGHT be achievable.

Mark Alexander

1:06 AM, 29th December 2012
About 6 years ago

Sorry to hear this all too familiar story Anthony. Presumably there was no financially stable person acting as guarantor for this tenancy? This is a classic case for why it needs to be a crime for people to misappropriate housing benefits. It's no wonder that 98.5% of landlords are now say no more!

11:50 AM, 29th December 2012
About 6 years ago

living in the real world can be very difficult for some charities, governments and council housing departments.

we may have to resort to RENT BOOKS. upon every payment made, both the LL and tenant sign the book. no signature no evidence of payment.. but the book must be from the start of the tenancy and every tenant must have one. landlord keeps the books.

Mark Alexander

12:00 PM, 29th December 2012
About 6 years ago

I watched Will Smith's film "The Pursuit of Happyness" again over Christmas. Now that's how things should be. Give people an incentive to get off their backsides.

I've just got back from a friends wedding in the Cotswolds. Amazing hotel and service but not one of the accents of the staff was English. Why are these people working whilst English people are not? Are they really so much better at Customer service or is it that they have an INCENTIVE to work?

8:24 AM, 30th December 2012
About 6 years ago

it's called " work ethic "

the belief that the world is your slave and you are it's master. might have been the case 200 years ago but ....times have changed.

so now we have a delusional minority that believes they have no need to work as they do not have to work.

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