What do I need to know about renting to unemployed people?

by Readers Question

9:41 AM, 24th August 2020
About a month ago

What do I need to know about renting to unemployed people?

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What do I need to know about renting to unemployed people?

As a landlord who has always rented to employed people, the prospect now is that I will have tenants who either become unemployed mid tenancy or who are unemployed already as they apply to a new tenancy. What are the actual pitfalls and watch points?

I know many landlords avoid tenants claiming benefits as a rule, but given the current situation with many decent tenants having their income slashed, we may not be able to. What are the actual issues with this source of a tenant’s income?

Also, does rental income protection insurance cover all of this, or is that a minefield of exclusions, just like my travel insurance has proven to be in the last few months?

Many thanks

Matthew


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Old Mrs Landlord

8:42 AM, 25th August 2020
About a month ago

Reply to the comment left by Bill irvine at 25/08/2020 - 07:57
Given the rising unemployment rates, current and forecast, one wonders for how long this will remain a "niche area" of the market. Already DWP staff are undertrained, overworked and making mistakes so that, as you say, problems arise with payments intended for landlords going astray on an all-too-regular basis. Landlords experienced in dealing with UC claimants tell us that there is no simple way for landlords to, as you suggest, "raise their complaints with the DWP hierarchy" and any response is a long time coming and frequently fails to resolve the problem.
Learning that almost a third of cases give rise to problems certainly does not fill landlords with confidence for the months ahead when the furlough scheme ends and we are unable to evict tenants for whom we receive no rent.

Mick Roberts

10:10 AM, 27th August 2020
About a month ago

Reply to the comment left by Robert Mellors at 24/08/2020 - 13:03
Ha ha brilliant Rob, send that to Shelter why Landlords aren't taking benefit tenants any more.

Monty Bodkin

12:04 PM, 27th August 2020
About a month ago

Reply to the comment left by Bill irvine at 25/08/2020 - 07:57
Around 70% of all tenants reliant on HB or UC pay their rent on time and in full. It's the remaining 30% that are either late with payments or don't pay at all.

That is quite a damning statistic. Do you have a source for that?

By comparison 90-97% of working tenants pay their rent on time and in full, depending on which survey you read.

Bill irvine

18:46 PM, 27th August 2020
About a month ago

Reply to the comment left by Monty Bodkin at 27/08/2020 - 12:04
Hi Monty

During the Local Housing Allowance (LHA) Westminster inquiry in 2010/11 when I gave written & oral evidence, on behalf of SAL, DWP and some of the other contributors, pointed to these facts.

It was also discovered, around 20% of cases, managed by PRS landlords, had debts in excess of 8 weeks rent arrears, permitting redirection of the LHA to the landlord. Few, if any, of the landlords, made any effort to reduce arrears below the 8 weeks' level, as they feared "LHA direct" would immediately stop.

DWP produced data, more than 3 years ago, which showed around 30% of social landlord tenants (housing associations & councils) had their rent paid direct to their landlord, via the APA scheme, whereas, in the PRS, the figure was less than 10%.

Southwark Council was one of the first areas of Britain to see Universal Credit full service roll out. Its rolling reports on the impact of this on housing have found that there is a noticeable decrease in the levels of arrears for those claiming Universal Credit in 2018 compared with those transitioning to Universal Credit in 2016.

The Smith Institute report commissioned by Southwark Council states that "it is the earlier and increased use of APAs, rather than other reforms, which have contributed most to reductions in arrears levels observed".

On average, each person in the 2016 group was six weeks in arrears at the end of the period compared with just under two weeks for the 2018 group.

The report adds: "Originally designed to apply to a handful of cases, more than 40% of Southwark tenants claiming Universal Credit have now entered into APAs with the council to help manage their finances".

Social Landlords can apply for an Alternative Payment Arrangement via an online portal once their tenant meets one or other of the Tier 1 factors. In the case of the SRS the award of the APA is immediate.

In the same report, the autors point to the fact - "54% of those private landlords who have let to tenants on Universal Credit in the past 12 months have seen them fall into rent arrears. Of these, 82% said that the arrears only began after a new claim for Universal Credit or after a tenant had been moved to it from housing benefit."

Why is there such a big discrepancy?

a) PRS landlords don't have access to the SRS portal or anything equivalent;
b) Legislation was created that allows much greater sharing of information between DWP and SRS landlords;
c) SRS tenants receive most, if not all, of their contractual rent & services charges, under HB or UC, whereas, private sector tenants must rely on the LHA
scheme rules;
d) Critically, APAs are easier to access in the social sector and tenants receiving Housing Benefit, simply tick the box, requesting payment goes direct to the council or housing association.
e) Around 50% of SRS landlords employ specialist staff to help navigate their tenants through the enefits maze and assist them complete and prosecute their claims for HB and UC.

I hope this, at least, partly explains why the figures differ so much.

Bill

Bill irvine

19:12 PM, 27th August 2020
About a month ago

Reply to the comment left by Old Mrs Landlord at 25/08/2020 - 08:42
Hi Old Mrs Landlord

There is no doubt, things are going to get worse, over the next few years, for tenants & landlords alike. Take away the financial measures, introduced by the Chancellor, it can only add to the unemployment numbers, more tenants becoming reliant on state benefits, and the every day struggle of managing on a low income.

In February 2020 we had 2.8 million claiming UC. By July that figure had increased to 5.2 M. Unemployment is expecteed to add between 2-4 million more misfortunates to the pot, with another 3 million, currently claiming "legacy benefits" (JSA, Income Support, Tax Credits, ESA and Housing Benefit) waiting to receive their Managed Migration Notices, forcing them to move over to UC.

DWP has started a recritment drive for 13,000 additional "Work Coach" posts. These new recruits will be challenged with assisting claimants seek and secure employment. I spoke to one of the more experienced Work Coaches a couple of weeks ago and asked him for his opinion. Not surprisingly, he welcomed having additional colleagues to call on, because he reckoned there will be a hell of a lot more disgruntled claimants when they discover that, on average there's around 20 people applying for the same job; most of these involve wages that are equal to or slightly above minimum earnings; and for every £ earned for most single, able bodied claimants, working will attract a bonus of only 37 pence for every £ earned.

Bill

Old Mrs Landlord

18:01 PM, 28th August 2020
About 4 weeks ago

Reply to the comment left by Bill irvine at 27/08/2020 - 19:12Thanks for the info. in this and your other posts Bill. Now you've really depressed me! Obviously with hindsight we should have sold up a couple of years ago, but we did not want to evict decent tenants plus rents were just beginning to creep up a little in our area after years of stagnation, so now we just have to grin and bear it. I knew regulations were stacked against private landlords versus social where benefit tenants are concerned, but had not realised the full extent of the blatant discrimination, yet Shelter never aim their venom at the social landlords who discriminate on the grounds of affordability, just a the PRS does.

Mick Roberts

17:16 PM, 16th September 2020
About 2 weeks ago

Reply to the comment left by Bill irvine at 27/08/2020 - 18:46
Yes Bill, I did exactly this in wanting to keep the tenant in arrears forever. HB staff at first din't get it, but when I said that arrears tenant is Gold-dust, I'm finally being paid, I want to keep her forever, HB staff said Ooh yeah.

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