Should you take Housing Benefit Claimants?

You may have noticed that the tide is turning when it comes to Housing Benefit tenants.

Consider, a couple of years back average Local Housing Allowance (LHA) levels were often as high, if not higher, than market rent for professional tenants, the rates available for four and five bedroom properties were mostly very generous, the rate for young singles were usually likewise, and getting direct payment was pretty easy if you knew how to play the game.

Since then LHA levels have been reduced from the 50th to the 30th percentile (and on average are 10% lower), the 5 bedroom rate has been removed, the rate for single people under 35 has been drastically reduced. Direct payment is only available if the rent level is set at the (now reduced) LHA level.

We’ve also got Universal Benefit now being phased in  – with claimants receiving all their benefits as one payment. Housing Benefit will be part of this.

Housing Benefit tenants tend to have bigger families and spend more time in the house, increasing wear and tear. Many smoke and have pets (of course you can state “No smokers or pets” but this then has to be enforced!). Benefit payments can be put on hold if their circumstances change and both the Government and Local Authorities have an agenda for direct tenant payment, which puts the Landlord at risk.

On the plus side, they usually stay longer as they’re not upwardly mobile.

The question is, how much of a premium do you need to make it viable to rent to Housing Benefit tenants? In my opinion, where you have a genuine choice (i.e. the property is in an area that attracts professional as well as Housing Benefit tenants) the premium required is an absolute minimum of 20%.

On a property where the LHA level is £500, I’d prefer to rent to a professional tenant for £400.

More and more of the landlords we manage properties for are coming to similar conclusions. Our system allows them to tag each of their properties according to a number of preferences, including which type of tenant they’ll accept.