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Lenders need to keep an eye on BTL landlords with tenants on Universal Credit

Almost two-thirds of private landlords with tenants receiving Universal Credit have had problems with non-payment and arrears, according to the latest research from the Residential Landlord Association’s research exchange, PEARL.

It found that 61% of landlords with tenants on Universal Credit have experienced them going into rent arrears, compared to 27% in 2016; on average, these tenants owe almost £2,400; 49% more than last year.

The statistics are very worrying and highlight the urgency in which the government needs to revisit the new benefits system.

The idea of the welfare reform is to simplify benefits for working-age people by merging income support, jobseeker's allowance, employment and support allowance, housing benefit, child tax credit, and working tax credit into one single Universal Credit payment.

But it has been plagued by problems since it was first announced in 2010 and recently, pressure has been mounting on the government to either delay or halt the next stage of the reform.

The main criticism is timings; it takes up to 35 days for claimants to receive their first payment, leaving them struggling to pay their bills.

This then, of course, has a knock-on effect on landlords who then cannot pay their mortgages as they are not receiving the rental income they need.

This could, in turn, see arrears and repossessions rise in the buy to let sector as another issue hits landlords who have already had a hard year with all the other changes to buy to let rules.

And even those tenants on Universal Credit who are receiving their payments may not be passing them onto their landlords due to their reduced disposable income as a result of the scheme.

The government has admitted that many will be worse off under the new system with The Times newspaper reporting that some families could lose up to £200 a month.

And as Universal Credit is paid to the claimant, many landlords are concerned that if money is tighter, rental payments will be one of the first casualties.

According to the RLA, many of their members feel there should be an option where tenants on Universal Credit have payments paid directly to their landlord.

The government has already announced that it will delay the latest stage of universal credit and take a more measured’ approach starting in 2019 with a small number of people to ensure it works.

But there are still fears that the system is not fit for purpose, that people will continue to experience delays in receiving their payments and that once it is in place, too many families will be worse off as a result.

But whatever the outcome, it is highly likely that landlords across the UK will be adversely affected too. It is therefore important that the landlords’ lenders keep a close eye on their buy to let tenants’ ability to keep up with their repayments if they have tenants who are on or are soon to be moved to Universal Credit.

The most successful outcomes for both lender and borrower tend to be when the lender engages with third parties to ensure each and every borrower’s best interests are looked after whilst having a full and detailed understanding of the tenants’ situation also.

Dave Miller is account manager at Spicerhaart Corporate Sales.

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    Hardly news is it, most of us have past experience here, we know that we will have problems getting the rent paid when renting to people on benefits so we don't rent to them, not rocket science is it?

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    Tax payers money for rent should NOT under any circumstances be paid to the tenant.

    In all instances it should be paid direct to the landlord, that way the money is GUARANTEED to be used as intended. Think of how much court time could be saved etc, less evictions means less stress on the system.

    As Andrew above says, its not rocket science

    Until then, housing benefit claimants need not apply for any of my properties

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    Maybe shelter can take note rather than attack landlords and agents for having reservations with this part of the market

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    Simple business sence do not take persons on any sort of benefit.
    Never have never will.

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    Depends which area you are in really doesn't it?
    Sometimes there is no choice and what about people who are working and getting benefits?

     
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    Still say no or you are dicing with danger. You are running a business not a charity. If you have a b2l mortgage the lender will expect their repayments the same every month the same amount on the same day, no excuses. The lender would and will not agree to you taking on tenants on benefits. Simple business rules apply.

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