The widening gap between housing benefit rates and market rents means that many buy-to-let landlords are now forced to rely on ‘incentives’ provided by councils in order to achieve anywhere near what they would get on the private rental market.
With rents increasing, the gap between local housing allowance (LHA) rates and actual rents in some areas is considerable.
The biggest disparity between housing benefits and market rents is unsurprisingly evident in London, where some landlords have to accept as much as £200 a week below market rental value in order to accommodate renters who rely on housing benefit to keep a roof over their heads.
One landlord we spoke with yesterday said that he had little alternative but to recently evict a young family in receipt of housing benefit, because the rent was not sufficient to cover the property’s expenses.
The landlord in question was receiving £365 a week from his previous tenants, in accordance with the LHA. However, he has just re-let the same property for £520 a week to private rents who can afford to pay the market rent.
Part of the problem is that the rates of LHA are currently frozen, meaning there is no link between the benefit and real term rents, which are rising.
According to a new investigation by The Guardian, councils in London spend more than £14m a year on private landlord “incentives”.
Last year private landlords in London received incentives of up to £8,300 each more than 5,700 times, in addition to rent, in an effort to encourage them to house people who were either homeless or at risk of being homeless.
Several councils argue that it currently costs less money in the long-run to pay incentives than fund the building of social housing.
But increasing rents, benefit freezes and a lack of social housing are contributing to the escalating housing crisis, leaving many households living in private rented accommodation at risk of becoming homeless.