It’s one of the most crucial questions for the future of the housing system but the answer may be more complex than recent publicity suggests.
The alarm was raised when Fergus and Judith Wilson, the King and Queen of buy to let, revealed that they were evicting all of their tenants on benefit. A poll yesterday by the website spareroom.co.uk found that only 18 per cent of landlords currently rent to claimants, down from a third two years ago.
A combination of different factors seems to be at work here, starting with the April 2011 cuts in the local housing allowance, continuing with further cuts such as the overall benefit and culminating in concern about the impact of universal credit and the presumption that the housing element will be paid direct to the tenant rather than the landlord. The most worrying finding from the poll was that half of those currently letting to claimants said they wouldn’t after the introduction of universal credit.
However, a survey in London by the Residential Landlords Association (RLA) presents a more mixed picture despite the fact that the capital is where many of the housing benefit cuts are having the biggest impact. In contrast to the poll, 36 per cent of landlords say they continue to let to benefit claimants and 63 per cent say their tenants have not fallen into arrears because of the cuts.
In terms of specific changes, 59 per cent say they have not stopped renting to claimants under 35 because of the change to the single room rent but 74 per cent say they are more reluctant to let to claimants because of the benefit cap.
So far, so good for the DWP and its hopes that the private rented sector will absorb the changes but only 9 per cent of RLA members say they have reduced their rents because of the LHA changes and only 6 per cent say they would be willing to drop the rent so their tenants could stay in London. Meanwhile 46 per cent have concern that working age claimants whose benefits are restricted will be driven out of the capital altogether.
This is at odds with the hardline stance taken by the Wilsons across their 1,000-home portfolio in Kent. They say they will refuse to take tenants on housing benefit and have ended the tenancies of 200 existing claimants who should ‘get a job’.
In a series of media interviews over the last month, they have cited many reasons for this decision: principally the non-availability of rent guarantee insurance for claimants but also rising levels of rent arrears, the shortfall between LHA rates and rents, the prospect of direct payment under the universal credit and the availability of alternative Eastern European tenants who are working.
If you haven’t seen them yet, watch Fergus Wilson’s ‘If I’m heartless then all landlords are’ interview with Channel Four News and read his bizarre ‘Fergus calling Dave’ statement to The Guardian. Discussion forums reveal some frustration from other landlords with ‘the story that refuses to die’.
The extensive coverage has certainly raised the media profile of the housing benefit issue but are the Wilsons representative of private landlords as a whole? If the London survey perhaps suggests not, are the more professional landlords who tend to be members of national organisations taking a different attitude to the small buy-to-let investors in the website poll?
Richard Lambert, chief executive officer of the National Landlords Association, says its research shows ‘more and more landlords moving away from renting to tenants claiming benefits’. However, he says it also knows of many landlords who have never had a problem and specialise in the claimant market. ‘They tend to be the more experienced landlords with larger portfolios, who understand how to manage tenancies to ensure stability and minimise the risk of arrears.’
RLA consultant Bill Irvine argues that there is no need for landlords to follow the Wilsons’ lead: demand is high, margins are good and the threat posed by the universal credit is exaggerated. He says the government has already made concessions on direct payment and in any case the national introduction of universal credit will not happen until after the 2015 general election.
In the Commons this week, ministers played down fears of a private renting crisis. Housing minister Kris Hopkins said that ONS showed that rents were rising by 1.1 per cent in England and 1.9 per cent in London, which were both below inflation, and boasted about £2 billion of bids for phase 2 of Build to Rent. Asked by Labour’s John Healey how he would ensure that claimants were able to access the market, he said:
‘The key to making the private rented sector accessible to all is to build more homes for rent. That is why we are investing in the private rented sector through the £1 billion Build to Rent fund and giving £3.5 billion in guarantees to get builders building—and we will deliver 170,000 new affordable homes by 2015 through this process.’
Labour’s Sheila Gilmore tackled communities secretary Eric Pickles over his denial in an earlier debate that landlords were refusing to rent to people on housing benefit. Given the reports about the Wilsons, she asked, would he carry out a proper inquiry? Pickles replied that ‘there are a lot more private landlords than just that particular gentleman, and I do not think he represents anything that speaks of the sector as a whole. The short answer is no.’
Only time will tell if that complacency from Pickles is justified but Hopkins’s response of using stats about affordable homes that are not privately rented does not fill me with great confidence. Neither does his comparison between rents and inflation. At a time when rents are still rising faster than both earnings and the 1 per cent cap on increases in the local housing allowance it is completely irrelevant.
If the action taken by the Wilsons is unrepresentative of the sector as a whole, the caps and cuts are undoubtedly having an impact on landlords as well as tenants. It’s one that will vary around the country according to local market conditions but as demand continues to rise the pressure grows. Housing benefit may have taken the strain for more than 20 years but for how much longer?
by Jules Birch on ‘Inside Housing’ 23rd Jan 2014: http://www.insidehousing.co.uk/home/blogs/mixed-messages/7001775.blog