Renting to tenants on housing benefit – yes or no?

by Ed Firmin

Posted on Wednesday, October 14th, 2015 at 10:00

Renting to tenants is never going to be without its problems. But should landlords consider letting their property to those that receive housing benefit?

There are so many arguments against it, that’s for sure.

Some mortgage lenders won’t allow it, so check this out first if you want to think about this as an option, you might be thwarted at the first hurdle!

You also might want to explore any rent guarantee insurance you might have, again, renting to tenants on benefits may invalidate the insurance policy you have in place.

Taking that aside, then you do have to consider several factors. Housing benefit that is received is generally less than the market rent, so as a landlord, you either have to think about whether you would accept a lower rent, or ask your tenants to make up the shortfall. Obviously with tenants on a low income, this could be a problem for them, and they may find themselves in difficulties now and again, so you have to prepare for that.

The rules were changed a few years ago, and rent is no longer paid directly to the landlord, but to the tenant in the majority of cases, so you have to put your trust in the tenant to then pay it to you.

If a tenant does default on their payment to you, it can be very hard to try and claim the money back as there simply isn’t the money there to claim in the first instance.

With all that in mind, you can see why a landlord would avoid it like the plague.

But there are those that do, and so in light of the above, is there anything that landlords can do to give themselves a bit more reassurance against any potential financial losses?

You could look at getting a guarantee from a family member who could pay their rent if they find that they can’t.

Do a little bit of research into where they were living before, if they have a reference from another landlord, for example. This will help to reassure you if you find out that they have previously been able to afford their rent, and have always paid on time, for example.

If you do decide to take on tenants that are in receipt of housing benefit, then there’s just some additional considerations to overcome, but it’s not to say you won’t have long-term, loyal tenants. Just be aware of the system, and any additional admin you need to cover off as a result.

If you would like some advice on what taking on a tenant on housing benefits would mean for you, then please get in touch here.

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