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Friday, August 08, 2014

HB only benefits rich landlords

I read with interest this rather misguided commentary on the relationship between housing benefits, landlords and rents.  It suggests that housing benefit is just forcing up rents and going straight into the pockets of rich landlords.

In my view it fails very simply to recognise the commercial realities of renting to tenants with benefits. Landlords need a premium to make it worth it.

Housing benefit is not fueling rent increases
His argument is that housing benefit increases are fueling rent rises and thereby feathering the nest of landlords.  Firstly, outside the bubble of London real rental levels aren't rising.  Payments from the public sector far from forcing up rents just allow benefit tenants to compete with private sector tenants.  Even then they often cannot afford the best properties or the higher rents for the better areas.  A landlord renting to a tenant on benefits faces exposing themselves financially to individuals with limited or no capital and by definition limited income.  The reality is that a small financial set back will often mean that a landlord will not receive their full rent and will be forced to shoulder the tenants hardship. 

Taking benefit tenants means taking on more risk
Any businessman & I include landlords as small businessman is prepared to take on additional risk if they are compensated by extra reward.  This means additional rent and or a guarantee that they will receive the entire housing benefit.  Without this the economics of renting to benefit tenants simply doesn't work.  If this becomes the case benefit tenants will be forced to live in the cheapest & the worst areas or government and us the taxpayer will be forced to pay the astronomical costs of having to provide and manage massively more public sector housing. 

If renting to tenants is so attractive why are so many landlords leaving benefit tenants alone?

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