In my years of being an estate agent and letting agent, if I had a pound
note every time a potential tenant has asked me whether a particular property
will accept people who are receiving DSS
benefits.
Why? Quite simply that’s because there’s large demand for properties
that will accept benefit claimants – SKDC have ‘waiting lists’ running into the
thousands which continue to grow. It is a specialised area of the market, and
one that you must not enter casually. However, for some Grantham landlords it is a very
lucrative market, and I know a few landlords who are buying to meet the tenant
demand.
These tenancies can work well, but it’s really important that the
landlord understands in advance how these tenancies work, and what the pro’s
and con’s are. I’ll go through these below.
Should I, Shouldn’t I?
The main question Landlords should ask is ‘do I need to
accept Housing Benefit Tenants to rent my property’?, For the vast majority
of Landlords, the answer to this question will be no – there will be a large
enough supply of good quality private tenants happy to pay the rent you want.
As such you’ll stick to the private market as it is, statistically, less
hassle. Grantham landlords generally need to consider a tenant on benefits :
- if
their property is in an area where there’s low demand from private
tenants, or
- if the
local market is such that there’s a shortage of private tenants generally.
What are the advantages?
If your property isn't in the best area, there are many!
- You can
get a premium rent for your property – SKDC, in fact all council's have a set
‘scale’ they pay against, based on the size of the property, and not based
on the area. As such if you’ve got a property in one of the poorer areas
of town, you’ll get more for it with a Housing Benefit tenancy than with a
private one.
- In many
cases South Kesteven District Council (SKDC) will provide a guarantee bond
instead of a deposit. This is usually capped at 1 months rent..
- Housing
Benefit tenancies statistically last longer – if you’re claiming benefit
and you want somewhere nice to live, the world is by no means your oyster!
As such when tenants get somewhere nice, they tend to stay longer.
- In
certain areas of town, a housing benefit tenant may be a safer bet than a
private tenant – a single parent with children is always going to be
entitled to funds, whereas a private tenant on low income and in / out of
work, may struggle more to pay.
- More
often than not, a decent letting agent should be able to arrange to
receive direct payment from SKDC, which mitigates the likelihood
of the tenant not paying.
What are the disadvantages?
There are a few here also. It's important you understand these in
advance.
- Rent is
paid in arrears, not in advance.
- SKDC, in fact all local
Authorities, make 13 rental payments a year instead of 12. You still get
the same amount of rent annually, only in smaller chunks.
- Without
wishing to over generalise, tenant often struggle to deal with issues that
arise (such as their benefit entitlement being changed) and deal with this
by ignoring it, or burying their head, rather than coming and telling you.
- If tSKDC overpays housing benefit, they will take it back from
whoever they paid it to. As such if we’re getting direct payment for your
tenant, and the LA subsequently decides the tenant wasn’t entitled to that
money, they will deal with it by simply taking the money back – that's
democracy for you!
- SKDC aren’t geared up to communicate with landlords, and very much
see the tenant as their ‘customer’. If the tenant's entitlement to benefit
changes, you can bet the local authority won’t tell you – the first you’ll
know is when the money stops coming in. As such Housing Benefit tenancies
can take a lot more management.
- If you
want to / need to get rid of your tenant, you can bet SKDC won’t help you – you’ll very much have to rely on the court process unless
your tenant is happy to play ball!
- Your
agent will lose a little bit of flexibility on which tenant they let to –
SKDC doesn’t like to see us making arbitrary decisions, and rejects
any form of 'discrimination'.
- The
secret to success is hence understanding the above and managing it. If you
get a reliable tenant, and a relaxed landlord, it can work really well and
deliver a great yield for the landlord. If you get an unreliable tenant
and an inflexible landlord, problems can ensue!
As such there can be problems
with accepting tenants in receipt of housing benefit. It’s not a market that
suits everyone and if you’re the sort of landlords that treats their rental
properties as extensions of their own home, it’s not the market for you. That
said, you can pick up a cheap property in one of the less upmarket areas of Grantham
and rent it for good money. I know a number of landlords who operate
successfully in this market.
