Fact over fiction: landlords are not milking the Housing Benefit system

Vincenzo Rampulla NLA Public Affairs Officer

Members of Parliament are set their homework for the summer recess, by Doctor Vincenzo Rampulla.

Today, MPs get released to travel back to their constituencies for their summer break (lucky them).

While here at NLA Towers we wish them happy holidays, I’ve got a bit of a summer task for them: I’d like them to go back to their constituencies and have a proper conversation with 10 or more landlords over the course of their summer break.

It should not be difficult; there are somewhere around one million landlords across the UK. But it is crucial that our lawmakers get a better sense of what it is that landlords do, why they do it and the issues they face while going about their business.

As I’ve previously posted, the Government’s LHA proposals are going to cause significant amounts of pain for tenants and landlords. And it is a clear area where MPs and Ministers would benefit from a better idea of why landlords make the decisions they do.

The perception in Parliament is still that LHA landlords have been ‘milking’ the system and taking the taxpayer for a ride. Yet the evidence points in the other direction:

The perception: The Government has based their rationale for capping Housing Benefit and cuts to LHA rates seemingly on the moral outrage at the Daily Mail and Telegraph stories which have headlines like: “Somali asylum seeker family given £2m house… after complaining 5-bed London home was ‘in poor area’” and “Family claims £147,000 a year in housing benefit for seven bedroom home.” These articles give the impression that landlords up and down the country are making piles of money out of housing benefit.

The reality: The average LHA award is £113.38 per week which is £491.31 per month. That’s hardly profiteering. Moreover, Ministers have admitted in Parliament that from one million LHA tenancies: “…fewer than 100 customers…received the maximum local housing allowance rate [£1,800 per week]. All these customers are located in the central London broad rental market area.”

That is an incredibly small number of cases given the scope and scale of the changes the Government is proposing.

Surely the real issue that Ministers should be trying to tackle are those local authorities who have been allowing these excessive claims?

The perception: Just listen to some of the views of MPs on landlords and Housing Benefit during a recent debate on Housing Benefit:

Oliver Heald, Conservative MP for North East Hertfordshire: “The effect of the local broad rental market area, which takes in surrounding areas such as Fylde, has been to put up all the rents in the centre of Blackpool. There are other examples, including one in yesterday’s Evening Standard showing that housing benefit rents are higher than ordinary rents.”

Steve Webb, Minister of State Department of Works and Pensions: “What we cannot do is to continue to pay out blank cheques to private landlords – this is a blank cheque not to tenants but to private landlords. Rents have been going up and the state has been a passive observer.”

Mark Field, Conservative MP for the Cities of London and Westminster: “It distorts the overall price level that landlords – often absentee landlords, of which there are far more – reckon they can get away with. That has a distorting effect on the rest of the free market in this area.”

The reality: The rhetoric is disingenuous. According to the Government’s own figures, 47 per cent of LHA tenancies are in receipt of the £15 excess which means that just under half of the LHA tenancies are below the maximum LHA rate available.

The bottom line is that 99 per cent of LHA tenants are going to lose out because of these proposals. While the average loss is likely to be only £12 a month, those who had previously become used to getting the £15 per week excess will lose even more – as much as £117 per month.

FACT:  cuts can be made to the cost of the Housing Benefit system but they cannot all fall on to the landlord. At the moment the Government seems to think that landlords can easily accommodate a 20 per cent cut in rents and still operate with the business risk that LHA presents. This is unrealistic.

4 thoughts on “Fact over fiction: landlords are not milking the Housing Benefit system

  1. Vince

    This is a cracking summary of the reality of LHA tenancies. Let’s hope your readership include many of the MP’s who will ultimately decide the fate of the market!

  2. Steve Webb Minister of State at DWP says ‘ LHA is a blank cheque not to tenants but to private landlords’ does he not know that the cheque now goes to the tenant?! He also says that ‘rents have been going up’ well wake up so have house prices, I suspect MPs salaries have also been going up. Private landlords charge more for benefit tenants because they create about five times the amount of work as non-benefit tenants. Private landlords do not actually ‘charge high rents’ the Rent Service fixes the LHA and any tenant on state benefit cannot afford more than £10 a week top up so the landlord’s hands are tied. When is government going to recognise what a fantastic job private landlords do in housing the needy – often when local authorities will not house these people. Does the country want cardboard city?

  3. So you think private landlords are milking the system? I am currently getting a 3.36% pre tax return which will fall to 2.56% pre tax return after the proposed cuts.

  4. I have previously rented to people on housing benefit. The benefit was paid to the tenant who always had a hard luck story as to why he could not pay me. He had another income from casual labour. The private rental income (market rate) is greater in comparison to that of the housing benefit. The property is abused and the landlord incurred a higher cost in remedial repairs. The landlord is certainly performing a service to his own cost. The bottom line is that I provide decent homes and therefore will not rent to those on housing benefit due to bitter past experiences.

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