Propertymark has told a group of MPs that many benefit recipients are excluded from the private rented sector due to the inadequacy of Local Housing Allowance rates.
The trade body was giving evidence to the House of Commons Work and Pensions Committee which has launched an inquiry into benefit levels in the UK to help inform current and future government thinking on the adequacy of benefits. The MPs are also looking at the relationship between social security and the labour market.
Propertymark says LHA rates have been frozen since 2020 and have not kept up with market rents.
Drawing on research by the Bevan Foundation in Wales and Centrepoint in England, the trade body’s evidence highlighted the glaring gap between LHA levels and market rents and reaffirmed its call that LHA should be pegged at the thirtieth percentile, if not the fiftieth and topped up annually to keep up with market rents.
Propertymark also pointed out that reform of Broad Rental Market Areas could also reflect local areas rental areas more accurately and the important role that letting agents could play in improving the collection of rental data from the Valuation Office Agency.
The VOA collects rental data which feeds into government statistics and insight such as LHA levels. Unfortunately, despite the importance of submitting data, landlords and agents appear reluctant to do so and Propertymark recommends that the committee look to overcome some of the potential barriers.
The industry body also reiterated its concerns over the fact that Universal Credit has got some tenants into debt while waiting for the initial payment from the first five weeks, was completely unacceptable.
It recommended that the waiting period at the beginning of a claim be reviewed as well as turning UC advances into a grant rather than a loan and direct payment of the housing benefit element of UC should be paid directly to landlords as the default option.
Given the challenges to young people from the cost-of-living crisis, Propertymark also called for a temporary suspension of the Shared Accommodation Rate, and demonstrated the impact the Benefit Cap was having on large families especially in high rent areas such as London.
Timothy Douglas, head of policy and campaigns, comments: “We have called on the UK government time and time again to end the freeze on LHA rates and improve how Universal Credit operates in order to help its recipients' ability to obtain good quality and well managed housing.
“We hope the influential Work and Pensions Committee can also add its weight to the issue and force the UK government to address these urgent issues and reengage with stakeholders representing the private rented sector as a priority.”
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There was no such think as housing benefit when I was growing up. My very poor parents had to pay their council house rent out of what they both earned, while my siblings and myself were what was then known as latch key kids.
Council house rent has historically been very much below PRS rent. Last time I looked at it properly about 4 years ago it was less than half price in my local area.
There was not much else to rent in those times. The PRS did not exist, but the state provided even if they were prefabs in some instances. Correct me if I am wrong, but council or HA tenants do get HB these days.
There are far too many wealthy high earners hogging social rental properties who should either be charged full PRS market rents or obliged to move out to release an affordable rental property for those on lower incomes.
Robert, Bob Crow of the RMT union was a well know high earner hogging a council / HA place. Eddie Dempsey (also of the RMT) is another Champagne Socialist doing the same at the moment.
Robert, Nick you are absolutely correct. Maybe a concerted campaign against these two rascals like we as landlords have had would highlight how unequal this system is.
Maybe means testing the likes of these would put a bit more money back into the coffers ..
Agree Peter. FYI Bob Crow died about 10 years ago. He was 52. Apparently on £145,000 package back then. Died on an aneurysm and heart attack. No doubt too many big lunches. So one down one to go.
Nick
Unfortunately lots more still to go!
LHA fuels rent rises! When there are more people who can afford the rent than there are houses, rents go up. Increasing the ability of more people to pay that rent, without increasing supply, just pushes the rents higher.
We need more affordable housing.
Perhaps the Tories are on our side after all by failing to build enough new housing?
Who is going to build that "affordable"housing?
Define "affordable" housing. Everything is affordable to someone.
How much is it going to cost the tax payer to subsidize "affordable" housing?
Jo, the Govt needs to build it. Yes it will cost but if they build it and take the 'profit' out then it is cheaper. The long term savings from not paying LHA to all those in the PRS who should be in social housing, where the LHA costs are lower, & not paying for 'temporary' housing at extortionate rates would, in time, help to pay off the cost of building. The tax payer is already paying - in the form of the HUGE benefits bill. This money would be better spent on building homes.
If we keep increasing benefits then what incentive is there to work 👎🏻🙄. We will be going down the rabbit 🐇 hole with this policy.
2.5 million long term unemployed and over 1 million unfilled vacancies. We're already down the hole!
Are the job vacancies anywhere near where the unemployed live?
Work needs to pay better so people don't need 'in work benefits'. We have become a nation of part-time workers, supplemented by the tax payer! Make companies employ people full time not just for 16 hrs!
Tricia
A great many people can't work full time as they are caring for other generations such as elderly parents or grandchildren. There needs to be far more part time contracts available. It is actually far more lucrative to have 2 or 3 part time jobs instead of one full time one due to how NI works. Also some jobs are incredibly boring, especially at the minimum wage end of employment.
I deliberately work in this type of employment so I am fully aware of the realities of bottom end employment and because I need exercise and am too tight to pay for gym membership.
Jo, I get part time suits some people but also many people work 16 hrs to get the 'in work' benefits & prefer not to work extra hours for only a little more. This is effectively the tax payer subsidising companies 'bottom line!
Tricia
It's also the way the UC taper works. The extra money someone gets for working more hours is negligible after their extra travel to work costs have been taken into account. I played with a benefit calculator for one of my tenants to see why he wouldn't work more hours and by the time he had paid the extra bus fare, tax and NI he would have finished up with £4 for working an extra 5 hours. 80p an hour to clean toilets really isn't a very attractive option. Especially as he was likely to spend the extra 5 hours fishing for mackerel, which would cut his food bill by far more than the £4 he wasn't earning.
The system is basically wrong, especially the disparity between single people and claimants with children. Minimum wage is too low for anyone with any kind of work ethic or ability but it could be argued far too high for some of the completely useless people in some work places.
Jo
Many people have to move home to take up employment, which is why a healthy PRS which is not overpriced is vital to our economy.
No one, other than long term sick, has the right to a life of leisure fully paid for by the taxpayer simply because they want to live near their family and friends.
Tricia
It is far better for the economy, and for low earners, to be partly subsidised by the taxpayer than to be fully supported in a life of leisure.
Hospitality and the care sector etc. simply couldn't exist at rates which customers pay if the minimum wage was much higher, although care is still extremely expensive for self funders but the care industry isn't making massive profits. Many pubs and hotels are closing every month because they can't be made to pay with current wage rates.
The minimum wage for many workers has caused their wages to be held DOWN to that level rather than increased to that level, so it has had a mixed effect for lower wage earners.
Higher wages means higher prices for customers so its benefits are questionable. Look at our rail industry compared to our continental neighbours.
Personally, I wouldn’t raise LHA, just causes rent inflation. I would also tax benefits received after stripping out any HB part, why should you get more than 12.3K a year on benefits and not pay tax , and many families do get more than £236 a week.
I agree that benefits should be classed as taxable income as it would make the transition to work easier to understand.
I don't see the link between LHA and rent inflation. Most claimants would fail referencing for various reasons so would be excluded from most rental properties anyway. Any lower priced housing would be in very high demand from fully self funding applicants.
Jo, when the LHA rates went up significantly because of Covid, catching up with where they should have been, I discovered 2 of my properties were now at LHA levels. That is not the market I want to rent to so I put my rents up! There's the link between LHA & rent inflation.
I also have one tenant now in receipt of UC - I will be checking the rates next year to see if I can increase her rent without hurting her, because the rent is below market rates. If LHA has gone up so will her rent! There's another link!
Yes , give the lazy workshy layabouts everything and tax law abiding hard workers into oblivion
What could possibly go wrong ??
This whole ‘money for nothing’ culture is at the root of multiple problems not least it disincentives, lowers self esteem, promotes idleness, destroys aspiration, damages mental health, is nationally unaffordable, a waste of human resource and is laden with the knock on consequences of all these factors and more.
State support is not in itself a bad thing, but it is if it, requires absolutely nothing constructive or positive in return.
As you can see, the countries that are coming up in leaps and bounds is India and China, where if you don’t work and earn your living, you don’t have food to eat or roof over your head, so you just HAVE TO! And if you can’t because you are physically not able to, your family takes care of you, and work for you and look after you!!! There, not even a child is able to say that the exams are difficult, studying is very hard, or mental health issues, or any excuse. If you have an excuse, you have no chance of a job, or a career or living. So they don’t - it’s as simple as that. AND, crime levels are equally as bad here as they are there, so we can’t argue that providing here makes a difference.
It doesn't matter how much LHA is to a certain extent as a great many landlords simply won't put themselves through the hassle of dealing with the UC department. It's the most unresponsive, unreasonable department ever created. I have got some UC tenants and it is on the basis they pay their rent to me and I don't have to deal with the Benefits department. I tried it about 4 years ago and it was awful. They put random amounts of money in my bank account with no indication of who it was from or who it was for or what period of time. It certainly didn't correspond to the tenancy agreement. Some months they just didn't pay anything with no notification there was a problem. The problem was usually that they had sanctioned the tenant for not putting enough information on his online journal. He was suffering from depression and had some very bad days made worse by the journal system. At one point he was £1800 in arrears mainly due to the DWP.
I currently have one tenant who has recently been signed off sick and has started claiming UC. His rent has been in arrears since he stopped working at Christmas. It's due on the 1st of the month and he's currently paying it on about the 4th of the following month when he gets his UC. So if I wanted I could evict on the basis of persistent arrears purely because UC have deliberately created that situation. I'm not planning to because I bought that flat specifically for that tenant in one of my more altruistic moments. He had been my plasterer for a few years and had had a fairly chequered past. A couple of spells of homelessness resulted in him living in his van for a while. We were chatting one day while he was plastering and he mentioned his dream home would be in the seaside town where he grew up. I spotted the ideal renovation project in the perfect location for him on Rightmove, which could still fit into LHA rent when renovated. Market rent for that flat would be at least £750 a month. He pays £570 (which is LHA level). He only gets £11 a day on top of the housing part of his UC and that has to cover food, electric, water, phone contract, clothes, entertainment, transport, etc. How many adult men can survive on £11 a day nevermind using some of it to fund a rent shortfall?
I have other properties which are way below market rent. Some at LHA level, some slightly above as the tenants dip in and out if entitlement. Most of them are long term and I haven't increased rents due to Benefit freezes. With mortgage rate rises that is no longer sustainable.
Across the 6 properties that I have at below market rent or LHA the rents are collectively at least £1200 a month lower than they should be. Just think how much extra tax I would have to pay if all my tenants paid market rent.
Very noble of you Jo. Honestly, all these politicians who for the sake of portraiting landlords like the evil ones those days and the tenants as victims, should bring stories like this to the people - atleast, try and create a rapport between the two important sectors in housing instead of creating a war between them. How is this possible that every one of them are against landlords, and lls are portraited in this way always? I am sure in every industry, there are good and bad ones, even in politics? So why are only lls totally considered evil? There are soooooo many of us that provide way above what the law or the council or even the tenants expect of a decent property, at very reasonable prices, and all that’s being asked for is pay rents on time and treat the house properly as they live in it. If the Government can make sure tenants respect this and do this, to ensure a good relationship and everything goes smoothly, won’t that be better than making us the baddies, and encouraging tenants to treat the house as they fit, and abolishing all laws that gives some security to the lls that they can get away from bad tenants! Instead, they fuel this battle, and lean on the more votes side, widening the gap between lls and tenants! Where is this leading??
The Government policies need to incentivise the people that are working hard for their living (of course, benefits need to go to the people that truly can’t work and deserve it). Instead, people who work full time, not because they can’t do part-time, because they want dignity, and work inspite of having children, and being single and running around and trying to do everything, paying tax for their earnings, and they seem worse off than people choosing to take the easy route, go part-time, because they can get benefits and work less hours too, and work for cash at other times, so they get all the incentives - why would they work? Yes, all the more happier if allowances were increased too. Understandably, it is difficult with any system that was put in place with good intentions on the first place, but gets misused by the people. But you would think that the Government would try and crack down on this to find a way, instead of cracking down on a lot of other things that is going the opposite way!!!
Talk about “mental health”!! It’s in fashion now!! Anyone that owes money, especially rents, come back threatening about mental health issues, which means, you are in danger of harassing them if you talk to them about rent arrear or remind them a few times, or just want them to pay the rent for the house that they are living in which is your house!!!! Mental health is a strong word now, of course, you cannot use it because you are the LL.
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