A new report has indicated that buy-to-let landlords are looking for tenants less likely to fall into rent arrears, following the introduction of the tax changes affecting the Private Rented Sector.
An investigation by the National Landlords Association (NLA) suggests that some tenants on benefits are therefore being overlooked by some landlords.
‘Riskier’ tenants
Around 60% of residential landlords surveyed by the NLA said that Chancellor Osborne’s actions on restricting buy-to-let mortgage lending and increasing stamp duty will reduce their profitability.
In order to cover costs, 20% of landlords who will be affected by the changes informed the NLA they will prioritise other groups ahead of ‘riskier’ tenants, such as those on benefits.
During the last twelve months, 64% of landlords with tenants in receipt of housing benefit said that they had experienced rent arrears.
What’s more, the report claims that 20% of landlords let to tenants in receipt of benefits in the first quarter of 2016. This was down from 36% in the first quarter of 2012.
‘Riskier’ tenants being avoided by landlords
Competition
Richard Lambert, chief executive of the NLA, said, ‘many of those who once would have expected to live in social housing now have to compete for private homes with other types of tenants.’[1]
‘It’s a real concern because a significant proportion of landlords already choose not to let to tenants who receive benefits because the perception is they are too risky. Rightly or wrongly, young professionals or working families are seen as more likely to be better payers and less hassle to manage,’ Lambert added.[1]
Mr Lambert also warns that increasing tax changes and the falling availability of social housing means that some tenants could struggle to find any housing whatsoever.
Landlords should always look to protect themselves and their investment by taking out rent guarantee insurance, which will cover them against tenants defaulting on rent.
[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/5/landlords-avoiding-benefits-tenants-due-to-osbornes-tax-changes