Councils are paying private landlords up to £4,000 to house homeless tenants, as a shortage of social housing has forced authorities to entice the private sector with the incentives.
This news arrives as the Conservative party pledge to extend the right to buy scheme, which allows housing association tenants to purchase their home. This could worsen the housing shortage by selling around 1.3m properties, with councils struggling to replace them. Find out more here: /how-would-the-conservatives-right-to-buy-work/.
Councils in London and the South East are now advertising to private landlords with attractive cash incentives. Westminster Council in central London will pay up to £4,000 for landlords who accept council tenants. Tower Hamlets in East London has publicised a £2,500 payment for one-bedroom properties rented for two years by council tenants and £4,000 for two or more bedroom homes.
In Haringey, North London and nearby Barnet, private landlords are being offered payments of up to £3,000 for two-year tenancies. Southwark Council in South London will pay up to £2,000.
Housing charity Shelter says that these offers indicate a power switch between councils and landlords. Policy Officer at Shelter, Zorana Halpin, says: “Landlords don’t need local authorities, but local authorities need them.”
These cash incentives highlight the struggles that councils are already facing housing homeless families and individuals.
Increasing rents in the private rental sector and the cuts to housing benefit in 2011, have made landlords less likely to rent to council tenants, yet local authorities are finding it difficult to house the growing number of households dependent on this accommodation.
More councils have launched or increased cash incentives to landlords. November saw Hounslow Council in West London raising its payments, and in March, Basildon Council in Essex announced that it would start paying £1,000 for 12-month agreements and £1,500 for two-year tenancies.
Councils are so concerned over the lack of housing stock that payments are often made for homes in different boroughs.
Westminster Council said that it has paid landlords with properties outside London in the hope of housing people on its waiting list.
Housing consultant David Lawrenson says that landlords consider council tenants to be higher risk than private renters, and increasing rents in the private sector are more financially appealing.
For example, in Haringey, the average rent for a two-bedroom home is £1,556 per month, yet the maximum local housing allowance (LHA) for the same property is £1,109.
Lawrenson says: “There is supposed to be some kind of agreement to stop councils competing with each other, but these landlord incentives suggest that they are not working, as they still seem to be competing with each other to try to get that stock in. It’s only going to get worse as rents continue to rise.”1
The highest payments are made to landlords who take on council tenants for long-term contracts. The rent on these agreements is paid for in housing benefit claimed by the resident. Other schemes are open to landlords who let to council tenants for up to five years. In both situations, if the landlord did not take the tenant, then they would have to be housed in temporary housing such as a B&B.
Landlords who enter the schemes are not given a deposit, but could have to use the cash payment at the end of the agreement to make any repairs. However, the money is theirs to do as they please.
Benefits for 12-month tenancies are paid for by LHA, but this was cut in April 2011, making private renters more attractive to landlords.
Halpin says: “Local authorities used to procure large volumes of temporary accommodation from private landlords through leases; the rents they could pay were in line with market rates and it meant no void periods for landlords, so councils had a bit of negotiating power and the deal was attractive to landlords.”
Halpin explains that councils’ buying power has decreased: “The fact that councils are prioritising their spending to make sure people are being housed is a good thing, but we are concerned that they have limited resources and are having to use some of them to pay these incentives. Ultimately, the only long-term solution is to build more affordable homes.”1
Head of Policy at the Chartered Institute of Housing (CIH), Melanie Rees, says that councils have been given more freedom to help house homeless people by making use of the private rental sector, despite benefit cuts reducing the rents paid to private landlords.
She says: “But welfare reform, in particular the benefit cap, has cut the amount of benefits that people receive and made private landlords in some areas more reluctant to let to claimants.
“In some areas, offering incentives to private landlords may well be cheaper than using temporary accommodation, and a better option for the tenant than being stuck in a poor quality B&B.”1