House in multiple occupation (HMO) landlords are not keen to expand their portfolios or take on housing benefit tenants in universal credit pilot areas, according to the Department of Work and Pensions (DWP).
In an interim report looking at the impact of the new housing benefit rules on tenants and landlords, the DWP notes, interviews with local landlords indicate article 4 directions and extra HMO licensing is leading property investors to shift their focus away from providing shared houses.
“This might be because the private rental sector supply for local housing allowance claimants is becoming saturated in these areas, or, as several local landlords suggested, because the ability to expand the supply of rental properties may be constrained by planning issues such as article 4, restricting the development of HMOs in certain localities,” said the report.
The report also highlights an increasing demand declining standards in private rented homes for housing benefit tenants.
Interviews with tenants, landlords and housing officers revealed that tenants on benefits were generally offered lower quality homes.
“Most of those landlords who thought that property quality in the private rented sector had declined in recent years attributed this to their precarious overall financial position in a difficult economic climate, rather than to any reduction in rental income as a result of tenants failing to meet shortfalls,” said the report.
“This reason was more prominent among buy-to-let landlords who held several mortgages. Some landlords acknowledged that they now adopted an explicit strategy: letting to local housing allowance tenants was equated with offering poorer quality properties.
“In particular, some landlords suggested that tenants in receipt of benefits would end up renting poorer quality properties due to the shortage of this type of accommodation in the local market.”
Download a copy of the report
