Lenders under attack for not permitting landlords to rent property to tenants on housing benefit.
Lenders to the Buy to Let investors are under attack for not permitting landlords to rent property to tenants on housing benefit.
Nearly all buy to let lenders as a lending policy or terms of lending “We will not consider multiple tenancies, Homes of Multiple Occupancy, bedsits, DSS tenants or ‘Related Person’ tenancies.”
The government is being urged by Work and Pensions Select Committee to address concerns that lenders are increasingly adopting “no DSS” criteria for the buy to let market
Mr Frank Field, chairman of the Work and Pensions Select Committee, commented: “The government claims its welfare reforms are intended to drive employment, but allowing banks to operate a “no DSS” policy is a return to the wicked old days of housing discrimination, with claimants effectively blacklisted for housing and at risk of being senselessly evicted for no greater crime than receiving housing benefit.”
He added: “NatWest is now taking a look at its policy, and other mortgage lenders will no doubt follow suit. If the change we need to protect people is not forthcoming voluntarily, we may need to look to regulation.”
Wicked old days of housing discrimination
Mr Field went on to say: “The government claims its welfare reforms are intended to drive employment, but allowing banks to operate a “no DSS” policy is a return to the wicked old days of housing discrimination, with claimants effectively blacklisted for housing and at risk of being senselessly evicted for no greater crime than receiving housing benefit.”
NatWest Bank came under fire in October after it was revealed that the bank was refusing to remortgage a property because it was being rented to a tenant receiving housing benefits. Although nearly all Buy to Let lenders are averse to lending where tenants are or may be on housing benefit and many have terms that stipulate landlords cannot let to tenants on benefits.
Natwest has said it is carrying out a review of its lending policy and will inform the committee of the outcome later in the year.
Data from our parent company Landlord Advice UK show that out of the evictions carried out 87% of the defendants where possession was sought were on benefits. Out of the 87% only 8% of the defendants paid the debt as ordered by the court on or before the 14 days.
Landlord Advice UK do not have any data if the debt was paid after the 14 days.
Recent example from Liverpool county court; Claimant went before a judge a claim under section 8 for rent arrears. Defendant did not attend. Claimant sought possession in 14 days, which the Learned Judge gave. When it came to the money judgement the judge asked the claimant if he wanted a judgement for the rent arrears and Legal costs. The Claimant said no, he did not want a judgement for rent arrears or costs. The Judge said “I presume that’s because you know you are not going to get any money from the defendant”. The judge was of course right, that’s exactly the reason the claimant did not seek any money judgement.
Housing benefit tenants are a high risk and lenders are entitled calculate the risk
There is no doubt tenants on housing benefit are a high risk and lenders are entitled calculate the risk when lending to investors. If tenants are not paying the rent (high risk tenants) and in turn the landlord defaults on the mortgage that is of course going to be a concern for the lender.
Mr Hanson from the British Landlords Association commented “We understand the lenders concerns and they are entitled to calculate the risk when lending, however, we very much hope all lenders in the Buy to let market can come up with a product that does not discriminate tenants on benefits. It is not just the lenders, but the insurance companies too who run a discriminatory policy. Many landlords are unable to insure their buildings if the tenant is on housing benefit. This needs to be addressed hand in hand with the lending policy of lenders.”