In an attempt to reduce the annual welfare bill, the government is
introducing a number of stringent reforms. One of these is a cap on
the amount of money benefits claimants are entitled to. This cap is
intended to ensure families and individuals are always better off
working as opposed to claiming benefits. The benefit cap is currently
being tested in four London boroughs and will go “live” in the rest
of the country towards the end of the year.
How will the benefit cap affect landlords?
Until the Universal Credit comes into effect in October, deductions
made as a result of the cap will be taken from the Local Housing
Allowance element of benefit payments. This will inevitably mean that
many tenants cannot afford to pay their monthly rent and unless they
find a way of making up the shortfall from the rest of their benefit
payment, rent arrears will soon be on the increase.
The NLA believes that landlords could end up out of pocket as a
result of the changes. Indeed, a recent survey carried out suggests
that increasing numbers of landlords are abandoning the social
housing sector because they are concerned about the prospect of rent
arrears.
Supply and demand
In some parts of London demand for rental housing is so high that
landlords do not need to let to tenants in receipt of benefits.
Unfortunately, the private rental market plays a big part in
providing housing to tenants on a low income, so if landlords do
start to pull out of the sector, a lot of families could end up
homeless.
