Tenants Face Fierce Competition!
A new report has been released that highlights the current competition in the rental market, Around 68 per cent of letting agents reported seeing more people wanting to rent than there were properties available during the third quarter, according to the Association of Residential Letting Agents.
Here in the Martin and Co Shrewsbury office, we are experiencing the steadily increasing influx of tenants searching for suitable properties, with multiple viewings booked on properties and multiple applications made on one property, there is a lot of competition and landlords are able to "pick and choose" who they would like to Let their properties to.
The situation has been exacerbated by a fall in the number of homes available on the private rental market. The shortage of rental properties looks set to get worse going forward as recent house price gains tempt landlords to cash in their portfolios.
I have noticed a steep increase in the amount of tenants claiming housing benefits currently searching for property, there appears to be a lack of landlords willing to accept housing benefits as a form of rental income, this is often for a variety of reasons and creates a huge back-log of tenants in desperate need of accommodation and no way of moving forward. It can be a stressful time for tenants and indeed for agents, with so many people in need of accommodation for a variety of reasons, often reasons out of their control, we find it frustrating when we are unable to help people in need.
The Guardian recently released an article highlighting the top 7 reasons a landlord will not accept tenants claiming housing benefits:
1. Payment in arrears
When letting to tenants who depend on the allowance, assuming the LHA can even be paid direct to the landlord (which is not always the case following changes to the system in 2008), the payments are nearly always made in arrears. This compares unfavourably with a private letting where the rent is paid a calendar monthly in advance, which means a better cash flow for landlords.
Tenants who are dependent on housing benefit often do not have a deposit they can hand over to the landlord to protect. And even where local government can help with a deposit, private landlords often tell us that council schemes are cumbersome, slow to administer and claim against in the event of damages caused by tenants.
3. Red tape
The administration of housing benefit can be slow and involve lots of form filling. Payments can start and stop without notice, and councils retain the right to try to claw back past payments from landlords if it later emerges that their tenant was claiming fraudulently – even if the landlord was unaware of a change in the tenant's circumstances.
However wrongly, a minority of private sector landlords still believe that tenants claiming housing benefit are more likely miss rental payments or to not look after properties properly. We are working to change that perception.
5. Insurance traps
Buildings and contents insurance premiums are often higher where a landlord lets to people dependent on the Local Housing Allowance. Sometimes insurance is refused to landlords altogether. Central government must challenge the insurance industry on whether such inflated premiums are justified by claims records.
6. Buy-to-let mortgages
Scandalously, some buy-to-let mortgage loan terms and conditions do not allow landlords to let to tenants on any kind of benefits or income support. Government should challenge the lenders on this.
7. Constant change
Finally, the array of changes to the housing benefit system, rates of payment and rules over the last four years has left landlords feeling confused. Rather than trying to understand something that keeps changing, many private landlords simply opt out instead.
Unfortunately Landlords have all had at least one bad experience with tenants in receipt of housing benefits, there are those who abuse the system and indeed abuse other people's properties, as with everything in life, there are those who ruin it for the rest.
However, there are those (the majority we meet on a daily basis) who are respectful, decent and house-proud tenants who are in receipt of housing benefits for a variety of reasons, who would make perfect tenants and unfortunately are over-looked by Landlords based on their situation.
It really has become more difficult, with a large number of people abusing the system, it leaves those in genuine need of help, stranded.
Another problem we often face, is finding accommodation for those with pets. Pets are another "issue" for many Landlords searching for tenants, and many Landlords, the majority in fact, will not consider tenants with pets due to previous bad experiences and/or the potential damage to the property.
- Pets can be destructive and messy, especially if they aren’t looked after properly.
- Pets can smell, especially if their hygiene is neglected by their owners.
- Pets can be disturbing towards neighbours e.g. dogs barking at unsocial hours. It’s important to keep a healthy relationship with your neighbours. (Landlord Blog / Life).
As an agency, we adore pets, of all shapes and sizes, and if i could i would encourage every one of our landlords to accept pets in their properties, not only does it increase the amount of interest, dramatically reduce void periods, but you may also be able to ask for higher rent amounts to cover the cost of any extra cleaning required as an added "security".
What we would always suggest to Landlords is this:
Base your decision on the tenant and how reliable you believe them to be, perhaps ask to meet the tenant (s) with their pet (s) to determine how they are together. From our experience, i can honestly say that the Pets are very rarely the problem, the owners/tenants are the responsible party and they should be the ones judged. As a responsible dog owner and tenant myself, i know that if you care for the property, and care for your pet, there should never be any issue.
"If you care careful with your selection, there is no reason why tenants with pets should be problematic. Even if the pet does cause irritation to the property, that’s what the security deposit is there for. Additionally, a good tenancy agreement that has the appropriate clauses for pets should protect you from most scenarios." (Landlord Blog / Life)
These factors add to the fierce competition among tenants searching for property, the current rental market lends itself to a particular 'type' of tenant, that being employed, young single tenants or couples, or families with young children. The current market is un-sympathetic to tenants who require help for a variety of reasons, and/or have pets, therefore segregating landlords and properties from the larger section of the rental market.
This quarter, we have seen demand for properties in the rental sector significantly rise, while the supply of residential rental properties has dropped. Nearly a third of landlords said they were selling a property, up from 27 per cent in the previous quarter. At the same time, the number of landlords buying more properties fell by 8 percentage points to 27 per cent. As a result, there were more landlords selling properties than those who were expanding their portfolios for the first time in four years. The situation in the rental market mirrors that in the wider housing market, where the number of people looking to buy a home has fallen as more properties have been put up for sale.
The rental market is fast becoming over-saturated with potential tenants, desperately searching for suitable accommodation but struggling to source anything that will accept certain factors of their lives, be that DSS or Pets. Competition is fierce enough between "suitable tenants", so how do this other 'segment' stand a chance? Landlords in the Midlands need to expand their acceptance of certain "types" of tenants and therefore create a rental market that is less difficult to enter and caters for a wider variety of tenants.