Have private landlords reacted to bedroom tax?

Have private landlords reacted to bedroom tax?

The explosion of the demand for rental properties is largely because it has become so difficult to purchase property.

"Generation rent" are the people who, perhaps five years ago, might have got a mortgage without a large deposit, but who are now unable to save for the large deposit needed for home ownership, while renting; "Catch 22" most renters will call it.

By 2020, it is predicated that the number of home owners under 30 will almost half, from 2.4 to 1.3 million. Many of these people, would have been home owners before the recession, and are in relatively well-paid jobs - a 'safer bet' for letting agents and landlords and usually pass tenant reference checks without the need for a guarantor. There has been a large rise in the number of tenants fitting this profile.

This upward pressure on private rental stock is good news for landlords, but not so good news for people less well off, or relying on housing benefit to pay all or part of the rent, as these tenants are sometimes considered to be higher risk when it comes to affordability and receiving the rent.

According to Mike McGann, Landlord Advice Specialist at Legal 4 Landlords, most private landlords have previously been happy to accept tenants who are on housing benefit, provided that they could provide a reliable guarantor. However, recent changes to housing benefit, from April 2013, popularly called "bedroom tax", has altered the amount that can be paid to landlords - and the difference will need to be paid by the tenants to the landlords, which they find difficult to find given that they are relying on benefits.

How much does the bedroom tax cost?
For example, the Smith family had two children and a three bedroom home, and they have been paying their rent via housing benefit. But one of the Smith children left home last year, which now means that they have a spare bedroom. Their rent is £100 a week, and the housing benefit has paid this. But under the new rules, they would have lost 14% of the eligible rent, because they now have a spare bedroom. This means that the Smith family would need to find £14 a week, £61 a month or £728 a year.

Example two, the Smiths' neighbours, the Browns, have an even bigger problem. They have been receiving housing benefit of £200 a week to cover their home, which has had two small spare bedrooms. They now find that they will be responsible for finding 25 percent of the eligible rent, so £50 a week, 216.00 a month, or £2600 a year. This could be more, depending on who lives with you and other factors.

The bedroom tax and rent arrears
By September 2013, it was predicated that about 50,000 people had already fallen behind with rent and so were facing eviction. For the private landlord, who has an array of tenants to choose from, it is no wonder that they are more likely in future to want to rent to the relatively affluent 'generation rent' over somebody who is receiving housing benefit.

But this causes the Government a problem; these people have not made themselves homeless, and the Government has a responsibility to house them. With a surplus of tenants, it is likely that some of these families will end up in expensive bed and breakfast accommodation, which probably costs the Government more than the 14 or 25%that they are saving through the "bedroom tax".This is particularly a problem in larger houses, where it is likely that there might be one or more spare rooms, which the tenant will need to pay for.

Has the bedroom tax influenced landlords?
The outcome of these changes can only be that landlords remain able to be selective with who they rent their properties to, and the safe bet is always going to be the private tenant, in work, who can most easily cover the rent.