Tenants on benefits 'discriminated by mortgage lenders' - claim

A letting sector trade body says two thirds of the largest buy to let mortgage lenders do not allow landlords to rent property to tenants receiving housing benefit.

A survey conducted by the mortgage consultancy 3mc - which is linked with the Residential Landlords Association - suggests that 66 per cent of lenders representing around 90 per cent of the BTL market do not allow properties to be rented out to those in receipt of housing benefit. 

Lenders in this category include TSB, Virgin and the NatWest.

“Some of the reasons given for not lending to those renting to claimants include concerns about rent not being paid and historic data which calculates the risk of tenants falling into arrears or facing repossession” says £mc director Doug Hall.

The RLA says it wants to see more security for landlords and lenders, especially giving tenants in receipt of benefits and universal credit the ability to choose to have payments made directly to their landlord to cover rents.

Out of 58 lenders contacted by 3mc with a a hypothetical enquiry about a two-bedroomed flat where the tenants were in receipt of housing benefits, some 38 (equivalent to 66 per cent) said they did not allow properties to be rented out to those in receipt of housing benefit.

Another 10 (17 per cent) did allow properties to be rented out to those receiving housing benefit, although one of these was with the caveat that properties cannot be rented to “vulnerable tenants.”

A further nine (16 per cent) indicated they were prepared to “consider” housing benefit claimants and one lender indicated that it did not have a lending criterion related to housing benefit claimants.

“Discrimination against tenants receiving benefits is not driven by landlords but by the banking system. If the private rented sector is to house more people then barriers to landlords making fair decisions over who they rent to must be removed” insists RLA chairman, Alan Ward.

“We need a system which gives tenants, landlords and lenders the confidence they need that rent will be paid on time and in full. All political parties need to trust tenants to know what is best for them and give them the opportunity to choose, without having to get into arrears, to have Universal Credit and benefit payments made directly to their landlord.”