It used to be so easy. Landlords could buy a flat, let it out to a social tenant and then collect a rent from the council with practically zero risk of default.
But then in 2008 the law was changed so that housing benefit was paid to the tenant rather than to the landlord. Now an amazing nine out of 10 landlords with experience of council tenants have had late or missing payments, according to a new poll by SpareRoom.co.uk.
This clearly begs the question: is it worth letting your flat to council tenants? For most, the answer is a resounding no. Of the 1,032 landlords asked by SpareRoom, nearly three in five said they specifically stated "no housing benefit tenants" on their adverts.
The main reason given in the survey was the hassle of dealing with payment problems. The caps to housing benefit announced to much fanfare in 2010 may also have played a part in expensive areas like central and west London. But the underlying reason is that landlords have the choice - most can let instead to young professionals who are priced out of the market to buy. Rents in the private rented sector have been rising in almost all areas of Great Britain due to high demand.
New landlords can simply avoid the housing benefit sector, but what about established landlords? Nationally, only 36 per cent of tenants in the private rented sector are on benefits; but council tenants tend to be concentrated in certain areas of certain cities. Finding private tenants in such areas may involve cutting the rent by more than can be justified by more punctual payments.
The good news is that the law has again changed so that landlords can receive housing benefit direct from the council. But this is now administered on a case by case basis, and only if the tenant appeals for help. It isn't back to the good old days yet.
