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Making Local Housing Allowance work for landlords - James Davis, Upad.co.uk

Making Local Housing Allowance work for landlords

Writing about the housing market this week has more hazards than usual. In the first days of a new administration, there's always the danger that what looks like a probability today will be an impossibility next week. Housing Minister Grant Shapps seems as though he might be more sympathetic to the private rented sector than some of his predecessors, but the real shape of the coalition's housing polices isn't yet clear.

One thing we can say with certainty is that the pressure on social housing is about to get a lot worse. There are 1.8 million households currently on waiting lists for social housing throughout the UK, and as cuts bite into public sector employment budgets and affordable housing building schemes alike, these queues are only going to get longer.

You'd think that social tenants would be a great source of easy rentals for private landlords, yet at Upad, we see a lot of adverts specifying "no DSS". What's putting landlords off?

One landlord summed it up for us recently: "too much hassle, too much paperwork, and tenants who don't look after the place." Not necessarily so, says James Davis, Upad's CEO, who's been renting to housing benefit tenants for more than a decade: tenants on housing benefit make the place their home, rather than just seeing it as one step on the road to buying their own place.

Avoid the voids with tenants who stay longer
There is plenty of evidence to show that social tenants are a great business proposition for landlords. 79% of them stay in their rented home for more than 3 years, and 60% for more than 5 years. Compare that to the constant churn of tenants through the private sector, where tenants typically move on after just 16 months – or 12 months in the capital – and you can see why social tenants might be attractive. Fewer void periods for landlords, less advertising, fewer references to chase up: the tenant who'll move in and stay put and keep paying rent year after year is what many of us were looking for all along.

Right now, social tenants can also offer an even more immediate financial benefit, in that Local Housing Allowance rates are often pitched above comparable private sector average rents. The current rate for a one-bedroomed flat in central London is £340 per week, which for many areas is pretty generous.

Of course, we don't know how the new government might change this; there were murmurs during the election campaign that the Conservatives would seek to reduce LHA payments to be more closely aligned with private market averages. But for now, many landlords could see extra profit in offering their properties to tenants receiving LHA.

Referencing and risk-assessment – the FastTrak advantage
For some landlords, this won't be enough. If you're used to dealing with the private sector, the limited ability to reference some social tenants may give pause for thought. Employers' references may simply not be available. References from previous landlords might be easier to come by – but there's always the nagging worry at the back of the mind that this glowing reference has been written by a landlord who's anxious just to see the back of a troublesome tenant. And can you really effectively credit check someone who's either never been eligible for credit in the first place, or whose circumstances have just changed dramatically – for example with redundancy or relationship breakdown?

For the moment at least, LHA is still paid directly to tenants and that feels like a risk for landlords. Though we might argue that social tenants are no more likely to not pay their rent than private tenants, couple with this inability to reference them thoroughly, and it's easy to see why landlords would say that the risks of letting in this sector is just too high.

And for other landlords, it's not about the tenants themselves: it's the system. The prospect of weeks without rent as Housing Benefit offices process applications, with neither landlord nor tenant quite knowing what's going on with their application, whether it might be approved and when, puts many people off.

Now Upad can offer private landlords a way to access the obvious advantages of social lettings without many of the associated risks. We have a new partnership with FastTrak, who have made it their mission to make tenants with an entitlement to Housing Benefit an attractive proposition to private landlords.

FastTrak pre-approves and references tenants eligible for Local Housing Allowance, so you can access the expanding and profitable social housing market, with minimal risk to your property or income.

Tenants signed through FastTrak are referenced to a standard much higher than most private tenants. Landlords can be reassured they're getting trustworthy tenants who will look after their property and make it a home. Plus FastTrak offer an insurance-backed rent payment guarantee, which comes with no excess and a 14 day claim procedure, as well as an insurance-backed damage deposit (to value of 6 weeks' rent) as standard. So if something does go wrong, you can be confident you're not going to lose out.

And if it's the paperwork that's putting you off, FastTrak prepare not only the tenancy agreement but the LHA application as well. This is packaged for the local council, and includes application tracking as standard, so you'll never be left wondering when your rent will be paid.

Finally, there's nothing to pay to find a FastTrak tenant until they actually move in to your property. Upad offer the most cost-effective route to a FastTrak tenant, with a one-off fee of £399 + VAT to cover the entire application process. What better way to find a great tenant, maximise your returns and minimise risks.

James Davis

James is CEO of Upad.co.uk. A residential landlord for over 12 years with an established portfolio and an active long term investor. Previously Sales Director for First Radio Sales and successful floatation of AIM listed Campus Media.

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