What do I do if benefit rates don't meet my rent costs?

Question

Answer

This is a bit of a hot potato at the moment, as a recent freeze on housing benefits has seen access to the PRS pushed out of the reach of many tenants in receipt of benefits, according to research from the Chartered Institute of Housing (CIH).

The research suggests that in 90% of instances where a tenant is in receipt of housing benefits, the benefits are no longer enough to cover the rents that they were originally designed to pay for. So, you are certainly not alone in this situation.

The CIH suggest that tenants are facing shortfalls ranging from £25 a month on a single room in an HMO outside London, to around £260 a month for homes in the capital. Over the course of a year, these costs really pile up, with potential arrears backing up to over £3,000 – a horrible situation for both you and your tenant.

Local Housing Association rates were frozen for four years back in 2016, so the issue isn’t going away for a couple of years either, with April 2020 the date set for this to be reassessed. If you are planning to take the tenant on, you need to come up with a solution that will work for both of you.

You have a couple of options here:

The tenant can make up shortfall of the rent themselves: Depending on their circumstances, the tenant may be in a position to pay the difference themselves. They may have friends or family that are willing to help out, or savings that could be used, however, do be aware that this is often not sustainable in the long run. Goodwill and savings may only last so long, so do have a frank conversation with your tenant about the realistic costs.

You can reconsider the rent:If your property is priced just above the housing association rental rate, you could consider adjusting the rent so it falls in line with what your tenant can afford. It’s likely that if you can find a tenant who is looking to settle down and make your house a home, they will look to stay long term, and in the long run, sacrificing a few pounds a month to ensure a long term, reliable tenant may be a price worth paying.

If you have already allowed the tenant to move in and they are living in the property, there is a third option:

The tenant can apply for a discretionary housing payment: In certain cases tenants can apply for additional housing benefit if the amount that they are receiving doesn’t cover their rent. This is known as a discretionary housing payment. The funds are decided on a case-by-case basis, and are awarded by the Housing Executive. The HE will decide how much money is to be awarded, and how long it is to be awarded to the tenant for. A tenant must prove that they will fall into financial hardship if they do not receive the additional funds, and the HE will examine the following elements before making the decision:

• Have the circumstances changed in a way that more money is needed to cover the housing costs?
• Will the tenant be evicted immediately they cannot pay the rent?
• How much is owed?
• Does the tenant have any savings?
• Could the tenant negotiate with the landlord to reduce the rent?
• Is there a requirement for the tenant to live in a specific are, or could they consider moving to an area with more affordable rental rates?
• Does the tenant, or anyone in the household, have any health problems that mean they must live in this specific area?
• Do young children live in the property?
• Is there anyone else living in the property who could contribute towards the rent?
• If a discretionary housing payment is refused, will you become homeless?