Why has the government failed to take action to prevent lenders such as Lloyds-owned BM Solutions exacerbating our housing crisis?
Many private landlords are reluctant to let to tenants who are dependent on housing benefit, preferring instead to let to tenants who do not have to rely on the state for any assistance. There are several core reasons for this, as I have set out before, including payment in arrears and the lengthy paperwork needed for local housing allowance claims. Insurance premiums are also raised for landlords housing tenants claiming benefits.
But there is another reason why some private landlords are actually unable to let to people on housing benefit even if they want to. Unfortunately, some mortgage lenders still actively restrict private landlords from letting to tenants who are dependent on housing benefits.
The Council of Mortgage Lenders has no overarching policy on this issue, preferring to leave it to the banks, building societies and other lenders to apply their own policies. I found two major buy-to-let lenders that still have such restrictions in place.
BM Solutions, part of the partially state-owned Lloyds Banking Group, has within its underwriting criteria a restriction which says landlords cannot let to tenants claiming housing benefit.
Accord, a mortgage brand of Yorkshire Building Society, does not allow to lets to "Department for Work and Pensions (DWP) supported tenants" or leases to housing associations or local authorities.
When I questioned this policy, a spokesperson for Yorkshire Building Society told me: "We entered the buy-to-let market with a specific profile in mind – experienced but not professional landlords seeking to purchase properties of reasonable quality – and we shaped lending criteria to meet that market. We didn't feel that DWP-supported tenants would generally fit in with the profile of landlords or properties that we are looking to lend to. This is mainly due to concerns about poor maintenance and repairs, and that the rental values of the properties we are seeking will not be at the lower end of the scale."
A BM Solutions spokesperson said: "We constantly review our policies, however the current terms and conditions of our mortgage policy do not enable borrowers to let their property to tenants claiming housing benefit. Should the circumstances of the tenant change, we would expect the landlords to consider each case on an individual basis. Landlords do not need our consent to terminate or renew a tenancy agreement." This raises more questions than it answers – answers I will be pressing for in the coming months.
It seems remarkable that the government, which has a clear interest in seeing vulnerably housed people found accommodation in the private rented sector, has not picked up on this issue before – especially as one lender is a part state-owned bank.
Within our town halls, the majority of the caseload of those in urgent need of accommodation will consist of people who are dependent on the local housing allowance. Yet private landlords who have taken out buy-to-let mortgages with the BM Solutions subsidiary of the state-owned Lloyds Banking Group would be unable to offer accommodation to them.
I think that the fact that Lloyds Bank's restrictions are still in place highlights a general lack of understanding of the private rented sector and how it operates within Whitehall. The most interesting thing about this is that, from all the work we have done in this area, we have seen no statistical evidence to suggest that landlords who let to tenants claiming benefits are any more likely to default on their mortgages than landlords who avoid such tenants.
David Lawrenson is founder of private rented sector consultants LettingFocus.com
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