?Landlords are warning they will be forced to sell up because of a freeze in housing benefits which will worsen a burgeoning rental crisis.
According to the Institute for Fiscal Studies, the combination of soaring rents and a freeze in housing welfare means tenants are finding it increasingly difficult to afford their housing costs.
Just 1 in 20 private rental properties can be paid for via “Local Housing Allowance” (LHA) rates - the lowest level on record.
The rates, which are used to calculate the maximum amount people renting from a private landlord can claim in housing benefits or Universal Credit, have not been updated since March 2020, when they were raised to cover the rent for the cheapest 30pc of properties in each local authority.
Since the freeze, rents for new tenancies have surged by more than a fifth on average, according to the analysis of data from property website Zoopla.
The proportion of properties now covered by LHA rates has plummeted from 23pc to 5pc.
Housing benefits are a crucial income source for landlords as they are used by nearly two-fifths (38pc) of renters – or two million households.
It puts affected landlords between a rock and a hard place: leaving them with the choice of raising rents to pay for rising mortgage bills, knowing their tenants may be unable to pay and forced to vacate, or keep the rent as is and fund increases to their mortgages via other means.
Sherrelle Collman, Managing Director of Caridon Landlord Solutions who provides vital advice to landlords with tenants on LHA and Universal Credit, says: “Landlords are already looking to sell up due to rising mortgage costs and the impending Renters Reform Bill. The freeze to benefits will make this even worse, reducing much needed housing stock and pushing up rents even further.
Many landlords rent is no longer covering mortgage costs but they know their tenants also can’t afford the kind of increase that is needed for landlords to cover costs.
Landlords are being put in an impossible position where they know their tenants have a fixed income from benefits and so there is little chance they can swallow any kind of increase.
Private renters are seeing the number of homes they can afford shrink dramatically. The Government’s freeze on local housing allowance is unsustainable. Even if renters can find somewhere affordable to live, it’s likely to be a home that’s unsafe or in disrepair. These homes are also harder to heat, leaving renters facing energy bills they just can’t afford.”