Most landlords are fully aware that lenders won’t offer them a mortgage if their tenants are on benefits. We have covered this issue in a previous article, where a landlord was told by her lender (NatWest) to evict a vulnerable, elderly tenant or face hefty fees to move to a new lender.
RLA Research Shows 90% of Lenders Discriminate Against Benefit Claimants
Research carried out by the Residential Landlords Association (RLA) has shown that 90% of lenders won’t accept tenants claiming benefits. All the main lenders, including TSB, Barclays, and NatWest won’t allow properties to be let to a tenant claiming benefits. Indeed, NatWest’s own T&Cs say:
“We will not consider multiple tenancies, Homes of Multiple Occupancy, bedsits, DSS tenants or ‘Related Person’ tenancies.”
Millions of Benefits Claimants Living in the PRS Face Homelessness
The problem is that 4.2 million people claim benefits and many of them are living in the private rental sector because of a severe shortage of social housing. Discriminating against tenants on benefits makes it very hard for landlords to provide accommodation to low-income families. The lack of rental properties for benefits claimants is the underlying reason that homelessness has been increasing year on year for the last 7 years.
If a landlord has a mortgage, which many career landlords do, they must approach a specialist lender if they have tenants on benefits. This limits their choice of products, so inevitably they will end up paying more for finance.
“With growing numbers of benefit claimants now relying on the private rented sector, it is shameful that many lenders are preventing landlords renting property to some of the most vulnerable in society with little or no justification,” says David Smith from the RLA. “The banks have had long enough to get their house in order. It is now time to take firm action to stop such unjust practices.”
The Residential Landlords Association is calling on the government to force banks to change their policy. They want the Equality and Human Rights Commission to conduct a review to see if banks are in breach of equalities law. The RLA is also asking the FCA and Bank of England to investigate; they say the banks are breaching the FCAs ‘Treating Customer’s Fairly’ charter.
Landlords Beware of Draconian Lending Policies
Not all landlords are aware of their lender’s draconian lending policies, but it is very important to read your lender’s T&Cs. If your tenant goes on to claim benefits and you don’t inform your lender, you could be in breach of your borrowing conditions. It will also be a problem if you need to re-mortgage.
Given that Theresa May has gone on record saying that discrimination against social housing residents needs to end, it seems likely that the government might actually listen to the RLA on this matter. However, watch this space to find out if they do anything concrete.