Shut out: The barriers low-income households face in private renting - June 2017 shelter.org.uk
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Shut out: The barriers low-income households face in private renting June 2017 shelter.org.uk
Contents
1. Executive Summary
2. Introduction
3. Recommendations
4. What barriers do low-income families face?
i. Housing market changes
ii. Affordability and Local Housing Allowance
iii. Housing benefit administration and the introduction of Universal
Credit
iv. Landlord attitudes towards low-income households
5. Current and potential interventions
i. Current solutions to solving barriers to PRS access
ii. Potential solutions
6. Conclusion
Shut out: The barriers low-income households face in private renting 2Executive summary
“Every day I look at around 15 different estate agent sites online, trying to find
properties. I find properties that would be suitable but they say no DSS, no
pets, no smokers, no children. I speak to agents most days trying to plead
my case and I buy local papers trying to find somewhere to live. But I have
had no luck at all… God know what is going to happen to me, my son and
my dog. The whole system is unfair, wrong and seriously needs to change.
Landlords need to be more understanding with people receiving housing
benefit.”
Mother of two, 46, former trainer for people with disabilities
A total of 4.5m households now live in but we don’t know what else we can do’.”
privately rented housing.1 Over the last
20 years, the private rented sector (PRS) The inability to access a new home after
has seen considerable expansion, and losing a property in the private rented
has grown to overtake the social rented sector has become one of the main
sector.2 But the evidence suggests that drivers of homelessness. Research by
even at a time of significant growth, it has Shelter shows that 78% of the rise in
become harder for people on low incomes homelessness since 2011 has been due
to access the PRS. For people who rely to households losing their previous private
on housing benefit to pay their rent, the tenancy.3
barriers can be even higher. Many families
find they cannot afford a privately rented The Government acknowledges that
home, or encounter landlords unwilling to the rise in homelessness acceptances
let to housing benefit claimants. because of the end of an assured
shorthold tenancy “indicates that
As a result, Shelter’s advisers see affordability is an increasingly significant
increasing numbers of clients who have issue, as more households facing the end
run out of options. An adviser at Shelter’s of a private tenancy are unable to find an
Bournemouth hub described how a family alternative without assistance”.4
struggled to find a new home when the
landlord decided to sell. This briefing sets out the main barriers
to low-income households accessing
“The wife was a deputy headmistress, the PRS. It examines the wider housing
the husband stayed at home with their market context, affordability and Local
four children. The family tried to find other Housing Allowance rates, the attitudes
private rented housing but the prices had private landlords have towards low-
gone up so much since they had moved income tenants, and the upfront costs
and additional hurdles that bar tenants
into their original place that they were no
who might have been able to afford
longer in the sort of situation where it was
ongoing rents. The briefing examines what
easy to get together the money upfront, current schemes are in place to assist
as well as affording the actual rent. So people into accommodation, and sets
things had really changed for them and out recommendations for change. It is
they said ‘we never go anywhere for help based on a review of current literature and
Shut out: The barriers low-income households face in private renting 3interviews with advisers at Shelter advice Landlord attitudes towards low-
hubs all over England to understand income households
what is going on in different areas of the
country. There is significant reluctance among
private landlords to let to LHA claimants.
Although a large portion of the private
Major barriers to rental market has historically been hostile
accessing private rented towards housing benefit claimants, survey
housing data suggests that landlord reluctance has
increased. Welfare reforms, particularly
Housing market changes the restrictions on LHA levels, have
contributed towards the reticence of
Housing market shifts, such as the inability landlords to let to this group. Landlords
of first-time buyers to purchase a home are also influenced by media depictions
and the shortage of social rented housing, and other factors such as mortgage and
have led to an increasingly competitive insurance rules barring letting to housing
private rental market. This competition benefit claimants.
has seen rents rise and allowed landlords
to be choosier about who they let to. Upfront costs and guarantors
Consequently, rents that were once
affordable have risen year-on-year, and The upfront cost of private renting
housing benefit claimants are overlooked prohibits low-income households from
in favour of professional tenants. accessing the PRS and means that many
are forced to borrow, starting a tenancy
Affordability and Local Housing in debt. For households experiencing
Allowance multiple moves, the repeated costs of
fees, deposits and rent in advance can
Government changes to Local Housing pull them further into debt. Our advice
Allowance5, particularly the four-year services tell us that private landlords are
freeze on LHA rates, has caused benefit increasingly asking for guarantors, who
rates to become increasingly misaligned can be difficult for low-income households
with local rents. Research by Shelter to secure.
shows that by 2019/20, four fifths (83%)
of England will be unaffordable to LHA Limits to existing schemes
claimants.
Specialist PRS access schemes –
Housing benefit administration schemes in the statutory and voluntary
and Universal Credit sector to help low-income households
access a private rental – have been
Housing benefit administration acts effective in helping to house some
as a barrier, with potential delays to applicants.
payments and the setup of rent paid in
arrears clashing with landlord business However, limited resource means that
models. Wholesale reform of the housing these schemes are often limited to
benefit system over the last 10 years has statutory homeless families and are not
exacerbated landlords’ reluctance to let to widely publicised or available. Such
housing benefit claimants. programmes have met barriers, including
the failure of LHA rates to keep up with
The transition from housing benefit to LHA market rents at the bottom end of the
dissuaded some landlords from renting to market. This limits the ability of access
low-income households and the current schemes to source properties that are
changeover to Universal Credit is causing affordable for their clients, and in turn,
others to introduce blanket policies reduces landlords’ appetite to participate
against claimants. in such schemes.
Shut out: The barriers low-income households face in private renting 4PRS access schemes mostly do not, and In this briefing, we suggest ways that the
cannot, aim to alter the structural barriers Government and others could take action
faced by low-income tenants. Instead, to reform some of these structural barriers,
they aim to help tenants within current such as recalibrating LHA rates, making
structural constraints, often with financial ambitious changes to deposit systems,
assistance. and expanding welfare benefit advances.
Combined, this could do more to radically
address the barriers to the PRS faced by
low-income tenants.
Shut out: The barriers low-income households face in private renting 5introduction
Why do barriers to the accommodation.7
private rented sector •Local authorities are unable to use the
matter? PRS to meet their statutory duties to
secure accommodation for homeless
The inaccessible PRS is fuelling increased families. More than 80% of local
homelessness. Growing numbers of authorities say they have found it difficult
families are trapped for years in temporary to help homelessness applicants access
accommodation because local authorities private rented housing to prevent or
struggle to secure accommodation for resolve homelessness.8
homeless households. It is leaving many
low-income tenants with no choice but to •When people on low incomes do manage
accept poor conditions and bad landlords. to find an affordable private rental, it’s
likely to be at the very lowest end of
•A total of 14,420 households were the market where standards are lower.
accepted by local authorities as homeless Our advisers tell us that some families
between October and December 2016, accept properties in desperation, and are
up by more than 50% since 2009.6 The forced to endure poor conditions and bad
ending of a private tenancy is now the landlords.
biggest cause of homelessness, as
families that have lost their home struggle Low-income tenants are increasingly
to secure a new rental. limited to the private sector because
there is no prospect of them getting
•At the same time, tens of thousands on the housing ladder and there is a
of families are stuck in temporary shortage of social housing. Therefore,
accommodation, unable to move into more broadly, increasing the supply of
a settled home. In December 2016, genuinely affordable housing must be part
nearly 76,000 households were living of the solution. However, this will take
in temporary accommodation, of which time and we need to make sure that in the
60,000 were families with children or meantime, low-income households can
pregnant mothers. This is more than 10% find somewhere to live. Solutions aimed
more than the year previously, and 58% at the private rented sector are therefore
more since 2010 when just over 48,000 essential.
households were living in temporary
Shut out: The barriers low-income households face in private renting 6recommendations
landlord. Private landlords should have
1. The Government must end the freeze access to Trusted Landlord Status
on Local Housing Allowance and through a third party intermediary.
restore rates to the 30th percentile of
the rental market. 5. The Government should allow more
tenants to access advance payments
2. There should be a fundamental review from their benefits, including Child Tax
of tenancy deposits. The Government Credit and Working Tax Credit (and
should consider examples from the equivalent in Universal Credit).
New South Wales and New Zealand, Repayments for benefit advances
in which tenants lodging deposits should be set at reasonable levels and
are able to directly manage their take into account claimants’ ability to
deposits online. The Government pay for essential items.
should consider ways that tenants
can transfer their deposits from 6. Mortgage lenders should stop barring
one tenancy other and pay for their landlords from renting to housing
deposits in instalments. benefit claimants. UK housing
charities should monitor the use of
3. Employers should take up Shelter’s legislation in the Republic of Ireland to
rental deposit loan model to grant stop landlords barring housing benefit
employees interest-free loans to help tenants from their properties.
them secure a new rented property.
7. The Government should collect data
4. The Government must take action to on local authorities’ use of bond/
ensure Universal Credit does not result guarantee schemes (or fund non-
in landlords refusing to let to benefit government organisations to collect
claimants. This should include giving this data) as it is currently unclear
tenants a choice over whether their how widespread and accessible these
housing element is paid direct to their schemes are.
Shut out: The barriers low-income households face in private renting 7what barriers do low-income
households face?
There are a number of barriers stopping shortfalls in housing benefit to make
people from finding a home in the private landlords less willing to house LHA
rented sector and some of them interact claimants. Even if a household could find
to compound difficulties for low-income somewhere they can afford to rent, the
households. The changes in the housing large upfront costs involved in private
market, which have increased demand renting, including deposits and letting
in recent years, have interacted with the fees, makes the hurdles even higher.
Locked out High demand LHA rates Benefit Prejudice Extra
administration assurance
More low income High demand LHA shortfalls Universal credit Pre-existing Landlords will
tenants aree finding means landlords decrease landlords’ and delays prejudice against only let to tenants
it harder to access can be choosier appetite to rent to harden attitudes low income with high deposits
private renting about their low income against low households and guarantors
tenants households income housholds
Housing market changes low income households must now find a
private tenancy.
High house prices and loss of
social housing has increased Shortages in available social housing also
demand in the PRS mean that a large group of households on
low incomes, who would have previously
House prices have continued to increase, been served by the social rented sector,
rising by 6.2% in the year to January must now find a private tenancy.
2017.9 Bank of England analysts found
that the primary driver of demand for Increased demand facilitates
private rented housing between 2008 higher rents and choosier
and 2013 was the inability of people to landlords
borrow enough to buy a home.10 Tighter
credit conditions for first time buyers far Increased competition for private rentals
surpassed demographic change and means landlords and letting agents can be
migration as creators of demand for the more discerning about who their tenants
private rented sector.11 are. A study of private landlords in South
London found that “young professionals”
Meanwhile, the availability of social were considered the most desirable
housing has declined for a number of tenants because they were likely to
reasons, including the Right to Buy, need shorter term lets (allowing a higher
successive government’s inadequate turnover for new lettings and the ability to
funding for new supply and developers’ increase rents) and were seen as “good
ability to negotiate down their affordable tenants”.13 The study predicted that the
housing contributions. Social housing segment of landlords catering to low-
lettings to new tenants in England income people would decline sharply over
declined from 364,000 per year to 212,000 time as they turn to wealthier tenants.
per year between 1995/6 to 2014/15.12
This means that an increasing number of An adviser at Shelter’s London hub
Shut out: The barriers low-income households face in private renting 8described the difficulty of having to “pitch” time. Now it’s reversed, for the sort of
their clients to private landlords over and property I let, the tenants will now get
above professional tenants. around £590 a month and I could let that
property out tomorrow for £650 at least.”14
“Once you move outside of social housing
where allocations take into account Our London service also reported
vulnerability, in the private rented sector, increased incidents of “rental guzumping”,
it’s just who is most likely to pay their rent where a tenant who has already agreed a
on time, who is the least business risk.” tenancy with a landlord is “gazumped” by
another tenant who offers to pay more.
Our Greater Manchester advice service
told us that the city’s economic growth “We are hearing about rental gazumping
and increased attraction for wealthier around once a month. This is where a
tenants were making access harder for prospective tenant has had an agreement
low-income households. the landlord, but someone else further
down the queue later that day or that
“Because Manchester is becoming very week says they would be willing to pay
quickly the second city, it’s becoming a more than the advertised amount. The
bit more like London, it’s pushing people property goes to that tenant instead.”
out of the centre… we are seeing demand
rising for property and landlords are Increased competition has also allowed
capitalising on that. When 10 people want landlords to raise rents. Consequently,
a landlord’s property, they can practically rents that were once affordable within
name their price.” the LHA rate have increased above it as
demand has risen.
In 2013, the DWP found that landlords
were not as reliant on the housing benefit At the cheapest quartile of the market,
market as they had been in the past. rents for a one-bedroom property in
One large landlord and letting agent in England rose on average by 2% every year
Portsmouth reported: between 2011/12 and 2015/16. London
saw some of biggest rent increases,
“It was all very stable like that for a long with the cheapest average rents rising
Figure 1: Average monthly rents in the lowest quartile of the private rented
market in England18
Lowest quartile rents (£) 2011/2012 Lowest quartile rents (£) 2015/2016
850
795
575
550
475 495
435
400
325
282
R oom in 1 B e d room 2 B e d room 3 B e d room 4 B e d room
s h a r ed h o u s e p r o p er t y p r o p er t y p r o p er t y p r o p er t y
Shut out: The barriers low-income households face in private renting 9on average by 6% a year for both one Changes to housing benefit in
and two bedroom properties. In Bristol, the PRS
average rents at the lowest end of the
market have also risen 6% a year for one- Over the last 25 years, the welfare system
beds and for two-beds. In Luton, one- used to support low-income tenants has
beds and two-bed rents have increased by gone through a series of changes:
5% annually.15
•The 1990s saw the introduction of
Nationwide, the increase in rents is restrictions on eligible rents if the rent was
starkest for rooms in shared houses, with more expensive than the mid-range of
rents increasing by nearly 4% annually local properties.
over the time period. In London, rents
for rooms in shared houses saw annual •In 2008, LHA was introduced to calculate
increases of 7%.16 A review by the Smith housing benefit in the PRS. This provided
Institute recorded a council officer who a fixed allowance based on location and
said that rooms in the PRS that were family size. It paid tenants directly (rather
previously used to meet housing need than to the landlord) a fixed rate, based on
were now let out to professional young the median of the local market.
people who are able to pay higher rents.17
•In 2011, LHA payments were restricted
to the 30th percentile of the market and
Affordability and Local national ‘caps’ were introduced for LHA
Housing Allowance rates in accordance with the bedroom size
of the property (e.g. £302.33 a week for a
Housing affordability is a measure of
2-bedroom property).
whether or not someone can comfortably
pay for their housing on their income. An
•In 2012, the Shared Accommodation
accepted rule of thumb to gauge whether
Rate (SAR)19 was extended from people
housing is affordable is 30% or less of
aged under 25 to people aged under 35.
income spent on housing costs. A more
nuanced version of affordability is whether
•Since 2013, Universal Credit, which
or not people have enough of their income
combines six working-age benefits
left over after paying housing costs to
including LHA) has been rolling out across
meet their other needs. Changes to LHA
the country. There are more than half a
have reduced tenants’ income, worsening
million (520,000) households claiming
affordability.
Universal Credit – the Government does
not give statistics on what proportion of
An adviser in Shelter’s Manchester hub
these are in the PRS.
reported:
•In 2016, LHA rates were frozen at
“The LHA rate doesn’t cover the rent. 2015/2016 levels for four years.
Most regularly, there is a shortfall they
need to pay from their other benefits.” The impact of the LHA changes
An adviser in Shelter’s Sheffield hub Recent reform to LHA has deliberately
added: limited claimants’ entitlements and as a
result widened the shortfall between the
“We’ve got a significant number of rents charged by landlords at the bottom
people reliant on benefits and they are of the market and the amount of LHA that
really struggling to access the PRS… tenants can receive. Analysis by Shelter
found that people face large shortfalls
even if you can get a tenancy, there will
between what their LHA rate will pay and
sometimes be a shortfall in your benefits
their rent right now. In 2017/18, in one
and you’ll have to top up, but you won’t in four areas of England (25%), a family
be able to do that.” with one or two children living in a two-
bedroom property must find an extra £100
Shut out: The barriers low-income households face in private renting 10a month or more to make up the shortfall •In 269 (83%) of areas there will be a gap
in their rent.20 between LHA rates and the cheapest rents
in England.
Families living in London face the greatest
shortfalls in the country, but this problem •In 184 areas (56%) there will be a gap of
is not limited to the capital. In Cambridge, more than £50 a month between LHA and
for example, the same family would be private rents at the bottom quarter of the
expected to pay an additional £531.17 a market.
month to top up their LHA in order to pay
the rent for one of the cheapest homes in •In 117 areas (36%) there will be a gap of
the area. In Bristol, this family would face more than a £100 a month.
a shortfall of nearly £217.51 a month.21
•In 51 areas (16%) there will be a gap of
The LHA freeze will worsen existing more than a £200 a month.
affordability pressures. Shelter has carried
out research to assess how deep these •In 16 areas (5%) there will be a gap of
shortfalls will be by 2019/20 for a family in more than £500 a month between LHA
need of a two-bedroom home. and private rents at the bottom quarter of
the market.22
The analysis suggests that:
Figure 2: Areas in England where by 2019/20 there will be a shortfall between
two-bedroom LHA level and rents at the lowest quartile of the market23
•Further analysis looking at the whole An advisor at our Merseyside advice hub
of Great Britain (England, Wales and told us that where the PRS remained
Scotland) reveals that 1,069,517 affordable, it tended to be of far lower
households live in an area where there will quality:
be a shortfall between the amount of LHA
they can claim, and the cost of renting “There’s a bit of a subgroup of tenants of
one of the cheapest homes by 2020. Once landlords who own multiple properties,
these households’ tenancies end, they usually shared HMOs, where the tenant
may struggle to find a new one, and be will literally go from one place to the next
put at risk of homelessness.24 in the same landlord’s accommodations.
Shut out: The barriers low-income households face in private renting 11“There’s never any tenancy agreement it’s tax benefit. Each of these have impacted
all a bit cash in hand, under the radar stuff households’ ability to find a new private
and we’ve had clients that have moved rental by restricting how much money they
three or four times, it’s all a bit odd.” are eligible for.
The impact on younger people In particular, the benefit cap means
that families affected by the cap are
Most single, childless people under the immediately excluded from many larger
age of 35 are only able to claim enough properties or expensive locations. Under
LHA to cover the rent for a room in a the original £26,000 cap, the effect was
shared house (the Shared Accommodation minimal in places outside London. But
Rate, “SAR”). This means that the under the reduced £20,000 cap (£23,000
shortfall is particularly hard to meet for in London), many more families will be
younger people. In many areas, people restricted to a much smaller pool of
are often only eligible for a very small affordable properties.
amount of benefit and their problems are
compounded by a lack of shared housing. Previously, families living in two bedroom
In Warrington, for example, a single person properties were not hit by the cap in any
would be eligible for just £212.35 per area outside of London. Under the new
month (£49.55 per week). This means they cap, such families with two young children
would have to find an additional £233.05 sharing a room in need of a two-bedroom
a month to cover the shortfall between property are subject to the benefit cap
their LHA and the rent. In Oxford, under in over half of areas in England. These
35s would have to find an extra £219.28 include all areas of London and large
a month to pay for a room.25 Often, the cities, such as Bristol, Manchester, Leeds
only other benefit available for people to and Birmingham; large towns, such as
dip into is their Jobseekers Allowance Luton, Northampton, Plymouth and
(or the equivalent Standard Allowance in Gloucester; and rural areas, such as Yeovil
Universal Credit.) and South Devon.26
Our Birmingham and Manchester services Lack of negotiating power
highlighted the particular impact on under
35s. LHA was introduced to encourage private
tenants to ‘shop around’ to find a lower
“The low level of LHA rates mean that rent. However, early evaluations of LHA
suggested this objective was not being
a lot of people are excluded from parts
met. Later evidence suggests that tenants
of the city. Single, under 35s struggle
lack negotiating power to lower rents
because the LHA rate is £57 [a week]. and are frequently unable to find more
There are very few places you’re going to affordable options. The DWP’s 2014
get for 57 quid.” evaluation of the LHA reforms showed
that in 2013, the majority of claimants
“Single people just under 35 really were unable to find long-term ways to
struggle. It does begin to bite and it reduce their rent. Just 16% of tenants had
forces them to the bottom end of the spoken to their landlord about lowering
market where there are more rogue the rent charged and only 12% of movers
landlords.” and 6% of non-movers had managed to
persuade the landlord to lower the rent.
The impact of other welfare Instead, tenants were spending less on
reforms household essentials, which is likely to be
unsustainable in the long run.27
The effect of the LHA reforms cannot be
seen in isolation. Since 2010, previous Targeted Affordability Funding
governments have enacted widespread and Discretionary Housing
changes to the welfare system, including Payments
the household benefit cap, the freeze on
other working age benefits, the restriction MPs and peers have repeatedly
of child tax credits to the first two children, confronted ministers on the shortfall
the abolition of the social fund and council between LHA rates and local rents in
Shut out: The barriers low-income households face in private renting 12Parliament.28 Ministers’ responses have processing add tension to the relationship
been to highlight two schemes to mitigate between the tenant and their landlord,
the LHA freeze: Discretionary Housing reduce tenants’ bargaining power if they
Payments (DHPs) and the Targeted are in arrears, and make it more difficult
Affordability Fund, which allows LHA rates for tenants to ask their landlord to lower
to rise by up to 3% in the areas with the their rent.31
largest shortfalls between rates and rents.
Evidence has previously found that
However, both of these mitigations are landlords have to accept non-standard
inadequate in addressing the shortage practices when letting to the housing
of affordable properties in the PRS for benefit market.32 This includes having
households that claim LHA. DHPs are by to wait for housing benefit applications
their nature discretionary and tenants are to be processed, with delays sometimes
therefore unable to rely on them. Shelter taking weeks, rent being paid in arrears
clients have reported difficulties accessing when normally advance payment would
DHP and in many cases, councils are be required, and benefit payments being
failing to acknowledge requests. Our made four-weekly, rather than by the
figures show that four in 10 clients (40%) usual calendar month. A subgroup of
were waiting between a fortnight and four landlords has evolved to adapt their
weeks for a response, while 15% were business models to reflect these changes
waiting for more than four weeks.29 and specifically let to the housing benefit
market.33
The Government has recycled 30% of
the savings from the LHA freeze to use While these problems were present
as Targeted Affordability Funding (TAF). prior to the 2000s, housing benefit did
While TAF is welcome, it is clearly not not present an insurmountable barrier
enough to mitigate the large shortfalls to all landlords. Principally, once the
faced by households. Shelter’s research claim was set up, rental income was
into the current gap between LHA and guaranteed, with tenants able to request
local rents takes into account this year’s that payments were made direct into
TAF distribution. Therefore, even with their landlord’s bank account. Prior to
the mitigation of the TAF, in 2017/18, the 2008 LHA reforms, the proportion of
households face a shortfall in 79% of tenants choosing payments to be made
the country. Indeed, the method for direct to the landlord ranged between
distributing TAF highlights its inadequacy: 20% and 60% throughout the country.34
in 2017/18, only areas where LHA rates A Government review concluded: “For
matched less than 5% of the local private landlords, although less tolerant
market qualified for TAF – this means [than social landlords] of arrears, direct
that areas where 95% of the market was payment to themselves offsets their
unaffordable did not qualify.30 general preference of not letting to tenants
in receipt of [housing benefit].”35
Housing benefit
The 2008 LHA reforms changed this to
administration and the only permit the payment of benefit to
introduction of Universal landlords for vulnerable tenants and those
Credit in arrears of eight weeks or more. This
greatly reduced the incentive to let to LHA
claimants. A Government-commissioned
review in 2010 found that private
There is evidence that difficulties in landlords and local authorities agreed
administration and delays to payments that the introduction of direct payments
under both locally-administered LHA and had resulted in an increase in arrears.
nationally-administered Universal Credit Landlords reported that ‘model’ tenants
are a barrier to accessing a private rental. had become non-payers overnight. As a
result, landlords spent a lot more time and
Housing benefit maladministration and effort trying to secure rental payments.
delays to benefit payments have long- Many landlords tried to mitigate the risk
presented a barrier to the PRS for tenants. of arrears by barring LHA claimants. In
Studies have shown that delays to benefit some areas dominated by the housing
Shut out: The barriers low-income households face in private renting 13benefit market, landlords felt they were claimants.
left with little choice but to sell up in the
area, restricting supply. Other landlords Universal Credit contains some safety
increased requests for guarantors or mechanisms to protect landlords against
operated informal lists of blacklisted rent arrears. Managed payments to
tenants.37 landlords and Alternative Payment
Arrangements (APAs) are available to
Universal Credit provide assistance to Universal Credit
claimants who have difficulty budgeting on
Universal Credit was intended to normalise a monthly basis. This allows the housing
benefit-receipt and reduce landlord cost element to be paid direct to the
discrimination.38 However, evidence landlord instead of the tenant. Government
instead suggests that Universal Credit has guidance states that APAs should be
itself become a new barrier for claimants available from the beginning of a claim, if
wanting to access the PRS. necessary, particularly where a tenant is
likely to struggle to pay their rent from their
Our Sheffield service described seeing monthly UC payment which might lead
large numbers of people who were to homelessness. Being in temporary or
experiencing difficulties with their supported accommodation, or homeless,
Universal Credit claim. is a ‘tier-one factor’ causing a highly likely/
probable need for an APA.39
“We are seeing people on Universal
Credit all the time who are really However, research suggests that a lack
struggling to get by because their claim of knowledge is making it difficult for
is utterly messed up. They didn’t get the tenants to secure an APA without first
money when they thought they were accruing arrears.40 Further arrears are
going to get it or it’s not right or when it all often accrued while an application for an
comes in one big lump sum they are very APA is being processed, putting tenants at
confused about who they pay what to.” further risk of eviction and homelessness.
Local authorities have also reported errors
Other advisers also report landlords in the processing of APAs, including
operating blanket bans on Universal Credit applications disappearing, notifications
claimants. arriving inconsistently and rejections often
containing no reasons.41
This was a problem reported by our
service in the East of England: Trusted Partner Pilots
Social landlords have been working with
“In Great Yarmouth particularly, because the DWP on a scheme to make it easier
single people have moved onto Universal for tenants to transfer to an APA before
Credit, landlords are pulling out of the they are in arrears. Transferring onto an
market and it’s likely to be an issue across APA means that that the payment of
the county. Landlords have been in touch the housing cost element can be paid
with us but there’s little we can do… they direct to the landlord. Under the ‘Trusted
are not renewing tenancies and while Partner Status’ pilot, landlords will be
previously private landlords would work able to identify vulnerable tenants who
with the council to place more difficult may struggle to cope with having rent
paid direct to them, and recommend an
individuals into accommodation, that
APA. Applying APAs before tenants are in
market has completely changed with the
arrears would prevent the threat of eviction
introduction of Universal Credit.” and homelessness.
Our Bournemouth service reports a large The ‘Trusted Partner’ pilots are, to date,
local private landlord on the South Coast, only available to social landlords. But the
which is a major provider of housing to problems with Universal Credit continue
LHA claimants, has said it will no longer for private landlords too. Private landlords
take anyone on Universal Credit, and have reported difficulties attempting to
landlord associations have warned that secure APAs for their tenants.42
their members are reluctant to take on UC
Shut out: The barriers low-income households face in private renting 14Upfront costs and Holding deposits
guarantors Many landlords require holding deposits,
often in cash, to take a property off the
market until the tenancy is signed or
the tenant moves in. Tenants are likely
The upfront costs of renting – rental
to lose this money if they pull out of an
deposits, letting agency fees and rent
agreement or fail a reference check. As
in advance – can prohibit low-income
holding deposits are not covered by the
households from securing a new property.
Deposit Protection Scheme and are often
Some tenants also face other upfront
handed over at speed to secure a letting,
barriers, such as requests for guarantors.
they are particularly susceptible to fraud.
There have been reports of unscrupulous
The previous government recognised the
agents taking multiple holding deposits
need to remove some of these upfront
from prospective tenants with no intention
costs, announcing in the 2016 Autumn
of renting out the property.45
Statement that it would ban letting fees for
tenants. It is also consulting on proposals
The previous government was proposing
to cap deposits and to enable tenants to
to permit agents to continue charging
pay their deposit in instalments over the
holding deposits on the basis that tenants
first few months of their tenancy.
could speculate on multiple properties,
leading to unnecessary and costly work
The existence of upfront costs for agents and landlords. However, it was
in the PRS proposing to cap these deposits.46
In 2015, more than half (55%) of private
tenants were asked to pay rent in How are upfront costs a barrier
advance, while 42% had to pay a deposit to low-income tenants?
and 42% a letting agent fee. More than
The most common ways that tenants
a quarter (28%) had to pay a fee for
pay for upfront costs is from their current
credit checks.43 Low income tenants may
account and from savings. A total of 40%
be liable for the largest costs: Shelter’s
of renters who had moved said they had
private landlord survey found that two-
financed upfront costs from their current
thirds (61%) of private landlords who rent
account, over a third (35%) dipped into
to housing benefit claimants ask for one
their savings.47 However, borrowing is
month’s rent in advance, compared with
more common than average among
49% who do not have tenants on housing
families, female renters, younger renters,
benefit.44
and those receiving housing benefit.48
Shelter’s private tenant survey found
Not all landlords require upfront costs
“a clear association” between tenants
and some will waive deposits and credit
that did not move voluntarily and having
checks. However, an adviser at Shelter’s
to borrow to fund the move. This risks
Lancashire hub said this accommodation
leading families into unsustainable debt.
often tended to be in poor condition:
An adviser at our Sheffield hub reported
“We do have some private landlords who that some clients got into debt as a result
are slightly more accessible and they of upfront costs:
might accept a small deposit and don’t
require credit checks. We sometimes “The demands of deposits/bonds, credit
find it easier to access accommodation checks, fees: our clients just haven’t got
via that method. But a lot of the time, the them and they get into debt.”
accommodation that’s offered is not a flat
or a house, it’s bedsit accommodation. If low-income households do not have
And even if it is a house or a flat, immediate funds and are unable to
unfortunately the conditions aren’t always borrow, they may be prevented from
that fantastic. In a lot of cases that seems securing a new property. Shelter’s private
to be the common trend.” tenant survey shows that LHA tenants
are more likely than other tenants to
be unable to access the PRS for this
Shut out: The barriers low-income households face in private renting 15reason. Of the tenants who do not receive Guarantors agree to be legally liable for
housing benefit, 3% have been refused rent arrears and as such are attractive to
or prevented from moving into private landlords looking to minimise their own
accommodation because they cannot risks. People acting as guarantors have
afford the deposit or rent in advance. This to meet certain criteria, normally earnings
figure rises to 10% for those claiming and sometimes home-ownership.
housing benefit. Research by Crisis further
suggests that homeless people struggle For example, an advisor at Shelter’s
to meet landlords’ requests for additional Bristol hub reported that some landlords
financial safeguards and are consequently had guarantor requirements for younger
unable to find anywhere to live.49 families.
An adviser at Shelter’s London hub “Another thing we have come across
identified a substantial group of tenants with some landlords is that if they are a
that may just be able to afford on-going younger family – so under 35 – they have
rent but are unable to overcome the wanted some kind of guarantor. So that
hurdle of a deposit or one-month’s rent in
can be a barrier, particularly if people
advance.
don’t the family or friend connections to
find a guarantor.”
“For an increasing number of our clients
it is the first month’s rent and deposit
Our research shows that landlords are
and the fees [that is the main barrier] more likely to require a guarantor from
… Sometimes because the landlord tenants who are claiming LHA. Of the
has retained their deposit, sometimes landlords that do not have tenants on
because an issue over the deposit is LHA, 16% ask for a guarantor. This rises to
unresolved, or because they have gone 24% of those who have tenants on LHA.
down to zero trying to retain their last In 2013, a DWP survey looking into the
property. People don’t just [leave their consequences of the LHA reforms found
home] when they start getting behind that landlords were using “stricter vetting
on their rent. They usually wait until they practices”. “Where the receipt of money
are in a couple of grand’s worth of debt. upfront was no longer sufficient, landlords
were using checks and guarantors”, the
They’ve often tapped out a few credit
study found.51
cards thinking they can turn it around.”
An adviser at our Dorset hub told us that
An adviser at our East of England hub requirements for guarantors earning 36
highlighted the barrier of upfront costs for times the monthly rent was routine:
people without any savings or very low
income:
“Guarantors are a massive issue [the
requirement to have a guarantor earning]
“It’s deposits, two month’s rent in
36 times the monthly rent seems quite
advance, agency fees… it’s an enormous
normal. For example, there’s one agent
lump of money that you need to secure
that says if housing benefit covers the full
accommodation, and in some cases,
rent they do not need a guarantor, but if
people just have nothing.”
there is any top up required they need
This suggests that there is a gap a UK homeowner earning 36 times the
in housing benefit policy; while the monthly rent.”
entitlement is focused on people’s
ongoing rental liability, it does not The ability to find someone who earns
recognise the additional costs of setting enough to act as a guarantor is restricted
up a tenancy. for people on low incomes and those
who are homeless. Our survey of private
Guarantors tenants found that of those tenants not
in receipt of housing benefit, 2% were
An emerging trend has been for landlords refused or prevented from accessing
to ask for guarantors from housing private accommodation because they
benefit claimants as additional security. could not obtain a guarantor. This
Shut out: The barriers low-income households face in private renting 16increased to 8% for tenants on housing high that households are discouraged
benefit.52 from taking them out. Budgeting loans
are available for people who have
Our research found that homeless claimed Income Support, income-based
households’ friends and family were Jobseeker’s Allowance, income-related
also often living on low incomes, so the Employment and Support Allowance or
informal support they were able to draw pension credit for the last six months.
on to produce a guarantor, or borrow Universal Credit claimants can claim a
money for a deposit to access a private Budgeting Advance if their earnings are
rental, was limited.53 This research also below £3,600 in the last six months for a
found that those who became homeless couple or £2,600 for a single person.
quickly were less likely to be able to plan
for the move, gather savings or arrange for The Government does not publish
someone to act as a guarantor.54 figures on how many people claim these
advances, so we do not know how
Assistance with upfront costs frequently they are used. The very low
earnings threshold means that only the
Discretionary Housing Payments are very poorest claimants can receive these
available for those who need help with loans, so many claimants are locked out
upfront moving costs, including deposits. of claiming an advance. Additionally, the
However, a relatively small proportion repayment for a UC budgeting advance
of DHP funding is used for this purpose can be punitive; repayments can be up to
(10%), with the majority spent on keeping 40% of a claimants’ Standard Allowance.
people in their homes.55 DHPs are, by their This may discourage tenants from
nature, discretionary, meaning tenants requesting an advance.
cannot rely on them for support, and the
competing demands on DHP mean that
local authorities must ration assistance.54
Households struggling with deposits may Landlord attitudes
qualify for financial assistance in the form towards low-income
of deposit bond or guarantee scheme. households
Responses to a survey by the Association
of Housing Advice Services (AHAS) in Private landlords’ reluctance to let to
2010 found that nearly 80% of local people on housing benefit is not a new
authorities offered a deposit guarantee phenomenon. In 1995, the Joseph
scheme.56 There are no centrally collected Rowntree Foundation noted that “finding
figures on the use of deposit bond a landlord who will accept people who are
schemes. on housing benefit or unemployed” was a
problem for prospective tenants.57
Benefit advances
Shelter’s survey of private landlords found
Low-income households, even those that 63% of landlords would prefer not to
in work, are often unable to access let to LHA claimants, with 42% operating
borrowing facilities and credit cards. This an outright bar.58 Further, Shelter’s survey
is why interest-free benefit advances could of private renters revealed that more than
be effective in helping these tenants pay a fifth (21%) of those claiming housing
upfront costs such as deposits. They are benefit said they had been discriminated
also a useful alternative to loan sharks against because of their LHA status in the
and payday lenders. Payment in advance last five years.59
is sometimes accepted in the place of
guarantors. An adviser in our Greater Manchester hub
said:
But currently, benefit advances are
restricted to the very lowest income “There’s are still a lot of private landlords
households, and repayments are so
Shut out: The barriers low-income households face in private renting 17Figure 3: Landlords: What is your policy on letting to housing benefit/LHA
claimants?
45% 42%
40%
35%
29%
30%
25%
21%
20%
15%
10% 8%
5%
1%
0%
I don't let to this I'd prefer not to let I have no strong I prefer letting to Don't know
group to this group, but preference for or this group
occassionally do against letting to
this group
that won’t deal with housing benefit on housing benefit but now with things
mostly because of the delays, and like the household benefit cap, landlords
the top ups which they feel they won’t know it’s going to get worse and they
get… Over the last ten years, it’s grown are nervous about renting to people on
massively, that problem. There used to benefits because things can change and
be a level of security in getting someone what’s affordable for them one day isn’t
Figure 4: Number of times local authorities in England prevented and relieved
homelessness with an incentive paid to a private landlord60
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Shut out: The barriers low-income households face in private renting 18affordable the next.” Shelter’s survey of private landlords found
that of those who preferred not to let to
An adviser in our Sheffield service LHA claimants:
highlighted the widespread use of the term
‘no DSS’ in property adverts. •29% said this was because of stories
from the media and other landlords
“There’s so many adverts for private
rented that say ‘no DSS’ despite the fact •21% said it was because they had let to
that the DSS was scrapped donkey’s LHA claimants in the past and had bad
years ago. Especially the big estate experiences with tenants paying rent
agents. There are landlords that will
•14% said their mortgage companies did
take people on benefits but then the
not allow it.62
issue becomes the standard of those
properties and the kinds of landlords that Other surveys have suggested landlord
we’re dealing with.” reluctance stems from fears about
rent arrears and delays in housing
Local authorities have powers to prevent benefit processing.6364 An advisor at our
and relieve people’s homelessness Birmingham hub said:
through the PRS. Often, councils use
incentive payments to persuade private “Where landlords have got the choice
landlords to let to homeless households across the city in terms of tenants, a lot of
and to persuade them to continue a
landlords would prefer not to take benefit
letting.
clients… We’re picking up on landlords
Figure 4 shows that the number of turning away benefit clients because they
households who had their homelessness see them as more problematic and also
prevented or relieved with PRS landlord with Universal Credit coming through,
incentives halved between 2009/10 and they see that as another encumbrance.”
2015/16. In 2013, Cambridge University’s
Centre for Housing and Planning Research Research suggests that landlords’
noted the reduction between 2009/10 decisions can be made for reasons other
and 2012/13 and questioned “whether than risk management.65 These could
PRS access schemes are struggling in be altruistic or paternalistic reasons.
the current economic circumstances”.61 Some households interviewed said that
Combined with a fall in the number of landlords were not prepared to enter into
landlords willing to provide temporary arrangements with tenants that they saw
accommodation to local authorities, as abusive or bad practices. Examples
this strongly suggests that the PRS is included landlords not letting to families
becoming less accessible to tenants if they perceive it would be unsuitable as
on low incomes, even when supported the home was too small or that it would
by a local authority and that landlords take too much of their income. This was
who traditionally engaged in the housing presented as being on the basis that it
benefit submarket are looking elsewhere would be bad for the children or the family,
for tenants. and they weren’t prepared to put them
in this situation, or be an ‘exploitative’
landlord.66
Reasons why landlords However, survey data also suggests that
are reluctant to let to LHA letting decisions may often be guided on
claimants the basis of personal prejudices. Four in
ten landlords (41%) that do not delegate
Common reasons for prejudice against fully to a letting agent admit that it is
housing benefit claimants include media ‘natural for prejudices and stereotypes to
perceptions, bad experiences with come into letting decisions’. Landlords’
tenants, rent arrears, market competition own backgrounds can colour their
and mortgage requirements banning the decisions. For example, landlords who
renting to housing benefit claimants. have children at home themselves are
more open with their policies on letting to
Shut out: The barriers low-income households face in private renting 19both children and LHA claimants.67 Banning discrimination against
LHA claimants
Some instances of landlord discrimination
have attracted notoriety, none more Under the UK Equalities Act, benefit
so than the buy-to-let landlord Fergus claimant status is not one of the specified
Wilson, who has reportedly banned single ‘protected characteristics’. However,
mothers, “coloured” people, victims of groups such as women and disabled
domestic abuse, low income earners people are often over-represented among
and plumbers from his properties.68 It is LHA claimants, so it could be argued they
difficult to tell how common Mr Wilson’s are subject to ‘indirect discrimination’.
practices are in the wider lettings market
– certainly few have chosen to be so In 2016, the Republic of Ireland introduced
public. However, the fact that four in ten a new clause in its equalities legislation to
landlords believe it is natural to be guided specifically prohibit discrimination against
by prejudices and stereotypes suggests tenants in receipt of housing assistance.
that this behaviour, while extreme, may not Landlords and estate agents can be fined
be unique. up to €15,000 if they breach the new law.
There have been few publicised cases
Mortgages and insurance of fines for those caught flouting the
law. However in March 2017, an estate
A total of 14% of landlords say they prefer agent was reportedly fined 1,500 euros
not to let to LHA recipients because their after telling a man “no rent allowance
mortgage or insurance policies stop them accepted”.71 Charities in Ireland have
from doing so.69 This practice by mortgage reported emerging instances of “indirect
providers appears to be widespread. discrimination”, where people in receipt of
Research by 3mc, a mortgage broker, has housing assistance are not discriminated
found that 66% of lenders in the buy-to- against outright but landlords have put
let market bar landlords from renting to additional barriers in place such as extra
tenants in receipt of housing benefit.70 deposits.72
These providers include TSB, Santander,
Virgin and Natwest, according to the Although it seems like an attractive
research. Insurance premiums can also be solution, barring landlords from refusing to
higher if landlords decide to let to housing let to housing benefit tenants does nothing
benefit recipients. to address some of the biggest reasons
(LHA rates and benefit administration)
behind landlords’ decisions not to rent
to LHA claimants. However, it would be
helpful to collect information from Ireland
to understand how effective the policy has
been.
Shut out: The barriers low-income households face in private renting 20Current and potential
interventions
Current solutions to schemes for homeless people. A total of
153 schemes received funding under the
solving barriers to PRS programme, and coverage was broad
access across the country.75
The barriers facing low-income A number of organisations have called for
households have long been recognised the expansion of ‘social lettings agencies’.
by local authorities and voluntary These are a type of PRS access scheme:
organisations. Agencies have developed lettings agencies specifically set up to help
programmes to help such households low-income and homeless households
overcome barriers.73 Since the early into the PRS and incentivise landlords to
2000s, local authorities have been let to people claiming housing benefit.
encouraged to offer a wider range of The Centre for Social Justice (CSJ) called
housing options to statutory homeless for a £40m fund to aid the expansion of
households, making greater use of the social lettings agencies and encourage
PRS to reduce the use of temporary the introduction of new entrants.76 London
accommodation. Consequently, PRS Mayor Sadiq Khan pledged to establish
access schemes have increasingly been a London-wide social lettings agency.77
used to accommodate statutory homeless The previous government’s Housing White
households, such as families with children, Paper said ministers would “consider
who might previously have experienced a whether social lettings agencies can be an
(potentially prolonged) period in temporary effective tool for securing more housing
accommodation before accessing a social for households who would otherwise
tenancy.74 struggle”.78
Some of the current methods to help low- Challenges to expanding PRS
income tenants access the PRS are: access schemes and social
lettings agencies
•Cash rental deposit schemes
One of the biggest challenges to
•Bond or guarantee schemes for rental expanding PRS access schemes is
deposits landlord reluctance to participate. Shelter’s
private landlord survey shows that a
•Incentive payments to landlords to let to substantial minority of landlords who
certain groups (e.g. homeless households) will not rent to housing benefit claimants
are adamant that nothing will change
•Assistance with rent in advance their mind.79 A review of the PRS in
South London concluded that because
•Social lettings agencies of the buoyancy of the local market,
“any landlords willing to set up working
•Landlord and tenant matching schemes arrangements with the local authority will
be in a minority.”80 The shortfall between
•Support with claiming housing benefit LHA rates and rents also limits the ability
of PRS access schemes to source
•Tenancy floating support schemes affordable accommodation for tenants,
and to persuade landlords to let to people
•Private sector leasing schemes on housing benefit.8182 Additionally, DCLG
funding cuts have resulted in councils
Evidence suggests that such schemes are rationing local service provision, impacting
relatively extensive, especially in London. their ability to establish and maintain PRS
Crisis has previously received government access schemes, particularly for those to
funding to administer the Private Rented whom no statutory duty is owed.83
Sector Access Development Programme,
which expanded support for access PRS access schemes, especially social
Shut out: The barriers low-income households face in private renting 21You can also read
