Access to homes for under-35’s: The impact of Welfare Reform on Private Renting

by | Aug 1, 2017 | Blog post, Welfare Reform & Homelessness

As the dust settles after the general election there is a clear need for policy and practical solutions that have cross-party support. Private renting is an area which needs urgent attention. The Housing White paper published in January demonstrates that policymakers are increasingly looking to the private rented sector to accommodate younger households; half of younger households are private renters.[1] At the same time Welfare Reforms and taxation changes are changing the financial situation of private landlords. The Residential Landlords Association and ourselves at Sheffield Hallam University conducted a survey of two thousand landlords to investigate these changes. Our findings suggest that the limited housing options for young private renters is something the new government will need to pay urgent attention to.

The findings of the survey can be found here and they suggest that the vast majority of respondents are happy to let to all or some under-35s. Unsurprisingly, younger households are a major source of tenants with one-third of landlords seeing an increase in demand from this group. However, many landlords have decreased their lettings to some groups of under-35s in recent years. So why are landlords decreasing lettings to under-35s when demand is increasing?

There are specific reasons why  landlords are unwilling to let to some groups of under-35s – particularly Housing Benefit/Universal Credit (HB/UC) claimants. Reasons given tended to fall into two categories − difficulty in managing the accommodation and fears about financial loss. There are particular concerns about the administration of HB/UC and direct payments to tenants. Those landlords who still let to HB/UC claimants are also changing their strategy towards this group. Four-fifths of landlords who continue to let to this group had put in place additional safeguards in recent years. The most common safeguards are the use of guarantors and/ or direct payment to the landlord.

This decline in landlords willing to let to certain types of under-35s − particularly HB/UC claimants − represents a major challenge to government’s policy approach to the private rented sector. Few younger people can access scarce social housing and home ownership is a long way out of reach for those currently claiming HB/UC. This affects young people who work as well as those who are unemployed, as younger people are increasingly relying on HB/UC to top up low wages. So where will these younger people live if the supply of private rented accommodation for HB/UC claimants continues to decline?

The good news from the survey is that a range of policy changes or initiatives would make landlords more willing to let to under-35s. Over half of landlords/agents favoured tax changes − reversing changes to Mortgage Interest Relief and/or providing tax relief for longer tenancies. Four out of five would be more willing to let to under-35s with a bond or rent deposit scheme. It appears that landlords are not necessarily looking for higher rents or increased yields from their properties. Instead there is evidence that many are seeking a reduction of risk − particularly in relation to arrears and the administration of welfare payments. The formation of a new government provides an opportunity for policymakers to engage with landlords. There is an urgent need to find workable solutions to ensure that under-35s − particularly those on HB/UC − can still access accommodation within the private rented sector.

Dr. Ben Pattison, CRESR, Sheffield Hallam University – @bmpattison @CRESR_SHU

[1] 49 per cent of Household Reference Persons aged 16 to 34 years were private renters in 2015/16. Taken from English Housing Survey 2015/16, Households Annex Table 1.3.