DSS or Dogs?

Yesterday a very intersting article was published on the BBC website: No DSS: Most flat shares refuse benefit claimants

It claims that landlords are twice as likely to accept potential tenants who own pets than people who claim benefits.

The article goes on to look at the case of one particular tenant, Eva, who is a single parent, working full time but having her low wage subsidised by Housing Benefit. Day in day out we come across numerous people like Eva, hard working, honest people who have become victims of a stereotype and face discrimination due to their circumstances. We do not recommend or condone lying about your circumstances to obtain a rental property, often with our tenants it is the case that we can sit down and work together to agree affordability and help find a suitable property, as we understand the local market and our landlords tend to be receptive to tenants in receipt of benefits.

The private rented sector has doubled in size since 2002 and now accounts for 20% of all UK households, recent cuts in welfare means benefit payments in many parts of Manchester no longer cover the rest.

You can see our thoughts below on this short video regarding renting to people on housing benefit

 

Every week our Lettings Manager, Joe, makes a short video in response to enquiries throughout the week, if you’re interested in viewing more of our videos you can do so on our YouTube Channel

Should You Let to DSS Tenants?

Some landlords won’t let to DSS tenants under any circumstances, but others recognise that not all DSS tenants are going to wreck the house and turn it into a crack pad. In fact, some DSS tenants have more regular, stable incomes than employed people and may be a better bet for a buy-to-let landlord. So how do you sort the wheat from the chaff?

Delays in Payments

One of the key factors with DSS tenants is that they are dependent on the efficiency of the benefits systems which pays them. Universal credit has acted as a gigantic spanner in the works here. Because it involves a switch from the previous benefits system to a new set of processes, it was always going to be difficult, but add in the necessity to alter computer systems, which has never been a strength of government, and you have a recipe for tenants who are not getting the money they need to pay their rent.

This is not their fault, and if they were employees who had not been paid because the banking system had gone down, there would be abject apologies on their behalf. However government appears to think that not paying claimants is a risk-free activity, and government has also decided that DSS tenants who live in private rented accommodation are now personally responsible for paying housing benefit to their landlord.

Clearly, if there are delays in processing a person’s claim, they will not get their housing benefit on time and will be in a position where they must pay the landlord late. DSS tenants are people who are in receipt of housing benefit. How much they get depends on their circumstances and any other income that they have.

But tenants are usually very clear with landlords about the amount of benefits they receive, because if they manage to secure a tenancy, they need to inform the Housing Officer of the new rent that they have agreed to.

Poor Publicity has Affected the Better Tenants

Many tenants who are claiming benefits and want to pay landlords rent from their housing benefit are in their current situation through no fault of their own. They may have been diagnosed with a serious illness that has meant they could not continue in work. Or they may have lost their jobs, been unable to keep up their mortgage payments, had to sell their house, spent the resulting equity in private accommodation and finally ended up claiming housing benefit. Anyone dealing with lettings and Manchester property in general will have come across these cases.

Unfortunately, some reality TV programmes have given the impression that anybody claiming any kind of benefit is a drug-addled waster who will trash the property and leave without paying six months’ rent. This simply isn’t the case, any more than employed people who appear to have a lot of income are really faking it and waiting to sublet the property to another dozen tenants.

In the employed sector and the DSS sector, there are good and bad people who may make excellent or dreadful tenants. The key thing is to be able to distinguish between the two.

How to Get a Good DSS Tenant

One of the things you need to look for is any disparity between the amount that the tenant is receiving in housing benefit, and the amount that you are charging. The tenant has to make up the shortfall every month and if they are disabled or have no access to extra income, they are going to find this extremely difficult. So, to avoid rent arrears, make sure that your tenants can afford the rent from their housing benefit.

Make sure that you have a suitable landlord’s insurance policy in place and don’t gloss over the fact that you are letting to DSS tenants. Yes, they are slightly higher risk and you may need to pay a slightly higher premium but let’s face it, these tenants tend to be renting in areas where property is cheaper, and therefore rental yields are higher. Just accept slightly higher insurance as the cost of doing business.

And always meet the tenants personally. Your gut feeling is probably a better guide than any risk assessment. Look at why the tenants are dependent on DSS payments and you’ll get some insight into whether they are seeking a secure home or are irresponsible and likely to cause you problems.

What does the Budget Mean For Us?

What does the Budget Mean For Us?

Earlier this week we met as a team and were notably hawkish about what may come to light this week in the the budget. The chancellor told us what we all already knew, the future is indeed uncertain. In this, the so-called “budget for the next generation” we have a number of key takeaways and thoughts.

Keeping politics and personal opinions out of the blog, we have included below just the facts as we see them, and the major factors that will cause an impact to the people we work with on a day to day basis. We are happy to discuss any of the key points here and how they will affect you. Either call us on 0161 681 3724, or leave a note in the comments section at the end of the blog and we’ll respond and open up the debate.

 

Landlords and second homeowners

Stamp Duty

A 3% Stamp Duty surcharge on second homes and Buy to Let properties from 01 April 2016 will be introduced and larger investors will not be exempt as previously thought from the stamp duty charges, meaning all purchasers of Buy to Let properties will pay the additional tax. This was expected not to be of concern to people owning 15 or more houses however this isn’t the case it applies to everyone.

 

21st March – Mortgage Credit Directive

From 21st March consumer buy-to-let mortgages (on rented properties that are not being used as part of a business) will be regulated by the Financial Conduct Authority (FCA). Second charge mortgages (also known as secured loans) will also come under regulation. This could mean that financing deals become a little harder

 

Taxation

Capital Gains Tax (CGT) will be cut from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers. Residential property sales and carried interest will be exempt from Capital Gains Tax (CGT) being introduced on 06 April 2016.

There will be an 8% surcharge to landlords selling a buy to let property meaning this benefit is not being passed onto landlords. We consider the reason behind this that because of recent tax changes in stamp duty and also the clause 24 meaning less tax relief on mortgages of BTL property’s (unless held in a ltd Company) many landlords are already considering selling if they were to benefit from the CGT reduction this would encourage more meaning an increased amount of property to the market that may create a crash in prices.

 

Rents

We consider all the recent changes in tax and legislation on current landlords will increase the rents. There will be more landlords moving out of the market along with no large increase in building will increase demand. As LHA rates are frozen for the next 4 years this will mean either attracting working tenants or expecting LHA tenants to top up their rents.

 

THE NOTHERN POWER HOUSE

We all have our own views on the current effectiveness of the Northern Powerhouse, or lack thereof, but the budget statement did have some promising news for our region, my key takeaways were:

Homelessness

A major issue for Manchester – and one the government has been under pressure to address.In response the Chancellor strayed out of his usual territory to set up a £115m fund to help tackle rough sleeping. Most of that will be used to provide ‘low cost’ accommodation for people leaving hostels before they get into regular housing, creating 2,000 new beds.

It is also delaying a planned cap to local housing allowance by a year – and getting immigration officials to work more closely with local authorities to send back EU migrants who end up sleeping rough, a significant problem in Manchester.

The city has seen rough sleeping rise tenfold since 2010 and there is no sign of that rise slowing.

It is so far unclear how that money will be allocated – whether it will be done according to population size or the current rough sleeping figures.

Nevertheless the big structural problems that underpin our rising homelessness still remain: cuts to benefits and a chronic housing shortage but this is only expected to get worse by the unfair taxing of landlords

Buisness Rates

Greater Manchester has been handed control of all its business rates in replacement of its main central government grant.

Along with Liverpool and London, the area will move towards a model where it is far more reliant on the taxes it raises from local firms going forward.

At first sight the figures for 2016 would suggest Greater Manchester as a whole will be £80m better off as a result.

However there are all sorts of unknowns – including what happens if a huge economic downturn hits the region, such as when the steel industry collapsed in the north east.

There are currently revaluations taking place across the country, due to come in in 2017, that will be used to reset the amount paid by businesses in rates – so that could dramatically alter the amount of income available to councils.

Within Greater Manchester there is the issue of how the money will be redistributed, given that as it stands areas such as Rochdale and Oldham would lose out significantly compared to those such as Manchester and Trafford, which would gain enormously.

But perhaps the biggest danger is also contained within the Budget: thousands of small businesses – 90,000 across the north west – being taken out of business rates altogether.

That looks dangerously close to making a very generous tax cut – and making town halls pay the price.

Transport

High Speed III train between Manchester and Leeds has been given the green light. This will only help as increased infrastructure and improved transport can only help house pricesProbably the most significant part is £161m for the Highways Agency to speed up improvements to the M62 on both sides of Manchester , but money was also committed towards bringing town train journeys between the two cities to half an hour.

He also found £4m towards the eventual transformation of Manchester Piccadilly – and other northern stations – ahead of HS2’s arrival in more than a decade’s time.

CRIMINAL JUSTICE

Greater Manchester is to become the first English region to get new powers over the criminal justice system.

Chancellor George Osborne used the Budget to announce further devolution of powers to the area.

The change means decisions on offender management, education in prisons and work with youth offenders will be made locally.

The region’s Labour mayor, Tony Lloyd, said “we will have to read the fine print” to make sure there is “no loss”.

The Chancellor also announced the region will get a new prison and will keep 100% of business rates, beginning next year. Greater Manchester Combined Authority, which comprises the region’s 10 councils, said it will have more control of funding to support both offenders and victims of crime.

It is proposing devolving other budgets, including for female offenders, young offenders and those sentenced to fewer than two years in prison, which would mark a major change to the current system.

Announcing the change, Mr Osborne said: “This is the kind of progressive social policy that this government is proud to pioneer”

 

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