Let to Housing Claimants?  Study the Budget.

If you are a Landlord that lets to Housing Benefit Claimants, you may have a shock after the budget.  George Osborne decided to cap housing benefit at a maximum of £400 a week for any property with four or more bedrooms after unsavioury headlines in the press regarding claimants living in luxury at the taxpayers expense.

Previously in the 2008 Housing Benefit Reforms, claimants were paid LHA (Local Housing Allowance) which was based on average rental values.  The basis of the rent was on the broad market area in which they wanted to reside.

It has been said that in poorer areas the system pushed up rents. For example, in Wolverhampton, of the local rental market, some 75 per cent are with tenants receiving LHA.

This isnt just a shock to investors letting to claimants though; it will may also have a detrimental effect on the private rented sector.  The market rents in those areas were heavily influenced LHA.  If all landlords in that area put up their rents in line to what they believed was the market rent, they were rewarded with higher LHA payments as a result.

Study your local market, research the ratio between claimant rental and ordinary rental and assess whether there may be a backtrack in your rental income.