Private landlords may have to decrease rents on their buy to let property portfolio if they have tenants who are affected by the Chancellor’s housing benefits cuts.
More than one million families who currently receive housing benefit will have to find extra money in order to pay their rent from next year.
And it’s reported that George Osborne, who announced in the new emergency Budget he will be reducing the benefits cost by almost £2bn, wanted to stop the problem of “greedy families trying to live off benefits in expensive and extravagant parts of London.”
In central London, the Local Housing Allowance (LHA) gives families in four-bedroom homes up to £1,000 per week in order to pay their rent.
According to the Greater London Authority’s rent map, the median weekly rent for a four-bedroom home in Westminster is £1,100; in Camden it is £825 and in Southwark £450.
Chris Norris, policy manager for the National Landlords Association (NLA), said: “Landlords will have to look at their profit and loss and decide how much they can afford to cut their rents by.
“If they are not going to do that, they will have to seek non-housing benefit tenants or sell up.”
He added, “Many people will be forced to cut back on essentials like food and electricity, or take on extra debt, just to make ends meet.”
Campbell Robb, chief executive of Shelter, said the changes would cause “significant social and personal upheaval”, create “huge clusters of poverty and inequality, creating an even bigger gap between rich and poor”.
Meanwhile, legal information provider Sweet & Maxwell has revealed private landlords filed 23 percent more repossession claims against their tenants during the credit crunch.
Private landlords now account for 17 percent of all repossession claims in the rented property sector compared to 11 percent in 2004, with repossession claims jumping from 17,047 to 21,004 between 2004 and 2008.
In comparison, repossession claims by social landlords fell by 23.5 percent from 136,198 to 104,165.
However, social landlords are bound by rules for rent arrears to reduce the number of court disputes between tenants and landlords, which was introduced in 2006 to try and help tenants stay in their homes.
These rules have proved to be successful in reducing the number of repossessions during the credit crunch.
Michael Donnellan, partner at Trower & Hamlins, said: “The credit crunch led to a sudden drop in many tenants’ incomes.
“You don’t need to become unemployed to see your finances pushed over the edge.
“Private landlords have come under financial strain themselves and are likely to move much faster to replace a non-paying tenant with a paying tenant during a period of financial uncertainty.”
