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How to Prepare for the Welfare Reforms

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In the next few months the government is planning on implementing their welfare reforms, however many landlords and tenants are still not sure how this will affect them. Here we explain in simple terms what the welfare reforms mean and how they will change the face of the rental market. We also look at the best way for landlords to protect themselves now, as we always feel that it is better to plan ahead than to find yourself stuck in a few months’ time!

The Welfare Reforms Explained

There are many aspects to the welfare reforms, however one of the most pertinent for landlords is the way that housing benefits will soon be paid to tenants. Landlords that let out social housing are used to having the rent paid to them directly out of the tenants housing benefits, however the government has now decided that housing benefits will be paid directly to the recipient, who in turn will have the responsibility to pay it to the landlord themselves.

The welfare reform also plans to deal with the demand for housing in the UK by reducing the amount of housing benefit given to those that have a spare room in their properties. If there is one spare room the recipient will lose fourteen per cent of their housing benefits, whilst those with two spare rooms will lose up to twenty five per cent.

How this will affect Landlords

The fact that housing benefits will now be paid directly to tenants instead of landlords has caused great concern, as some landlords argue that as many tenants do not have experience budgeting for their rent they will ultimately fall into rental arrears. Furthermore, in a trial period it was shown that almost eight per cent of tenants failed to pay their landlords, and if they are receiving less due to having spare rooms there is an even higher chance of tenants not paying their rent on time.

How to Protect Yourself

The best way to protect yourself is to invest in a landlord insurance policy that has rent guarantee insurance built in so that if your tenants do fall into arrears then you will not have to find the money yourself to cover the mortgage payments on your properties. It is also a good idea to go over your tenancy agreements with your landlord insurance provider and your tenants to make sure that you have the legal right to evict your tenants should they constantly fail to pay rent on time.

We hope this article has helped explain the basics of the welfare reforms and how they could affect you in the near future. However, don’t forget that the best way to protect yourself is to keep up to date with the news and government legislation – the sooner you know what changes are coming up the sooner you can prepare for them!

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