Affordable housing shortage presents opportunities for investors

Tuesday 5th March 2013

Mortgage provider Nationwide, which provides buy-to-let mortgages for around one-third of the buy-to-let market, has become the latest lender to withdraw from lending to new landlord customers with Local Housing Authority tenants.

There are now growing fears over the impact that Nationwide’s decision could have on the Local Housing Authority (LHA) market.

With many local authorities struggling to meet the need for affordable housing, private-residential landlords often help to meet the need and let to LHA recipients. However, with some mortgage companies refusing to lend to landlords with LHA tenants, letting to this market can be difficult; an attractive proposition for those landlords who own their property outright.

In addition, whilst tenants may be in work and pass appropriate tenant checks when a tenancy commences, circumstances change and in the current jobs market, a tenant could find themselves out of work and claiming LHA benefits mid-tenancy. In such a situation the landlord would find themselves breaking the terms of the mortgage through no fault of their own.

However, the reality is that the vast bulk of LHA tenants turn out to be responsible residents, with most paying their rent on time, especially as housing benefit is often paid direct to the landlords. What’s more, LHA tenants often pay over the odds – above the open market value – in order to secure a property ahead of a working professional.

Richard Lambert, Chief Executive Officer of the National Landlords Association, says: “There is a great deal of demand from tenants in receipt of housing allowance and if the private-rented sector doesn’t help to support housing provision, many tenants will be left homeless. With this in mind, it is essential that mortgage providers look to lend to landlords of all tenants, irrespective of where they derive their income.

“Moves such as this will obstruct landlords from investing in much needed affordable housing. Our latest Landlords’ Panel shows that the incidence of landlords letting to LHA claimants has fallen six per cent from quarter three to 28% in quarter four 2012.

“There is widespread concern amongst landlords over the introduction of Universal Credit and this will only add to it. However, the government’s latest announcement that there will be an alternative to direct payments, the Alternative Payment Arrangement, should reassure landlords with vulnerable tenants that they receive regular rental payments.

“Our latest Landlords’ Panel found that 55% of landlords feel that buy-to-let lenders do not consider their individual circumstances. Given the housing crisis, now more than ever, we need products that allow letting to LHA tenants to encourage greater investment in the sector.”


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