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There is money to be made from LHA tenants

Tuesday 5th March 2013

As a landlord and letting agent with over 500 properties on his books, Aki Ellahi, founder of Dssmove.co.uk, says that LHA tenants offers a fantastic market opportunity for tenants.

I am always surprised when I hear agents say they won’t touch LHA tenants because they are a ‘bad risk’. Time and time again I hear the same complaints - they don’t pay their rent, won’t respect a property and are very unreliable. I don’t agree with this general view, as I think it is more ‘fiction’ than ‘fact’.

Well over 95% of my business is LHA tenants and in over 30 years my family and I have been landlords, we have found that private and benefit tenants can cause the same problems. By being especially selective, we’ve seen very few problems over the years. In fact, our void rates have been around 2-3% per cent, which is in line with average annual void periods for private tenants.

I hold the very firm view that agents will miss out if they ignore LHA tenants. Currently there are over five million people claiming LHA and this is set to grow over the next two to three years, as we face a tough economic period and continued austerity measures from the government.

In many inner-city areas in the South West, Wales, Midlands and the North East and West LHA rates are sometimes higher than the market rent. Therefore in order for landlords to achieve this higher rent yield, they need to move into the DSS market as private tenants will not pay the same level of rent in some areas. i.e two-bedroom LHA rate in Wolverhampton is £450 and many properties are on the open market rent £350 - £400.

Though city centre agents like Foxtons will not deal with the DSS market, many independents do and some of the corporates have spotted the gap and are moving more into this market ie Martin & Co, Northwood. For many landlords and agents across the UK - especially in the North – there will be no choice about accepting LHA tenants in 2013 and beyond.

Anecdotal evidence suggests that at least one in five mortgage lenders stipulate they will not accept LHA tenants, while four out of five do not make any reference to LHA tenants. There have been cases where the lender has no objection to a LHA tenant, but when the valuer appraises the property, they report they it should not be for LHA tenants. So landlords need to shop around if they want a lender for a property specifically for DSS tenants. I personally have been with Lloyds TSB for many years and have never experienced a problem with mortgages.

I strongly believe in the LHA market and that’s why I recently launched a property portal, Dssmove.co.uk, with the aim of putting LHA tenants in touch with landlords and agents happy to deal with them. I had also been getting frustrated that Rightmove was costing us an arm and a leg and didn’t work in the areas we had housing in, which is predominantly inner-cities.

Typically LHA in these areas is higher than market rent – that’s why the bigger portals don’t work. Add to this the extra, often frustrating work that tenants on housing benefit have to do when searching for properties, just to figure out if they are accepted, and it was clear to me that the current websites just weren’t working for tenants, landlords and agents.

Regardless of what happens with the introduction of Universal Credit later this year, the DSS market will always exist. The more difficult the Government makes it for private landlords to rent to this LHA tenants will mean more business for letting agents like me, who really understand this market and can help protect individual landlords from this perceived increased risk. What is for sure is that landlords, tenants and local authorities will have to work together to ensure the smooth transition from LHA to Universal Credit.

              

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