Lenders hurting industry by rejecting tenants on housing benefits – John Goodall

by: John Goodall CEO and co-founder of Landbay
  • 25/05/2017
  • 0
Lenders hurting industry by rejecting tenants on housing benefits  – John Goodall
We heard recently that two thirds of the biggest mortgage lenders will not accept buy-to-let landlords who intend to rent to those receiving help from the state.

Clearly the majority of the market is holding a short view of the demand and in the long term this is bound to hurt the industry as a whole.

This isn’t a small issue. The private rented sector is made up of around 4.3 million tenants, 1.5 million of which are on housing benefits. Circumstances aside, these people are unified in the fact they are relying on a well-served market to ensure rental growth doesn’t become unbearable – whether they’re renting as a stepping stone while they save for a home of their own or are choosing to rent for life.

The problem is magnified by the chronic supply shortage of housing stock which means there is more pressure than ever on the private rented sector to house Generation Rent; increasingly penalised as a result of stagnant wages, rising inflation and rents.

Barriers to landlords making fair decisions

Against this backdrop, barriers to landlords making fair decisions over who they rent to is just another thing standing in the way of any improvement for this group. The most vulnerable of which these are at risk of being unable to move house and at risk of poor treatment by rogue landlords or even homelessness.

Up until this week, the government has failed to commit to the investment of various tenures, most evidently ignoring the need for investment in social housing and housing for private sale. We have started to see some focus on “a generation of social housing” in this week’s general election manifestos, which will be a step change in the right direction if they can adhere to this promise.

As an inclusive lender, Landbay is part of the 17% of lenders which does allow properties to be rented out to those receiving benefits. We believe that a bespoke, rational and flexible approach to lending means that each borrower and their objectives can be assessed independently to make fair decisions that benefit brokers and borrowers alike.

Landlord groups and housing charities join forces

Taking a holistic approach to underwriting means not just looking at a handful of factors when making a decision but instead gathering a huge amount of information about the borrower, the property and the relevant rental market to make lending decisions. Being one step ahead with this specialist underwriting approach will ultimately benefit lenders once the PRA portfolio buy-to-let change comes into effect later this year.

It’s been interesting to watch an unprecedented step of landlord groups and housing charities join forces in calling for reform. As the general election approaches, this is an opportunity for the future government to support all tenants and all tenures, and we hope to finally see some cast iron commitments for further investment in the sector.

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