Buy-to-let: It’s time to show ‘DSS’ lending restrictions the door
John Heron (pictured) managing director for mortgages at Paragon Bank
Housing and Homelessness Minister Heather Wheeler called representatives from the UK’s Private Rented Sector (PRS) together last month (June) to press home the case for the removal of any remaining blanket restrictions on letting to tenants in receipt of benefits.
That such action is needed in this day and age is somewhat alarming. However, as a lender with over 20 years’ experience in the UK’s PRS, we can categorically throw our weight behind the minister’s campaign.
The PRS is now a mainstay of the UK’s housing market. Since the early 2000s, the sector has more than doubled in size and today provides a home to one in five UK households.
The sector has demonstrated an unparalleled flexibility to provide short and long-term accommodation to single people, couples and families on different incomes and at different stages in their lives.
Buy-to-let finance helps to fund an estimated 30-40% of PRS homes and many of those homes include tenants in receipt of benefits.
While as lenders we can’t dictate who landlords let their property to, we can encourage an inclusive PRS by making sure that our mortgage conditions don’t unnecessarily or unfairly prevent landlords from letting to any particular group of tenants.
At Paragon, we have seen no evidence whatsoever to link any group of tenants – including tenants on benefits – with a trend in higher mortgage arrears or losses. In fact, in common with all other lenders, we are rarely aware who the tenant is or of their status.
As a lender, our approach is to focus on the sustainability of the rental value of each individual property with due regard to its condition, location and local competition. This involves careful and often time-consuming valuation work from our expert surveyor team.
Responsible landlords and letting agents take a similar approach, treating each potential tenant as an individual and taking time to carry out a detailed assessment of their suitability and income.
The benefit landscape is complex, making a ‘one size fits all’ exclusion policy completely nonsensical.
According to the Department for Work and Pensions, 56% of family units in the UK receive some type of state support. Benefits range from Jobseekers Allowance to Income Support, housing benefit to pensions. What’s more, many benefits sit alongside income from paid employment, with government rhetoric firmly focused on developing a benefit system which supports people to stay in work.
Paragon has consistently campaigned for ‘no benefit’ clauses to be removed from lenders’ standard conditions, working initially through the Council of Mortgage Lenders and more recently via UK Finance. As a result, lenders representing 90% of the market have already withdrawn this type of clause from their terms and the remainder should now follow suit.
It simply cannot be fair that people who receive benefits, including the elderly, the disabled and those who are unwell, should face an uphill struggle when trying to rent a home. The selection of a tenant should be based on suitability and affordability, not on prejudice.