Work and pensions select committee threatens to regulate lenders’ policies on DSS tenants

The work and pensions select committee says the government must address the “housing blacklist” created by lenders’ “no DSS” policies and says it will look at regulation if lenders don’t voluntarily change their lending criteria.

The work and pensions select committee has published correspondence with NatWest chief executive officer Ross McEwan about the lender’s restrictions on approving mortgages for landlords whose tenants are in receipt of housing benefit and universal credit.

NatWest came under fire last month for giving landlord Helena McAleer the choice between paying the bank’s early repayment charges and remortgaging to another lender or evicting a tenant in receipt of housing benefit.

The bank’s policy is not to allow buy-to-let landlords to let to tenants claiming benefits. Research by the Residential Landlords Association found that 66 per cent of lenders, covering 90 per cent of the buy-to-let market, have this kind of prohibition on lending.

The work and pensions select committee says it is deeply concerned about the extent to which mortgage providers are preventing landlords from renting to benefit claimants, especially given the shortage of affordable housing and the large numbers of claimants now dependent on the private rented sector.

McEwan responded expressing the bank’s “extreme disappointment” with the way the case was handled, claiming it “did not reflect the values of [the] organisation” and promising an immediate review its lending practices.

However, the letter also states that “in line with a number of other lenders …our mortgage policy for landlords with smaller property portfolios…includes a restriction on letting to tenants in receipt of housing benefit. This reflects evidence that rental arrears are much greater in this segment of the market and we are satisfied that this restriction does not contravene equality legislation.”

However, NatWest has agreed to review its policy and inform the work and pensions select committee of the outcome.

The committee has been inquiring into the impact of universal credit since January 2017, when it first began to learn of the problems of rent arrears and destitution associated with rollout of the controversial new benefit. More recently these concerns have been echoed in its inquiry into the benefit cap.

The work and pensions select committee chair Frank Field MP says: “The government claims its welfare reforms are intended to drive employment, but allowing banks to operate a ‘no DSS’ policy is a return to the wicked old days of housing discrimination, with claimants effectively blacklisted for housing and at risk of being senselessly evicted for no greater crime than receiving housing benefit.

“NatWest is now taking a look at its policy, and other mortgage lenders will no doubt follow suit. If the change we need to protect people is not forthcoming voluntarily, we may need to look to regulation.”

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  • Michelle Lawson 21st November 2018 at 10:06 am

    It is actually the Government and local Councils that need to change their practice as they are part of the problem- not the lenders. When the Councils pay the rents directly to the tenants, this gives them a ‘choice’ as to how to spend their rent money. Also, it is paid every 4wks generally and not pcm. This means, in our area (not sure if this is the same nationally), the tenants often get the 13th payment in December and some of them think it is a ‘Christmas bonus’ to do their shopping with and forget it is to pay the rent and they then go into arrears. Our local Council position is that the tenants have to be in 8wks clear arrears before they will do anything with the tenants (meanwhile the Landlord foots the bill for the mortgage payments and it is highly unlikely that they will get the money off the tenant as they have spent it!). If there is a change in the tenants circumstances, the Council freezes the payments while their claim gets re-assessed and this can take 8-12wks minimum (again, while the Landlord foots the bill) and then pays a lump sum to the tenant once re-assessed and it is backdated. Once again, the tenant then has a ‘choice’ as to how to spend this bonanza. Admittedly not all tenants are the same and some do have a conscience but equally far more in my experience know how to work the system. As soon as the payments were made directly to the tenant and not the Landlord, this is where the problem started.

    Personally- I would like to see payments aligned to pcm and paid directly to the Landlord/Letting agent and this would help letting agents be more favourable with this type of tenant and it would give comfort to lenders at the same time.

    • Lisa Peach-Hill 21st November 2018 at 12:41 pm

      I think your idea about PCM and paying directly to the landlords themselves is a good one. I really don’t understand why that was changed to begin with it was a very bad idea. For some landlords that alone is too much risk without factoring in damage to property, pets etc. And I don’t think claims should stop being paid when under review. That is a huge problem for tenants and landlords alike. I do think its positive that lenders are reviewing their policies but I agree that the local authorities need to take a common sense view and stop freezing housing benefit during reassessment periods. Everyone is so scared of losing money that vulnerable people are at risk of losing their home.

  • Lisa Peach-Hill 20th November 2018 at 5:27 pm

    Excellent news -and about time too. I’m pleased to hear this is being looked at. Benefits are not a lifestyle choice anymore, I think those that are on them really need them and should be helped not hindered to achieve a secure home. There are also a lot of people losing benefits that should be getting them.

    In the past I’ve worked with landlords who have told me their housing benefit tenants have been the most reliable and considerate they’ve ever had, often residing in the property for many years. As a country we are going to be more reliant on private landlords in future due to a generation who may never own their own home.

    Regarding the statistics around housing benefit tenant rent arrears that the lenders are using – do they exclude the tenants who are put into arrears by the authorities due to aggressive benefit reforms and slow, incompetent claims assessments? I doubt it and I’m fairly certain there will be a lot of tenants plunged into arrears when authorities reassess or stop their payments unexpectedly. Ask any volunteer at a food bank – one of the main reasons people face financial crisis is benefits being stopped suddenly. It isn’t always their doing.

    Lenders operate by distinguishing themselves in the minutiae of their criteria. Would it be a step too far for ALL buy to let lenders to have a specific product for housing benefit tenancies? We distinguish between LTV, credit status, rental income etc and products are categorised accordingly. Surely something could be built in to reflect the perceived increased risk with the housing benefit sector – perhaps rates could be reduced on a sliding scale once evidence of regular payments from a long term tenant & landlord are built up?

    Its good to see a large lender like Natwest review at their policies to ensure they are being socially responsible as well as profitable, these reviews (if the outcomes are favourable to landlords and tenants) could go a long way to addressing the general shortage of housing – owned and rented and open up more decent homes/homes of an acceptable standard to benefit claimants.