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Benefit change will be testing, not fatal

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Paul Howard Head of Corporate Accounts Nationwide

Government changes to the way housing benefit is distributed will have an impact on landlords.

Currently, single people under the age of 25 renting from a private landlord receive a shared room rate level of benefit.

But from April 2012, the shared room rate will be extended to people under the age of 35, which means they will no longer receive housing benefit based on one-bedroom self-contained accommodation.

Logically, this should mean that demand for one-bedroom flats and rent yields will drop, as will the value of these types of properties, so one-bedroom properties will become a less attractive asset.

Landlords with one-bedroom flats should think about the condition of the property and the location. These days tenants demand properties in good condition and near transport links.

With this in mind, it’s not all bad news and I do not believe the demand for one-bedroom flats will drop significantly. Many tenants in one-bedroom flats will be unaffected by the benefit changes and demand for rented accommodation is generally strong.

Rental properties are oversubscribed by over 14 times in some areas and recent data from the Council of Mortgage Lenders shows that the number of buy-to-let mortgages taken out in Q3 2010 had grown by 15% year on year.

So overall, I feel market conditions and buy-to-let are strong enough to weather changes in housing benefit.

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