CML: Benefit reform will restrict lending to social landlords

Welfare reform that will pay housing benefit directly to tenants rather than landlords is likely to restrict mortgage finance to social landlords, according to the Council of Mortgage Lenders.

In its latest News and Views newsletter, the CML says that the Welfare Reform Bill, which had its second reading in the House of Lords last week, is raising concerns among lenders, tenants, consumer groups, landlords and social housing providers.

It says that the mortgage finance lenders provide to social landlords is underpinned by the certainty of guaranteed payments of housing benefit to landlords.

The CML says this has reinforced lender confidence in the reliability of income for the sector, thereby allowing lenders to offer mortgage finance at lower rates.

The trade body says: “But paying housing benefit directly to tenants will introduce greater uncertainty about the flow of income to social landlords. 

“And, in what is already a risk-averse lending environment, this is likely to diminish the confidence of lenders in funding the sector.”

The CML is now calling on the government to amend the Welfare Reform Bill to give tenants a choice over whether or not their housing benefit be paid directly to their landlord.