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  • LHA/Universal Credit

    RGI for HB tenants!?

    I raise this subject as pure a speculative concept and I am unsure as to the business viability  of such..

    So I start with the basic premise that lots of LL are very nervous about taking on any tenants who require an element of housing benefits.

    This is entirely  understandable given the current dysfunctional  eviction process.

    Now as we almost know a lot of this is simply down to perception rather than a common reality.

    The facts  are that the vast majority  of HB tenants pay their rent.

    There are roughly 150000 evictions every year mostly caused by rent defaults; not a of them HB tenants.

    Now if it were possible to offer all LL the assurance of RGI if they took on HB tenants wouldn't that result in many more HB tenants being housed who are currently  costing Councils fortunes in TA and DHP costs?

    Now I don't know how many HB tenants there are in the UK; but what if every HB tenant was able to obtain a RGI policy?

    Surely this would incentivise previously  reluctant LL to take on such tenants.

    I would propose a national RGI scheme for all HB tenants with Councils operating a joint business  venture with one of the major players in the RGI field; DAS.

    So I would propose as a business model that DAS manages the whole RGI process but that they and the relevant Councils are liable for 50% of any losses as well as having 50% of the profits with perhas DAS having a larger percentage of the profits due to their administration costs.

    The average Annual RGI policy is about £100

    This works out at about £3pw.

    Now a LL could write into an AST contract that providing the tenant was prepared to allow the Council to deduct £3 pw for a RGI policy which would  gain that tenant a tenancy how many HB tenants wiuld refuse such a weekly deduction?

    With the vast majority  of HB tenants paying their rent the claims made would be very few.

    The losses for what would be a public/private partnership would be relatively minor in the overall scheme of things.

    Millions of RGI polices that will rarely be claimed on seem a good idea to me.

    Everyone would gain

    The only sticking point would be that HB tenants would have to agree to the RGI premium deductions.

    For the benefits that it would bring them would many HB tenants refuse?

    If they did then they could remain homeless.

    The Council and DAS would make millions out of such a RGI scheme.

    Not sure if what I have suggested is perhaps a little naive.

    But I'm sure where the potential  profits far outweigh the losses this surely has something  going for it.

    What do the team think?

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    That's definitely an interesting concept - and with council's having more skin in the game the 'sit and wait for balliffs' nonsense would end in about 30 seconds.

    The problem is that for the small number of people that do default there is little chance of recovery - or the recovery period is incredibly long... (since RGI usually go after defaults with a civil claim for money)

    ...so unless it was coupled with a much faster eviction process to limit the level of possible defaults - or councils being able to use it as a reason not to have a housing duty towards the people being evicted then it could be difficult to get it off the ground - even if that was just from the fear factor rather than the reality.

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    DISCLAIMER just my personal opinion - for legal advice consult a qualified professional grown-up.

     Nice idea but dont think it would work and indeed isnt necessary if council just tweaked what they do

    My rents are all paid direct so RGI wouldnt be needed if all councils adopted this policy

    The Housing Regs allow this payment direct to secure a tenancy and/or to prevent eviction

    The trouble is some councils just ignore these regs

    RGI wont  solve the problem of HB caps LHA freeze etc .

    The tenants cant top up.  DAS wont cover that I`m sure .

    The council have to just alter their business model

    I had one today through . Classic example

    2 bed LHA . The rate was 625 pcm years ago . Ive never raised it to the new rate of 676

    The MV rent though is 725 . So it was on my list of things to do.

    The HB cap has just been applied so now a 200 shortfall .

    Crazy helps no one at all . Single mum 2 kids

    So I will sec 21 it . No RGI will touch that policy and no way tenant can make up 200 / 300 pcm

    So i will say to the council  i need the MR rate now of 725 pcm or I will carry on with the eviction

    Council will now DHP the 200 shortfall + 100 to get me to 725 MR for 6 mths + 725 RIA + 725 deposit

    So i issue a new AST for 6 mths @ 725 pcm which is now secure for 6 mths

    So DHP is in effect the same as RGI and it is being used as such to stop me evicting

    The council should administer their funds more efficiently

    DHP was once used sparsely now it is used routinely

    There is a Homeless Prevent fund as well which is another  dressed up RGI scheme

    if managed more efficiently and HB LL`s know where they stood they would come back

    Its a minefield but only because i know how it works  i stick with it in some cases . Not all

    To entice HB LL `s back in the game they need to unravel the spaghetti legislation first

    Just say to the council

    Pay me the 725  x 12 direct to me and that keeps me  happy for a year

    That`s what my  good working tenants would do so all they have to do is match it like for like

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    Jonathan Clarke. http://www.buytoletmk.com


    DWP say there are 3.2 million HB claimants per se and 1.5 million LHA claimants - latter being your core focus.

    Sept 2013 law change allows LAs to bounce accepted homeless cases in to PRS - with a min 12 month AST at LHA rate of rent - that is the cohort you are focusing on.

    UC of course pays LHA direct to claimant rather than Landlord - so a big part of the risk is around whether Tenants spend rent money on other things.

    As RGI cover is not currently available to the cohort you are looking at there is need to get data on rent defaults from that subset so as to calculate a per capita premium - ie what is called the "burning rate".

    In the media I have seen suggestions that PRS loses around £5 billion pa in unpaid rent/damages - but again that needs a detailed breakdown to inform the sum insured needed in aggregate across a cohort of LHA claimants.

    The cover would need to be compulsory - rather than voluntary.

    Compulsory means a big chunk of g'teed cash as a premium.

    Voluntary means a far higher per capita premium as only those likely to default would want cover. Hence voluntary covers would need to be individually underwritten at outset (filtered for acceptability).

    Core issue with LHA claimants is you are dealing with a population subset who are in poverty - hence one is underwriting both increases in cost of living as well as the ability of claimants to be good money managers. An address from Mervyn King in aftermath of credit crunch flagged that there is no way of guestimating how human nature will react in any circumstance.

    The massively simpler solution is to overnight make LHA payable direct to landlords - along with a fast track eviction process.



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