Britain's landlords are making a killing from an impossible situation poor people are in

The combination of more households having low incomes and an exorbitant rise in property prices due to the critical housing shortage is forcing more people into renting. And, in turn, private landlords are making a killing.

According to the
National Housing Federation, private landlords are now taking in £9.3 billion a year from people using specific welfare to pay for a place to live — housing benefit. This amount is double that of 2006, just before the onset of the credit crisis in 2007/2008, at £4.6 billion.

“It is madness to spend £9 billion of taxpayers’ money lining the pockets of private landlords, rather than investing in affordable homes,” said David Orr, Chief Executive at the National Housing Federation in a statement.

“Housing associations want to build the homes nation needs. By loosening restrictions on existing funding, the Government can free up housing associations to build more affordable housing at better value to the taxpayer and directly address the housing crisis.”

The main reason for this situation is due to Britain’s major housing shortage and consequentially a rise in property prices. If there is too little supply but huge demand, then prices will go up.

In tandem, if wages do not rise at the rate of house price growth, then buying a property becomes more and more unaffordable as many people will therefore not be able to save up for an average 10% deposit to buy a home, even if they could scrape by on mortgage repayments.

Therefore more people go into rental accommodation.

However, again, since there is a housing shortage for the average earner in Britain, there is also a massive shortage of houses for the lowest earners in society — council houses or properties run by housing associations. This then also forces people into the private sector where they will use their housing welfare payments to have a roof over their heads.

The National Housing Federation said there has been a 42% rise in the overall number of private renters receiving housing benefit since 2008.

But because the private rental sector is for profit, for example it will be buy to let landlords and people who rent out properties to gain an income, the National Housing Federation points out that “housing Benefit claims in the private rented sector are much higher than in the non-profit housing association sector.”

According to the group’s research, it says (emphasis ours):

  • It costs £21 a week more to house a family in a PRS home than in a social home – £110 overall in comparison to £89.
  • Over a year this is an additional £1,000 per family being spent (£5,705 in the PRS compared to £4,638 in the social rented sector)
  • In London, the contrast is even starker with PRS payments at £64 per week more than to those in social homes – £3300 more each year.

So all in all, Britain’s lowest earners are stuck in a rock and a hard place and the only people benefiting are the owners of second properties that profit from tenants.

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