How can landlords help low-income families manage the cost of living?

You know there’s a problem in the private rented sector when letting agents start talking about the unaffordability of properties for their prospective tenants. 

Agency chain Hamptons recently released research that sounded the alarm that households are about to be hit by ballooning energy bills and other cost of living increases. 

Generally, agents can be relied on to talk up the market to their clients. Could Hamptons be hinting to landlords that they should lower their expectations? The ongoing demand for properties in London suggests not. But perhaps we are nearing the limit of what tenants can afford.

Homeless charities have long highlighted the affordability gap for low-income families who spend a disproportionate amount of their household income on rent. Consumer champion Martin Lewis, the money-saving expert, has also sounded the alarm on the impact of rising energy bills and the cost of living.

Ironically, London renters may not feel the impact of bigger bills because their rent is already so high! In percentage terms, a jump in energy bills will have less impact on their overall cost of living. 

Nonetheless, London tenants are set to spend 55% of their household income on rent and bills in 2022. For households on very low incomes, paying over half your income on rent simply does not leave enough to live on.

As readers of this blog will know, councils are increasingly turning to selective licensing schemes in parts of their boroughs. They tend to licence areas with a high proportion of households claiming benefits so if your properties are in selective licence areas, your tenants are more likely to be affected.

So what can be done about the problem Hamptons has highlighted?

Capital Letters was set up to find private rented properties for people on the edge of affordability. These are the ones that councils have a legal duty to house such as families in temporary accommodation or facing homelessness. 

As demand for properties continues to outstrip supply, finding properties at LHA rates, the proxy for affordability, was already challenging. Nonetheless, many landlords have developed sound businesses by letting some or all their property portfolio to families claiming benefits.

Our one-stop service focuses on taking the hassle and risk out of letting to tenants in the benefits system. We offer landlords upfront incentive payments and help both landlords and tenants navigate the benefits system. 

We generally succeed in preventing tenancies from failing by ensuring benefits claims are completed correctly at the start of the tenancy and helping set up utilities and rent payments.

Looking ahead to a tough year for some tenants, more active support may be needed to help families on low incomes or benefits bridge the affordability gap. Our tenancy sustainment team already respond quickly to the warning signs of a tenancy in trouble. We will be even more alert in the current challenging environment.

Recent research by York University found that landlords letting to low-income families used active tenancy support to reduce the risk of arrears. Others recognised they did not have the time or skills, and use intermediaries such as Capital Letters to support tenancies.

We think that as affordability pressures increase on households on low incomes, some form of active tenancy support will become even more essential as the rising cost of living squeezes households.

Capital Letters is ready to help, but one way or another, landlords will have to find ways to support tenancies to ensure they are successful.