Committee hears evidence on discriminatory practices in letting industry

The Work and Pensions Committee has recommended outlawing the practice of refusing to rent out property to people in receipt of benefits.

The Committee announced an inquiry into this practice after a landlord from Northern Ireland shone a light on Natwest’s refusal to allow her to remortgage because a tenant on housing benefit lived in her rental property. When the landlord, Helena McAleer challenged Natwest and asked for proof that this term existed in her mortgage conditions, she was told that the position was an “internal policy” and advised to find an alternative tenant. A representative of Natwest, Lloyd Cochrane, later apologised to Ms McAleer for advising her to evict her tenant, acknowledging that this was a “mistake”.  Mr Cochrane also clarified that Natwest has changed its policies to allow landlords to offer tenancies of up to three years, where previously it had precluded a landlord from issuing a tenancy of longer than 12 months.

Lenders who gave evidence in the hearing confirmed that they no longer restrict mortgagees from renting to people on benefits, and clarified that they have reviewed the portfolio of mortgages acquired during the financial crisis to check if such policies exist. Where a restrictive policy has been identified, lenders intend to write to the mortgagee to explain that they would “never enforce such a term”.

Problem not isolated to financial sector

The Committee heard that other sectors commonly refuse services to people in receipt of benefits.

During the oral hearing, Lynne Mapp told the Committee about the difficulties she faced trying to secure a private tenancy for her daughter, who cares full-time for Lynne’s 92-year-old-mother and, as a consequence, is unable to work. Lynne and her daughter have spent the last two years trying to find a landlord who will accept a tenant in receipt of Housing Benefit.

Ms Mapp eventually found a landlord on Gumtree who agreed to issue a tenancy to her daughter. In response to a question relating to standards of properties available to tenants in receipt of benefits, Ms Mapp said that these properties are often “not up to scratch”.

Philippa Lalor was given a Section 21 notice which required her to vacate her privately rented home within 2 months. Philippa told the committee that she phoned every letting agent in Croydon during these two months and every person advertising property through Gumtree, and was repeatedly told that the landlord would not accept tenants in receipt of benefits.

Shelter carried out a mystery shopping exercise posing as landlords seeking an agent. Greg Beales from Shelter provided some examples of the responses received from letting agents when asked about their policy in regards to tenants in receipt of benefits, which pointed to institutionalised prejudice against people in receipt of benefits amongst letting professionals.

Northern Ireland landlord Helena McAleer told the Committee that she had just been made aware that her insurance provider also refuses to provide cover to properties rented to tenants in receipt of benefits, leading her to cancel her policy with Direct Line.

Can landlords, lenders or letting agents lawfully turn away tenants in receipt of benefits?

Equality legislation does not specifically protect people who are in receipt of benefits, so refusing to let to this category of renter cannot be regarded as direct discrimination. However, equality legislation also protects people from indirect discrimination. Where it can be shown that a policy which in itself is not discriminatory, has a disproportionate impact on a protected group, that policy causes indirect discrimination which is unlawful.

Shelter’s Greg Beales discussed the organisation’s concerns about such practices, explaining that people who have a disability and women are more likely to receive Housing Benefit. Shelter are currently bringing a series of cases through the courts and have already brought some that have settled with admission of liability. Mr Beales stated that many landlords and letting agents had tried to justify such discrimination on the grounds that their mortgage terms and conditions imposed the criterion on them, and several of the representatives of the letting industry who gave evidence to the Committee confirmed that they did not believe the practice of stating “No DSS” on property adverts to be illegal.

Universal Credit difficulties compound landlords’ fears about benefits

Representatives of letting agents and estate agents welcomed that some lenders had removed restrictions from their buy-to-let products, but cautioned that this was not always the reason that landlords were reluctant to let to tenants in receipt of benefits.

Landlords cite the fear of arrears caused by payment delays as a reason not to rent to people in receipt of benefits.  These concerns have been exacerbated by the introduction of universal credit and the decision to pay the housing costs element of Universal Credit directly to tenants in England and Wales.

Helen Buck of Your Move estate agency explained that her agents had built up good relationships over the years with Housing Benefit teams in local authorities, and that this had eased some of the difficulties around dealing with housing benefit. These relationships and areas of good practice which had developed over the years have now been lost as responsibility for assisting with housing costs falls to Universal Credit decision makers. Ms Buck felt that there is a lack of understanding about how to resolve problems with the new benefit system and that it is much more difficult for the agent to get in contact with a decision maker in order to help smooth out any difficulties with the housing costs claim.

Is legislative change necessary?

The Committee considered whether legislative change was required in order to end the practice of discriminating against tenants in receipt of benefits.

In response, Shelter’s Greg Beales commented that equality legislation already clearly outlaws this type of indirect discrimination, but that a stronger light needed to be shone on this practice in order to clearly illustrate that these practices are “unquestionably discriminatory and prejudicial”. However, Mr Beales also conceded that some of the agents challenged by Shelter have refused to accept that their practices are discriminatory.

Steve McCabe MP drew attention to equality legislation in the Republic of Ireland which specifically protects those in receipt of housing assistance payments from discrimination, and suggested that the Committee could recommend similar provisions to equality legislation in Great Britain. Such a change would address not just restrictions on mortgagees, but would also go some way towards assisting people such as Lynne Mapp and Philippa Lalor who encountered immense difficulties even finding an agent who would consider them as tenants because they are getting assistance with their housing costs.

When questioned as to the impact of such a legislative chance on their practices, representatives of lenders and letting professionals confirmed that making direct discrimination against people in receipt of benefits illegal would not pose a problem for their business models.