Published: 19/10/2015

Landlords Income Protection

As landlords turn their backs on housing allowance tennants, Andy Price from Coversure urges landlords to protect their income.

A recent survey by the National Landlords association identified that 31.58% of landlords in the Yorkshire and Humber region would not accept benefit tenants. This compares to a national average of 33%. The survey was undertaken a year after the introduction of the Local Housing Allowance rules, which mean that benefits are now paid to tenants rather than landlords, and identified these changes as a key factor in the loss of confidence. 40% of landlords who currently accept benefit tnancies are less likely to do so following the introduction of LHA

The survey analysed 476 responses from landlords throughout the country,

Andy Price believes that this issue will be exacerbated following this month’s unemployment figures which revealed that 7.8% of the workforce can’t find a job.

The fears seem to be backed up with hard facts too. Martin Oliver, CEO of property specialist group Barbon is at the very sharp end of rent arrears. “We have seen a 25% increase in arrears frequency and our insurance company has paid out over £3m on rent guarantee products in the last year”, he reported.

Nevertheless, this is an important sector, and the rental yields are very exciting. “There are a number of good reasons to be in the market, and it’s simply a matter of protecting oneself,” says Andy. A number of landlords have taken precautions to mitigate the risks. Barbon owns two search companies, and Oliver confirms growth in the market, “We performed just under ½million tenancy searches last year and it’s a rapidly growing service,” he said.

Letting someone else take the risk is another popular alternative. Andy's own brokerage Coversure Hull saw this issue coming and has worked with Abbey Legal Protection, a leading supplier of legal expenses and rent guarantee policies, to launch an insurance policy which protects landlords when tenants do not pay. “Our policy protects the whole rent, not just the benefit amount and is available for all rental contracts. We have already saved our clients thousands of pounds in lost rent, and as the economy shows no immediate signs of recovery, we have seen a huge surge in demand.”

Robert Nicholls, Sales and Underwriting manager at Abbey explains, “Rent guarantee insurance policies have until now been designed for the professional let markets. When we first discussed the letting arrangements for local authority housing with Coversure we recognised the existing “professionals” wording would not work. Designing a new product like this requires close interaction with the client to make sure we understand all the exposures and processes involved. We are excited with the result of the work we have undertaken together with Coversure because it gives us both an opportunity to provide a valuable product to a sector that very much needs our support.”

Andy Price concludes “What is most important is that Coversure has found a partner who has shown flexibility to create an Insurance policy that works with Housing Benefit processes.”