Two-thirds of buy-to-let lenders forbid tenants on housing benefit - research

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Two-thirds of the largest lenders of buy-to-let mortgages forbid landlords to rent to tenants receiving housing benefit, research shows.

Banks representing around 90% of the buy-to-let market have been accused of discriminating against claimants, many of whom are low-paid workers.

The Residential Landlords Association (RLA) has urged the next government to carry out an urgent review of the practice.

Chairman Alan Ward said: "Discrimination against tenants receiving benefits is not driven by landlords but by the banking system.

"If the private rented sector is to house more people then barriers to landlords making fair decisions over who they rent to must be removed."

Mr Ward said political parties need to "trust tenants to know what is best for them" and allow them to choose how to pay their rent.

He proposed a system where a tenant's Universal Credit and benefit payments can be made directly to their landlord, as long as the tenant does not fall into arrears.

"We need a system which gives tenants, landlords and lenders the confidence they need that rent will be paid on time and in full," he said.

Analysis of the market commissioned by the RLA assessed 58 lenders' policies for buy-to-let mortgages on a two-bedroom flat where the tenants would be claimants.

It found 38 - two-thirds - said they do not allow properties to be rented out to those in receipt of housing benefit.

Ten of the banks allowed properties to be rented out to those receiving housing benefit, however one stipulated they cannot be rented to "vulnerable tenants".

Nine indicated that they were prepared to "consider" housing benefit claimants and one said it does not have a criteria for claimants.

Doug Hall, director of the mortgage distributor 3mc, which carried out the research, said: "Some of the reasons given for not lending to those renting to claimants include concerns about rent not being paid and historic data which calculates the risk of tenants falling into arrears or facing repossession."

The study was published as Labour pledged a "consumer rights revolution" which will introduce legal minimum standards for all rental homes.

The proposals, which the party would introduce if it wins the General Election, include requirements for electrical safety, sanitation and cooking facilities.

The Conservatives said the standards amounted to a "tenants' tax" that will force up rents.