Government must address housing “blacklist” created by lenders' “no DSS” policy

20 November 2018

The Committee publishes correspondence with Ross McEwan, CEO of RBS, on concerns about restrictions on mortgage lending to landlords whose tenants are in receipt of housing benefit and Universal Credit.

Natwest came under fire in October over the case of a landlord refused a re-mortgage - and in fact threatened with revocation of the existing mortgage on the property - because she was renting the property to a tenant in receipt of housing benefit. The landlord, Helena McAleer, was told that she would either have to evict her tenant, a vulnerable elderly lady, or pay the early repayment charges and forego the mortgage as it was the bank's policy not to allow rentals to a ‘DSS claimant'.

There are 4.2 million people in receipt of housing benefit in the UK. Research by the Residential Landlords Association found that 66% of lenders, covering 90% of the buy-to-let market, have this kind of prohibition on lending. The Committee is deeply concerned about the extent to which mortgage providers are therefore preventing landlords from renting to benefit claimants, especially given the desperate shortage of affordable housing and the large numbers of claimants now dependant on the private rented sector.

"extreme disappointment"

RBS CEO Ross McEwan responded expressing the bank's “extreme disappointment” with the way the case was handled, claiming it “did not reflect the values of [the] organisation” and promising an immediate review its lending practices. However, the letter also states that “in line with a number of other lenders …our mortgage policy for landlords with smaller property portfolios…includes a restriction on letting to tenants in receipt of housing benefit. This reflects evidence that rental arrears are much greater in this segment of the market and we are satisfied that this restriction does not contravene equality legislation.” Natwest is reviewing its policy and has agreed to inform the Committee of the outcome.

The Committee has been inquiring into the impact of Universal Credit since January 2017, when it first began to learn of the problems of rent arrears and destitution associated with rollout of the controversial new benefit. More recently these concerns have been echoed in its inquiry into the Benefit Cap.

Chair's Comment

Chair of the Work and Pensions Committee Frank Field MP, says,

"The Government claims its welfare reforms are intended to drive employment, but allowing banks to operate a “no DSS” policy is a return to the wicked old days of housing discrimination, with claimants effectively blacklisted for housing and at risk of being senselessly evicted for no greater crime than receiving housing benefit. NatWest is now taking a look at its policy, and other mortgage lenders will no doubt follow suit. If the change we need to protect people is not forthcoming voluntarily, we may need to look to regulation."

Further information

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