Work and Pensions Committee
Oral evidence: No DSS: discrimination against benefit claimants in the housing sector, HC 1995
Wednesday 24 April 2019
Ordered by the House of Commons to be published on 24 April 2019.
Members present: Frank Field (Chair); Heidi Allen; Rosie Duffield; Ruth George; Steve McCabe; Nigel Mills; Chris Stephens; Derek Thomas.
Questions 1-110
Witnesses
I: Helena McAleer, Landlord, Lynne Mapp, Mother of tenant, Philippa Lalor, Tenant, and Greg Beales, Director of Communications, Policy and Campaigns, Shelter.
II: Paul Wootton, Director of Home Proposition, Nationwide Building Society, Gordon Soutar, Managing Director of Mortgages, the Co-operative Bank, and Lloyd Cochrane, Head of Mortgages, National Westminster Bank.
III: Glynis Frew, Chief Executive Officer, Hunters Property Group, Adam Hyslop, Founder, OpenRent, Helen Buck, Executive Director, Estate Agency, Your Move, and Matt Campion, Chief Executive, Shepherds Bush Housing Association.
Written evidence from witnesses:
The Co-operative Bank NDS0012 NDS0023
Hunters Property Group NDS0015
OpenRent NDS0011
Nationwide Building Society NDS0009
National Westminster Bank NDS0017
Shelter NDS0001
Shepherds Bush Housing Association NDS0014
Witnesses: Helena McAleer, Lynne Mapp, Philippa Lalor and Greg Beales.
Q1 Chair: Thank you all very much for coming. Some of you have travelled quite a distance, so we are immensely grateful to you. Helena, might you begin—I will go down the panel—by introducing yourself and the interest you represent?
Helena McAleer: My name is Helena McAleer. I am the landlord who brought a case against NatWest and started the petition to get the Government involved.
Lynne Mapp: I am Lynne Mapp. I am the mother of a tenant. I have been looking for a property for her for two years through letting agents, with no success.
Philippa Lalor: My name is Philippa Lalor. I have severe and enduring mental health problems, to the extent that I am currently sectioned under the Mental Health Act. I therefore cannot hold down full-time work and am excluded from private renting by the majority of places because I do not work full time.
Chair: You will have plenty of chances to tell us about that, and we want to hear it, Philippa. Thank you.
Greg Beales: I am Greg Beales. I am a director at Shelter.
Q2 Nigel Mills: I refer you to my entry in the Register of Members’ Financial Interests: I rent out a property with a buy-to-let mortgage from NatWest. I probably have not read the terms quite as closely as I should have, given some of the tenants I have had, but there we go. Lynne and Philippa, will you tell us what problems you—or in your case, Lynne, your daughter—have faced with finding rented housing while claiming benefits?
Lynne Mapp: My daughter is in rented accommodation, and the rent is £1,400 a month before any other bills, which is taking most of her money. I have applied to the council for help, but they are not interested; they just want her to go to a private-sector—
Chair: Lynne, can we just pause? I do not know whether we can turn the microphones up or whether you can speak up or get a little nearer the microphone. Thank you very much.
Lynne Mapp: I have been going to letting agents for the last two years, trying to obtain housing for my daughter. She is a full-time carer for my 92-year-old mother, so she is not working. She is on housing benefit. As soon as they hear the words “housing benefit” they are not interested, and they cannot wait to get you off the phone. It has been a slog for two years, and we are still no further forward, so I went to Shelter to see whether they could help. That has been my lifeline, to be honest.
Q3 Nigel Mills: Philippa, what is your experience? You were starting to tell us.
Philippa Lalor: Yes. I have had various experiences. I have been renting since 2013. When I go to the council, I am offered a bed and breakfast place, perhaps in the north, perhaps anywhere in the country, but I have treatment in Croydon that I need—it is life-saving. I have to choose between that B&B room in Enfield and having the treatment that will save my life in the borough of Croydon, where I live. That is not a choice that anyone should have to make. I do not think a B&B room is acceptable.
My housemate recently lost her job as well. She is also disabled and she has only ever worked part time, so she receives housing benefit. Any universal credit sanctions that come our way because of paperwork that may be a mistake at that end set us back. I have £12,000 in savings. I signed a year-long contract, knowing that I could pay for the whole contract up front without any problem. I have a guarantor who is a homeowner. I have excellent references. I have never, ever missed a payment. I keep the house very tidy. I go to bed early because I need my sleep.
Chair: Don’t become an MP.
Heidi Allen: I need my sleep, too—we don’t get much.
Q4 Nigel Mills: Even with all those assurances in place, you struggle to find a landlord who will rent to you, just because you are on benefits.
Philippa Lalor: Yes. To find a landlord who would rent to me is extremely hard. I went to see one property in 2016, when I was trying to find somewhere to move. Forty households all signed on the dotted line to move into that property. First, another family got it. Their references fell through. Our references were very good; we were the second choice and we got the property. We were just lucky, basically, that a property came up in the borough that we could move into.
Q5 Chair: That is really helpful. Philippa, you have talked about finding that property, waiting for it to fall through and then the people contacting you. How long did it take you to find the property and for them to come back to you as No. 2?
Philippa Lalor: I obviously received an eviction notice, which gave me two months to get out of my property. I was lucky that we found one within two months, but we found it literally at the end of two months. We phoned every single letting agent within the Croydon borough. We phoned every single Gumtree person within the Croydon borough. We went on every internet site. At the end of this, by the time we had moved in, my mental health had deteriorated so badly that I spent six months in a psychiatric hospital, unable to leave, unable to know my own name and completely psychotic, because that was how much stress I had been under.
Q6 Chair: It would cause all of us stress, let alone someone who had a vulnerability, wouldn’t it, Philippa? We would all be distraught at not being able to find a home for these sorts of reason, wouldn’t we?
Philippa Lalor: We had no choice over where to live. The one property came up and we had to move in. We had no choice of area. Someone asked me, “What are you looking for?”, and I said, “Well, walls and a roof.” That was pretty much all that we had the choice to get.
Q7 Nigel Mills: When you rang around all the letting agents and Gumtree people and they all said, “No, we’ve got nothing for you,” did they say that that was because you were claiming housing benefit?
Philippa Lalor: Yes.
Q8 Nigel Mills: That was the reason they gave.
Philippa Lalor: They would go into detail about properties and then they would say, “What are you earning? What job do you do?” And as soon as we mentioned housing benefit, they said, “No. No one takes housing benefit,” and that was the end of the conversation. They would say, “No. No one takes housing benefit,” and the phone would go down. There would be no more conversation; they just hung up on us.
Q9 Nigel Mills: Was the impression you got that that was because the landlords they were working for would not take housing benefit claimants, or was it because the letting agent themselves did not want to take them?
Philippa Lalor: Some of the letting agents wouldn’t even consider it—they wouldn’t even put us on their list as needing housing. We are potential customers, and that is how I would like us to be seen. My housemate had £6,000 in savings, and I had £12,000. We are looking to sign a contract for about £12,000. We are coming with excellent references. We have never been even a day late in paying our bills. As customers, I think we are pretty good. Why aren’t we taken on merit, as everybody else is?
Q10 Nigel Mills: Helena, you chose to change mortgage provider rather than evict your tenant. How easy was it at that point to find a lender that didn’t have these clauses?
Helena McAleer: I went back to the mortgage broker that took out the original mortgage, and they sorted it out, but it took a couple of months to get that; so I am not 100% aware of the level of difficulty, but it did take time. I only completed on that two months ago.
Q11 Nigel Mills: Okay, so you managed to find a new mortgage provider, but at that point NatWest presumably weren’t being very co-operative, and you were in breach because you rented to someone who was paying via housing benefit. Were you told, “We are not letting you remortgage”?
Helena McAleer: Yes, the choice was evict the tenant—or seek an alternative tenant—or leave them and pay the early repayment charge of about £2,500. There was no alternative.
Q12 Chair: So they don’t say “Evict.” They just say, “Find an alternative tenant” and then you do the eviction.
Helena McAleer: Pick an alternative tenant, yes.
Q13 Nigel Mills: Did they give you any reason why that was their policy? Did they just say, “That’s what your agreement says. It’s tough”?
Helena McAleer: When they first said it to me, I asked them to provide evidence of where it said that in the terms and conditions.
Q14 Heidi Allen: This was NatWest, wasn’t it?
Helena McAleer: This was NatWest. I have this email chain as well. I first asked them to show where in the terms and conditions it said that I couldn’t let to a tenant. The response was, “It’s an internal policy that we don’t have to share with you.” That is when I took the complaint over the phone to the complaints department and it wasn’t upheld, and I was told that. So nobody was ever able to provide me with any evidence as to why.
Q15 Nigel Mills: So they weren’t trying to withdraw your existing mortgage; they were just refusing to let you remortgage.
Helena McAleer: They just wanted to get rid of me, yes.
Q16 Chair: Had you ever not paid them the mortgage on time?
Helena McAleer: I paid extra. I was trying to get out of debt. I was trying to get rid of the mortgage, so every month I paid extra.
Q17 Chair: Who split on you?
Helena McAleer: Sorry?
Chair: Who split on you? I mean, when you go into a bank or these organisations you can never speak to anybody.
Helena McAleer: It was just the complaints department. I don’t even know the girl’s name, but it is in an email. It was just the complaints department. It was nobody specific. She just happened to be the person who answered the telephone that day.
Q18 Chair: So you don’t know where the complaint came from, or anything?
Helena McAleer: No, sorry—you mean with NatWest. I was trying to get a remortgage to release some equity.
Q19 Chair: And that is what triggered it.
Helena McAleer: That is what triggered it. I told them.
Chair: And your honesty.
Helena McAleer: Yes, that was my mistake.
Q20 Derek Thomas: Greg, you have obviously put a lot of thought into this and your view, I think, is that this is or should be illegal, because it is a form of discrimination.
Greg Beales: Yes.
Q21 Derek Thomas: How are you doing with that kind of campaign, and are you winning the argument?
Greg Beales: Let me start by thanking the Committee for hearing evidence on this today. This is a really big issue that we see in our services in every area of the country affecting, as you can see, people’s access to housing. In terms of legality, we think that this practice of no DSS—advertising the practice of excluding people simply because they are receiving benefits—breaches the indirect discrimination components of the Equality Act. That part of the Act provides for indirect discrimination, which is a policy or practice that treats someone differently in a protected characteristic. As you have heard this morning, you are far more likely to be receiving housing benefit if you have a disability. You are more likely to be receiving housing benefit if you are a woman, so these practices have the effect of discriminating against those protected characteristics.
Q22 Chair: Why is it indirect? It seems pretty direct to me.
Greg Beales: It definitely feels like that if you are going through the system. It is because it is a policy or practice that applies the same to everybody, so it does not seek to target someone who is disabled, which would be direct discrimination, but it has the effect of targeting people with disabilities, which under the Act is described as indirect discrimination, which is equally illegal.
The courts treat it slightly differently, as you have to prove it on a case-by-case basis, but we are in the process of bringing a series of cases through the courts. We have already brought some that have settled with admission of liability—with an admission of discrimination. We feel that our legal position is quite clear: people who are pursuing these practices and policies are not complying with their legal obligations.
Q23 Chair: But if they had a policy that said, “We do not let to people with grey hair, on the basis that they are more likely to die before other people and cause the landlord trouble with finding another tenant and getting the body out,” would that still be indirect discrimination, providing they did it to every grey-haired person?
Greg Beales: That would be indirect, but indirect discrimination is unlawful under the Act. What the court will ask in each of these cases is: have they got a good reason for that indirect discrimination? With some of the evidence that you will hear today, you may hear some people try to put some rational explanations for the policies, but in our experience none of this is based on rational judgments within the system.
I have a couple of quotes from a mystery shopping exercise that we carried out. We phoned up letting agents as a landlord seeking to let a property and asked whether they take people receiving benefits. I will give you a couple of examples: “In a year’s time, if you want to go back to the property, it may not be available to you and it may be trashed.” That is an example. “I don’t know if you watch TV much.” The caller replies, “What?”. “Do you watch TV a lot?” The caller replies, “I do, yeah.” “I’m sure you see those programmes with nightmare tenants and landlords, and predominantly a lot of them are usually DSS tenants. In my experience, I recommend not going down that route.” With these policies and practices, it seems to me, we have taken straightforward prejudice and we have institutionalised it into the housing system.
Chair: Even though 40% of the country would be on benefits by that definition.
Greg Beales: Yes.
Q24 Derek Thomas: Chair, I should have said earlier that I have an interest in a property company that lets to people on benefits.
Mr Beales, you explained a couple of examples of what potential tenants have been told, but if you have letting agents who would see themselves as responsible businesses, and then you have mortgage companies, that are all creating this environment that is hostile to people on benefits, they must have found a way to explain that. If it is, as you have said, under the disability Act, discrimination—
Greg Beales: The Equality Act.
Derek Thomas: Sorry, the Equality Act—why are more people not complaining and why are they getting away with it?
Greg Beales: We would definitely encourage people to come forward. We are seeking to bring cases to demonstrate this. I think people have not been talking about this much. It has been hidden away in the system. Sunlight is the best disinfectant, really. You will definitely hear letting agents talk about needing to do what the landlord tells them to do, but the Equality and Human Rights Commission’s advice is very clear in respect of a letting agent’s responsibilities. It says, “As well as not unlawfully discriminating against a client yourself, you must not accept an instruction to discriminate from a property seller or landlord. If you accept an instruction from a property seller or landlord to discriminate in disposing of housing premises…this would be against equality law, and the person could bring a legal claim against you.” There is no doubt that there is no excuse for a letting agent, or a landlord for that matter, to say that somebody else has instructed them to adopt a discriminatory practice.
Philippa Lalor: If you look at the demographic that I fit under—the severely and enduringly mentally ill—how many of those people are articulate enough to sit here, talk to you people and argue their way through court that they should be able to rent?
Q25 Derek Thomas: That is helpful, thank you. Can I take the conversation slightly sideways? We have done a lot of work here on the whole issue of fees that are charged and made payable by tenants looking and wanting to secure a tenancy. Do you think that is a subtle way of removing a certain group from the lettings market? Have you ever considered that?
Greg Beales: Possibly. I definitely think there are subtle forms of discrimination in the system. Obviously, the changes in legislation about fees are now in place, so that has changed the position of tenants very considerably. You would have to ask letting agents, but I think principally it has been a profit-making exercise for the letting companies.
Q26 Derek Thomas: I have had people come to me before the legislation changed who were looking at nearly a thousand pounds just to secure the tenancy. That is going to exclude an awful lot of people on benefits.
In terms of what we can do here, what changes do you want to see so that we can make it much easier for people on benefits to secure safe properties to live in? That question is open to any members of the panel.
Philippa Lalor: As far as I can see, universal credit sanctions have not particularly hit the individuals. Yes, they have hit the individuals hard, but they have hit the fact that people are paying rent harder. People are getting universal credit sanctions because they have mental or physical health issues, because they can’t get to the post office or because they have to have reasonable adjustments in order to use a computer, because they have certain disabilities. These universal credit sanctions are therefore hitting the landlords more than perhaps the tenants.
Helena McAleer: I think the law should be more refined about discrimination and prevent it. The estates agents blame the landlords, the landlords blame the insurance companies, the insurance companies blame the mortgage companies and it goes round in this vicious cycle. The mortgage companies then blame the landlords, saying the landlords don’t want the option to rent to people on benefits. We will stay in this vicious cycle as long as we continue to have these conversations. I should have asked before, but I found out today that my insurance company doesn’t allow me to rent to people on benefits. Before I walked in here I cancelled the insurance; I hadn’t realised, which I should have done and which is my fault. That is Direct Line. I was naive in thinking that people weren’t that discriminatory and it wasn’t an issue, until it was thrown in my face.
Q27 Chair: What can we do about it?
Helena McAleer: Be very specific in making the rights law, as part of the Act.
Q28 Derek Thomas: Can I come back to Helena for a second? What is an insurance company thinking? They are not responsible for the mortgage, so if you don’t pay the mortgage it is no loss to them. What are they are actually thinking about the tenant that means they would not be prepared to insure the property? Why would an insurance company think that I am any more appropriate or suitable than someone whose life has had a tougher start?
Helena McAleer: I can only discuss my own personal opinion, because no one has ever been able to provide me with evidence as to why they don’t rent to people on benefits. My opinion is that this is a policy that came into place years ago, when social housing was an issue, if it ever was an issue. Nobody has had the nerve to go and change it, to look through it and take action on it, because it is there. Why change anything unless you are forced to? I want to force the change.
Q29 Derek Thomas: Is there any evidence that someone on benefits is a tenant to worry about, compared with someone who is not on benefits?
Greg Beales: We are certainly not aware of any evidence. If you compare like for like at similar income levels, I would be very surprised if there is any evidence. Obviously, the onus is on the people who want to run these discriminatory policies to put forward that evidence. It is not presumption; you are not allowed to make a presumption towards that.
With regard to your question about what action the Committee can take, you will obviously want to look at the legislative framework, but our position is that sunlight is the best disinfectant. These are unquestionably discriminatory and prejudicial practices, sometimes formalised and sometimes much more informal. The most important thing I would encourage you to do is to give a clear statement that this is not how the welfare state is intended to work, and that the welfare state is not trying to create two classes of tenant or two classes of money or income.
Q30 Chair: Great. We are in favour of sunlight, but this is widespread. We don’t just need a bit of sunlight here, there and everywhere. This is institutionalised. Surely the law should play a part in bringing us sunlight?
Greg Beales: I agree. My point would be that the law is already quite strong, and from the breadth of the evidence you hear today I think you will see many of the organisations who have been running these policies are willing to change, when challenged. NatWest, Nationwide and the Co-op—you are going to hear from all of those this morning—have all in recent months changed their policy, so much so that in the banking sector, in terms of lending, we do not now think that there are any major lenders that still say “No DSS” in their policies. I will give the Committee a list of some smaller lenders.
Q31 Chair: Do you want to name the smaller ones now, Greg? Can you do that?
Greg Beales: I haven’t got that; I will have to provide that separately. I should say that the problems in the lettings industry are deeper. Certainly, some of the letting agents that we have named and called out have refused. Some letting agents have changed their practices: Ludlow Thompson have agreed to retrain their staff, for example. Some of the letting agents that we have challenged have refused to accept that they are discriminating.
Q32 Chair: Philippa, what would you advocate?
Philippa Lalor: I want to be taken on merit. I want to be taken equally to other people.
Q33 Chair: We all do, Philippa, but what would you propose as a change? Greg is saying shining sunlight. I am arguing more strongly for changes in the law. What would you propose?
Philippa Lalor: Definitely the mortgage companies.
Q34 Chair: What? Changing the law against them? Or just naming them?
Philippa Lalor: No, changing the law. Why can you have a mortgage when you only give a mortgage to people if they will only let a certain group of people in the property? In the 1950s it used to be, “No blacks, no Irish, no dogs.” Now we have, “No DSS.” It is still written on the shop windows.
Q35 Chair: Thank you. Great quote. Lynne?
Lynne Mapp: On letting agents saying “No DSS”, they are dressing it up now by saying, “Working professionals only” or “People who are working only”. My daughter is a carer for my Mum. In my opinion, she does a really good job. My Mum is 92 and she has to care for her and she also helps me. I’m finding it very frustrating because, when I ring them up, I just get, “No DSS. No, we’re not interested. We are not going to let out to DSS.” So, I don’t get as far as a landlord.
I’ve done my own mystery shopping and actually went to the estate agent myself. From watching their body language, they just want to get rid of you. They keep you out; it is so, so wrong. My daughter is on her own with three children and pays £1,400 a month rent. The landlord wants to put it up to £1,500. That’s without her council tax, her food, electric, gas, water, all that kind of thing. She is struggling and I have to fund £500 a month to try to make ends meet and the ends don’t meet. So, something has got to change here drastically.
Chair: That’s brilliant, thank you. Ruth and Steve, quick questions.
Q36 Ruth George: That is really interesting. I wanted to ask what you think the impact of these policies is on the lettings sector. Does it mean that people who are on benefits and want to get a property have to pay extortionately more? Does it mean that the quality is lower? You would have thought, on the insurance question, that, if it is so difficult to find a property, you would actually be desperate to stay in it and not to trash it. What’s your experience of the quality and the price that you are able to access? Is there a difference from what else is out there?
Lynne Mapp: My family had to find £4,800 to secure this property for my daughter. It was off Gumtree because no one else would touch her and she was desperate. Being desperate, the landlords who take DSS know that, so the properties are not up to scratch. They are really not.
Q37 Heidi Allen: In what way?
Lynne Mapp: They’re inadequate. Any old curtains up at the window, any old carpet put in there, all cheap goods—anything like that. When she was going to leave the property last year, we painted it all up and had the carpets cleaned, so that it was all nice for the landlord for when we left, but the council said, “Don’t leave. You stay there until you are evicted.”
But we don’t want to go down the eviction route. We want help; we want to move out. But she can’t move out because we can’t afford the fees, for one thing. If she leaves of her own accord she is deemed as making herself homeless. If she doesn’t pay the rent she is deemed as making herself homeless. You are in a no-win situation.
Q38 Steve McCabe: I think Lynne might just have answered my question. I was curious about the £1,400 rent. I don’t know what she is getting for that. Are you saying that, because all these other landlords exclude people on benefits, you are left with a relatively small sector who are charging exorbitant rents?
Lynne Mapp: Exactly.
Q39 Steve McCabe: People are being discriminated against in two ways: first by not getting access to the wider market, and secondly by being forced to pay exorbitant rents. Is that the point?
Lynne Mapp: Yes. If the council built more properties and let to tenants on housing benefit, they would reap the reward by getting that money back, like the landlords who earn huge sums.
Q40 Chair: Does anyone disagree with that?
Ruth George: The state is paying huge sums as well, through housing benefit.
Helena McAleer: I don’t disagree with it. I want to explain why I took on a benefits tenant. Her carer—her brother—was my neighbour at the time. She was living in a house that did not meet any humane conditions, and she had been there for years. He approached me and asked me. He said that obviously he could not afford the rent that I was getting from the public sector, but I made an agreement with him, knowing that she would be in there for the long term and that they would be good tenants, so I took less money to allow her to come in.
It made sense to me, as a businessperson or as anybody, to have somebody in long term who I know will look after the property, and to accept less money for that. I am okay with that; that is something I chose to do. However, not a lot of people have those personal relationships, so they do not have the ability to have those conversations and make those decisions. If landlords like me took the time to meet people like Lynne, they may be a bit more receptive to that.
I am so appreciative of the NatWest and the Co-op and everybody changing their policies. However, if we do not change the law, there is nothing to say that they are not going to slide those policies back in down the line, and that estate agents aren’t going to find other loopholes and that there aren’t going to be circles. We will be back here again in 10 years’ time with more homeless people and more people destitute.
Q41 Chair: Huge thanks to all of you for the session. Thank you very much.
Witnesses: Paul Wootton, Gordon Soutar and Lloyd Cochrane.
Q42 Chair: Thank you very much for coming. Gordon, might you start the introductions?
Gordon Soutar: I am Gordon Soutar, managing director of the Co-operative Bank.
Lloyd Cochrane: I am Lloyd Cochrane, head of mortgages for NatWest and RBS.
Paul Wootton: I am Paul Wootton, director of home propositions for Nationwide Building Society.
Q43 Ruth George: You will have heard from the previous panel that they found it difficult to understand why “No DSS” policies were in place. From your own perspectives, what was the rationale behind these policies—I know you have changed them now—when they were originally implemented?
Paul Wootton: You will have to excuse my voice; it is struggling a bit. It is worth pointing out that Nationwide Building Society, in the last seven years, has not had any form of policy that would discriminate against tenants on benefits. Actually, when you go back seven years, it was only for a three-month period that we unfortunately had that clause in our contract. We have never enforced that clause and will never enforce that clause. We are quite passionate about having a private rental sector that works for all involved.
This review has prompted us first to identify that there was that three-month window, which we regret, and as such we have written to all those landlords to confirm to them that we would never enforce such a term. We have also taken steps to review some of the very fine detail of some of the mortgages that we acquired during the financial crisis. You may be aware that Nationwide Building Society bailed out Derbyshire Building Society and Cheshire Building Society. As such, off the back of this review, we have stepped through the fine details of those mortgage contracts and have identified a small group of those contracts that had those terms in. We were simply not aware that those terms were in place, because our lending policy has never been to enforce such a term. As a result, we have written to those mortgage holders, to ensure that they are aware that we would never enforce such a term.
Q44 Chair: Would you give a 100% mortgage to people on benefits if they wanted to buy? You say you do not discriminate in any other areas. Do you discriminate against people on benefits if they wish to buy?
Paul Wootton: Unfortunately, on the residential mortgage side, that is not my area of expertise. We do not offer 100% loan-to-value mortgages; we offer up to 95%. If you are looking for information on how we assess affordability, I will have to write to you.
Q45 Chair: I will ask everybody in turn. Given that Santander shows that, in every region in the country, you are at least £100 a month better off if you buy rather than rent, I am puzzled that you do not help people out of this hole by offering them mortgages and increasing their income by at least £100 a week. Would you say that that is somebody else’s job?
Paul Wootton: Nationwide Building Society has one of the largest shares of first-time-buyer mortgages. We constantly seek ways to maximise the amount that we can lend, within PRA guidelines, to first-time buyers.
Chair: I only ask the question because I know the answer, because I have written to you about it.
Q46 Ruth George: I will move on to Lloyd about the reasoning behind the policy, because you have had that policy much more recently.
Lloyd Cochrane: We have always lent to tenants, or to landlords who provide properties to tenants on housing benefit, through larger landlords, which we define as landlords with 10 or more properties. We have had that policy in place for a very long time. The policy for smaller landlords with fewer than 10 has been to choose the larger landlords, who are more suited to dealing with the different complexities and risks in that market.
As you have heard, we reviewed that policy. We got great input from Shelter and the Residential Landlords Association, and we have changed that, from 1 March, for all our existing customers. We have no restrictions, regardless of the size of the landlord, for existing and new customers from 1 March.
Q47 Nigel Mills: Have you written to your customers?
Lloyd Cochrane: We have done a number of things. We have trained our teams, so that they understand the policy and the reasons for it. Together with the Residential Landlords Association, we have updated some information on our website, so we are comfortable that we are supporting our smaller landlords to understand the market while providing them with the ability to provide tenants into it. We are writing to all our buy-to-let customers, to ensure that they understand that we have changed our policy, and that we would not seek to enforce any of the terms that were previously in place.
I wanted to say that I am personally very sorry, and we are very sorry, for the experience that we put Ms McAleer through. Our approach—to seek her evicting her tenant from the property—was not consistent with our values. I am very sorry for that, and we have made moves to try to make good on that. It was never our policy that we would evict tenants from a property. It was a mistake, and we have coached the members of the team that were involved. To answer your question, writing to all landlords and educating our teams—
Q48 Nigel Mills: When?
Lloyd Cochrane: We have a letter going out in late May or early June that will update landlords on a range of different things, and the update about that will go there. The reason for that was that we did not want to send out—I do not know about you, but we get lots of feedback from customers that they get lots of mailshots from various organisations. We had an opportunity to put this update in a meaningful correspondence, rather than just a letter that might get lost on the doormat. It was a conscious decision to update all our landlords at that time.
Q49 Nigel Mills: I seem to recall that my buy-to-let mortgage terms may limit how long a lease I can give tenants. Is that something that you think is appropriate, and are you willing to extend it?
Lloyd Cochrane: I am glad you have given me this opportunity; I should have mentioned that. As part of the review that I mentioned, we have increased the tenancy from one years to three years, which gives all landlords the ability to give their tenants much more security of tenure. That has changed now.
Q50 Ruth George: You mentioned different complexities and risks involved in letting to people on benefits. Could you just expand on that a little bit?
Lloyd Cochrane: Yes. You will know better than I do the ways in which tenants are paid their benefits, and the ways in which landlords will need to engage with an authority in the event that a tenant is unable to make that payment, to get that payment from the authority—those complexities, of which there are a few, are in some of the examples that I gave when I referred to that.
Q51 Ruth George: Because under housing benefit, the landlord receives it directly, so—
Lloyd Cochrane: As we move to universal credit, that situation is changing. It is all of the complexities in that system that we want to ensure our landlords have the ability to understand as they go into that market.
Q52 Ruth George: Okay, but universal credit is relatively recent, whereas housing benefit was—presumably—a fairly assured way of receiving rent beforehand. So, taking that out of the picture, what are the other complexities and risks that you are talking about?
Lloyd Cochrane: With some of the risks involved in that, and we refer to this in a letter that we sent through late last year, the Office for National Statistics outlines different arrears rates between private tenants and tenants who are receiving housing benefit. So that is one of the risks that, from the data we have seen, informed our decision previously.
As I say, I am really pleased that we have taken the decision to understand the market, get input from the Residential Landlords Association, get input from Shelter, and be able to provide that support to smaller landlords as well as larger landlords. We should have done that sooner, I think, but I am really pleased that we have done it now, and those restrictions are for all our customers.
Q53 Ruth George: Thank you. And Gordon, from the Co-op’s point of view—?
Gordon Soutar: Our issue is very much a legacy issue, with the buy-to-let clause in the terms. It stems back—
Q54 Ruth George: If it is a legacy issue, when was that introduced?
Gordon Soutar: It stems back to when we had our merger with the Britannia Building Society, way back in 2009. We are quite a small player in the buy-to-let market; less than 0.5% of the mortgages drawn in the UK are done through the Co-operative brand. As far as it goes within our own mortgage book, about 7% of what we drew down last year was a buy-to-let mortgage, so we are relatively small in the buy-to-let place.
This only came to our attention as an issue when we were working with our corporate partner, which is Centrepoint, a charity in Manchester that deals with the homeless youth in the north-west. Centrepoint raised it as an issue with me as an individual in about November last year. From there on in, we have looked at that internally, and from the added publicity that I guess has been around about the cases and indeed the good work of the Committee, we made our decision to move on that policy and remove it all together.
So, from the beginning of April, all our newly introduced business brokers have been advised that the policy no longer stands. From the middle of May, all our documentation and all the customer correspondence will reflect that.
Q55 Heidi Allen: Listening to all the evidence we have had so far, it strikes me that “No DSS” has become this thing. It is not a policy that you actively, as lenders, have enforced: there are some anomalies, perhaps in your policy in the past, that you are trying to iron out. However, like a lot of the big societal issues, it is not somebody else’s responsibility; everybody has a bit of a role to try and improve things.
What more as lenders could you do? I am thinking about you, Gordon. Do you want to increase market share? What could you do proactively to turn the dial on this and change things for good tenants, like those we heard from in our first session? They are the kind of customers that, if I were a landlord, I would want. What can you do in your organisations perhaps to change things and make it a proactive policy that you want these customers? Can you do something different with your products?
Gordon Soutar: It was good to hear from the previous witness. Like the rest of the panel, I regret that that decision was not made earlier. Now that we have firmly got that in policy, everybody will have an equal right and be on an equal playing field when applying for a mortgage. That’s the way it should be.
So, I think that if you take the Co-operative principles of ethics and values, it very much fits with those. If you look at our current account proposition, you will see that 22% of those customers have got a basic bank account. So, we are helping customers to secure their money in an environment that is safe and that allows them easy access to their cash.
We are also working through Centrepoint, which is our chosen charity. We give a donation for every single mortgage that we make. That helps the homeless and helps the development of—
Q56 Heidi Allen: All of that is marvellous. Following on from Frank’s point, one of you could be a leader in this field and say, “We actively seek good-quality tenants.” They might come with housing benefit—so what? Listening to our initial panel, I am sure you would not want to not help provide a home for either of those people. What could you do, pro-actively, around policy and products to make you stand out in the lending market?
Lloyd Cochrane: The actions we have taken so far to force smaller landlords to take that restriction off—as I say, we have always had the policy in place for larger landlords—are about publicising the changes that we have made, for our existing landlord customers and, importantly, for the mortgage intermediary market. Most landlords go to a mortgage broker—I think Ms McAleer mentioned that she went to a broker—for their mortgage. From my perspective—my peers here will have a view—ensuring that we engage with that community, so that they understand that we are very much open for business for these customers and that there are no restrictions, is a very effective way of communicating with the person who typically will have the landlord conversation.
Q57 Heidi Allen: You could also have a product, couldn’t you? In the insurance world, a particular insurance broker might focus on a particular type of insurance that is deemed high-risk. Why not have a particular product that you push out through brokers that is just for this market place?
Gordon Soutar: It is a good suggestion, but for me treating the customers fairly and equally is the right answer, so that there is no differentiation.
Heidi Allen: But in practice that does not happen, and that is what we are hearing today. That is my point: whether you, as the big corporates, can help to turn the dial on this by proactively coming up with a product that seeks to have relationships with those sorts of customers.
Q58 Ruth George: Lloyd mentioned universal credit, and differential rates of arrears between people who are working and people who are not working. With universal credit, we are seeing much higher levels of arrears building up on rent arrears. How is that going to affect the way that you assess lending to landlords? Gordon, do you want to start?
Gordon Soutar: I come back to the point that each lending decision should be treated in its own right, and it should stand up to the scrutiny of a mortgage and affordability to be able to pay. That is the regulation that we follow. But there should be no discrimination in there. If a customer—a landlord—is able to make the repayments, it should not discriminate against the tenant who is coming into the property. For me, as long as it is an equal way of doing the assessment, it should make no difference to the calculations.
Q59 Ruth George: And existing rent arrears or previous rent arrears presumably are taken into account.
Gordon Soutar: If the landlord has had arrears with us, we would have to look at that, as well as affordability—can they afford to make the payment going forward. So it would be looked at on an individual basis.
Lloyd Cochrane: We have a similar view. We have not got any restrictions whatsoever. We would not make a judgment. We are very clear with our landlords and all of the people who serve landlords alongside us that we will not make any judgment about that for smaller and larger landlords.
Q60 Ruth George: Will you place any restrictions on landlords as to who they can let to?
Lloyd Cochrane: No, the only restrictions on landlords are ones that we put on them to ensure that the properties are of a good standard. When we ask a valuer to go around and value the property, we are ensuring at least an E energy rating and that the property is of a good quality, so that we are confident that we are supporting our landlord to let a good-quality property to a tenant. The restrictions on landlords are about ensuring that the property is of good quality, not on who they want to rent to.
Paul Wootton: Very similarly to Lloyd, all of our rental properties are assessed for property quality at the point of application, and we have measures to enforce the decent homes standards at the point of application.
Q61 Ruth George: But there are no restrictions on the type of tenants or the tenants that a landlord can let to?
Paul Wootton: No.
Q62 Steve McCabe: I understand that in Ireland being in receipt of benefits is a protected characteristic, so that you cannot have the kind of discrimination that we have been hearing about this morning. Would you welcome that change in the law here?
Gordon Soutar: Given that we have now made the change to policy, I think that that law, as it is in Ireland, would not impact upon us. It would impact upon those who have the clause in place, but for me it makes perfect sense.
Q63 Chris Stephens: You would welcome it?
Lloyd Cochrane: Yes. Our judgment has never been about discriminating an end tenant; our judgment was about the type of customer we support in the markets they are in. Again, we have made the decision that we are supporting smaller landlords, and we have put measures in place to help them to understand that market versus the one we have supported them with to date.
Q64 Steve McCabe: Would it have any impact on your lending policy?
Lloyd Cochrane: It would not. Our lending policies would be completely consistent with it. On the broader point about raising awareness and ensuring that all parties in the ecosystem that provides tenancies raise awareness and bring daylight or sunlight in, that may have a positive effect on other aspects of the market. From our perspective, we have been very consistent with it.
Paul Wootton: Similar to what has been said, we should also note that only about a third of the private rental sector is funded by buy-to-let mortgages. Such a change would not affect our lending whatsoever, but it might help to improve the practices across the wider sector, so Nationwide would support it.
Steve McCabe: Sounds like a big cheer for that, then, Chair, doesn’t it?
Chair: Doesn’t it? A good recommendation, don’t you think, Steve?
Q65 Steve McCabe: It sounds like it. Can I ask you all whether you happen to know what proportion of your customers are women and single parents?
Gordon Soutar: I do not have that figure, but we can revert back. Sorry, Steve. We could return to that.
Lloyd Cochrane: Similarly, we do not have that data to hand.
Paul Wootton: From a landlord perspective or the tenant’s perspective?
Q66 Steve McCabe: The people you lend to—the proportion of your customers.
Paul Wootton: No, I do not have that information to hand.
Q67 Steve McCabe: I only ask because we saw that startling stat earlier about 60% of adults on housing benefit being women and 95% being single parents. I wondered, since you all have these nice policies now, how in tune they were with figures such as that. You have welcomed the idea of this change in the law. Are there any other changes that any of you would recommend that would make it easier to see an end to the kind of practices that we heard about earlier this morning?
Gordon Soutar: The good work that the Committee has done and the visibility that has had in the press have certainly raised awareness. For those lenders who do not have it as a policy going forward, they should, so more of this type of activity to drive that action out would be appropriate.
Lloyd Cochrane: Paul made the point about the ecosystem and the fact that we as lenders have an important part to play in setting the tone, and I think you have heard from us how we are doing that. The fact that getting on for two thirds of landlords renting to tenants are not using a mortgage to fund their property means that there are other aspects of the market that definitely need some encouragement—we have heard examples of that today—to remove what is a completely wrong way of thinking about providing homes to people.
Paul Wootton: I agree with what has been said. Nationwide will continue to work closely with Shelter on this point, but also on a whole range of points across the private rented sector, including property quality, the rental deposit systems and longer term tenancies. We operate across all those points.
Q68 Steve McCabe: Would you like to see tighter regulation of letting agents? I am thinking about that £1,400 rent we heard about earlier and the fact that people are being forced into this narrow sector where they are being exploited. Would you like to see regulations on letting agents toughened up so that it is harder for people to get away with that sort of gimmick?
Paul Wootton: Nationwide has been an active supporter of the tenant fee ban coming into place on 1 June. We are also a supporter of the idea that all letting agents should belong to a trade body and that there should be certain rules and practices in place to ensure professional standards for all letting agents.
Lloyd Cochrane: Very similar—understanding and ensuring that the Residential Landlords Association is supported in its ability to raise standards, not only on fees, but on a number of other areas of conduct.
Gordon Soutar: I could not agree more, to be honest. The work we are doing with Centrepoint, similar to Paul’s work with charities and everything else, suggests that that is also an issue that should be addressed. If you look at the document that Centrepoint produced in November, which is a very thorough document and article, it talks about that as an issue.
Q69 Chair: I will not ask you to answer this now, because it is unfair and you were not prepared to do so—not prepared for me to ask the question, that is, not that you were not prepared to answer—but I come back to this point: given that Santander has shown that in every region of the country you will be at least £100 a month better off if you buy rather than rent, might you tell us how many people with mortgages you have who are on benefits as their main source of income? Might you think that a way of increasing the income of some of our poorest people is not for them to have to go through a landlord to find housing, but for them to come to you for mortgages so that they can acquire a capital good and their net income per month will increase? If you could take that away with you and come back to us I would be grateful. Thanks for your clear evidence today. It has been really helpful.
Witnesses: Glynis Frew, Adam Hyslop, Helen Buck and Matt Campion.
Q70 Chair: Welcome. Glynis, would you like to open the session and tell us who you are?
Glynis Frew: My name is Glynis Frew and I am the CEO for Hunters Estate Agents.
Adam Hyslop: I am Adam Hyslop. I am one of the two founders of OpenRent.
Helen Buck: I am Helen Buck. I am the executive director of Your Move.
Matt Campion: I am Matt Campion, chief executive of Shepherds Bush Housing Group.
Q71 Steve McCabe: This question is specifically for Matt. I understand that you established an agency specifically to help tenants on benefits. Could you tell us why you did that, and why you think others do not do the same thing? Are there any legitimate grounds for discriminating against people on benefits?
Matt Campion: Perhaps I can answer your last question first—no, I do not think there are any legitimate grounds for such discrimination. At Shepherds Bush we have started what we are calling an ethical letting service, called 220 Lettings. We own a few properties in that, and we lease others from private landlords for a three to five-year period. We set that up because we could see there was a real gap in the housing market involving people who were not able to access social housing, but were also not able to access open market rent housing.
The rents we charge are broadly similar to private rented accommodation, mainly because we are leasing properties from private landlords. However, we do not charge any strange or unusual administration or tenancy fees—we charge only the bare cost of administering those properties—and we do not have a ban on people claiming benefits. We look at each case individually and work with the individual to see what they can or cannot afford. So rather than us saying, “You can afford this property but you can’t afford that one”, we get people to try to reach that conclusion for themselves. In most cases we are able to find a property for people to move into. Because we work in west London where rents are high, the vast majority of people who are claiming benefits are claiming in-work benefits. It is not as if they are people who do not work or do not have a job; they are people who are in low-paid income but still need to live somewhere, and benefits are topping up their rent. We do not find any difficulty with having to evict more tenants who are in our ethical lettings business. It runs well and we think it is a really important service to provide.
Q72 Chris Stephens: Why do you believe that no DSS clauses are so common in the private rented sector? What do you do as an agency to challenge the myths about benefit claimants among the landlords you work with?
Adam Hyslop: For context, for those who do not know, we are the largest letting agent in the UK. We rent around 100,000 properties per year. We use a primarily online model to do that, which means that our focus as a company is extremely consumer-centric. I was here last year in support of the Tenant Fees Bill, which is kind of a contrarian view in the context of the lettings industry.
Particularly with reference to DSS tenants and benefit claimants, we have worked closely with stakeholders in the sector to try to design what we think is the best possible user experience for those tenants. We think the underlying issues are three-fold.
What we are really trying to design is, given an industry where landlords do come to us and ask us to find tenants who are not benefit claimants to fill their properties, how do we actually create a process that follows our clients’ instructions? What that means is that currently, when a landlord tells us that they do not want to let to benefit claimants, we reflect that in the advert wording and say, “This property is not available to DSS tenants.”
Q73 Chair: Do you feel comfortable about that?
Adam Hyslop: If I may, I will answer that by coming to the three underlying issues. We see three main reasons why landlords have that preconceived view when they come to us.
Chair: I interrupted you. You were giving us the main reasons, were you not?
Adam Hyslop: Yes, so I will come to that. The three main reasons are, first, some landlords have a contractual reason why they are not able to offer their property to benefit claimants, such as terms in their mortgage agreement.
Chair: Which shortly they are all going to be freed of, as we have heard today.
Adam Hyslop: I would hope so. Currently, we have to reflect that. That is the first contractual reason.
The second set of reasons that we see are actually—so you have a set of reasons why a landlord might have a contractual obligation as soon as they have that property available; the second is when the landlord is comparing applicants. If they are comparing somebody who has a provable income versus somebody on benefits, there is a secondary issue that is in the insurance industry.
If the landlord is looking to take out a rent guarantee product, which is an extremely common product and an extremely effective one, a landlord renting to someone with a provable income in the private sector, let us say, could buy a £99 policy—it is £89 through us—which guarantees any rental default or dilapidation to the property for 12 months. Those insurers currently tend to have a blanket ban on not recognising benefits as part of those income streams. That puts those landlords in a difficult situation, where even if technically it is at their discretion, they are choosing between an uninsurable tenant and an insurable one.
The third main area that I would highlight at this stage is basically a preconceptions issue. We serve a very diverse set of landlords, and some of them come to us from high street agents who have previously had a blanket no DSS policy, and they might then have that in their mentality, coming to us and saying, “My previous agent had this policy in place, and I’d like to carry it over.” There are other preconceptions about whether benefits income is equivalent to other sources of income, which is more of a mentality issue.
In that area, obviously, we have far more leeway; that is entirely within our control. We do things such as work with stakeholders. We have worked quite closely with Shelter, DWP and local authorities to put together information to try to encourage landlords to look more broadly. The way we see it, to answer your earlier question, is that landlords should be considering the widest possible set of applicants for their property. That makes complete rational economic sense. What is difficult is where there are contractual or risk-related reasons that actually prevent them doing that.
Q74 Chair: Glynis, the same question to you.
Glynis Frew: First, we do not have a blanket policy in turning away DSS. There are a number of issues. The first issue is quite simple to solve, in that when we started to investigate it from the Shelter investigation, there were a number of adverts, it would be fair to say, where that was just a cut-and-paste advertisement. You can easily eradicate those, and we have done so. Currently we have over 1,900 properties to rent nationally, and I think that about 19 still have this phrase. We will pursue those to see whether it is easily eradicated: “Well, that’s just a cut and paste and you shouldn’t do that.”
For a number of cases, the issue is the mortgage restrictions. It is not our place, as a letting agent, to say to a landlord, “Well, you can abide by that rule, but you can’t abide by this.” They have restrictions on their mortgages and insurances that cover this and locks and so on. I know that there was a lot of discussion earlier about what we should do to eradicate this, and I think that without question most people would want to do that. Letting agents are not the devil incarnate and nor are landlords.
The best thing is for all to work together, and I would say that one of the fundamental factors that we should address and shed sunlight on is the way benefits are paid. It is a huge expense for Government and the taxpayer and it needs to be addressed, in my view, as a community, as a group, with all groups working together. I think that it is unreasonable to expect a landlord to cover constant arrears of £2,500. That could have some detrimental impact on his or her life and family. I think that is the biggest issue of all, and we have always said, right from the beginning, that we would work with any party to make it right, because that will make the biggest difference.
Chair: Huge thanks. Helen?
Helen Buck: In line with many of the things we have heard today, our job as an agent is to try to marry up our tenant customers with our landlord customers, and it is in the interest of the landlord to open up as many tenants as possible. It is probably worth the Committee recognising that most of our landlords are really small landlords, often with a single property or possibly two or three; we don’t really represent big landlords with big portfolios. Those landlords are looking for a regular source of income, with the rent paid on time, so that they can then pay off their mortgage—or quite often our landlords are using the rent to supplement their pension or whatever. They really are quite small landlords. So that is what our landlords are looking for.
We have welcomed the changes in terms of mortgage providers removing restrictions, because that removes some of the reasons why a landlord might not wish to let to a tenant in receipt of benefits. But I think there is more that all of us can do on helping landlords to understand the system. We know that, where we have large numbers of tenants in receipt of benefits, quite often our branches have really good relationships with the local housing teams and they know who to contact if a tenant gets into arrears. They have a contact and they can navigate their way around the system. That allows them to talk with more confidence to a landlord who might initially say they don’t want somebody with benefits. So in the light of the changes—
Q75 Chair: Helen, before you go on from that point, I want to ask you this. You have talked about this really important working relationship that you have locally. Have you found that, as universal credit is introduced, there is a need to renew contact and spend time negotiating and telling landlords, “Well, this is just how the system works. You won’t get the rent for ages, but you might well get it in the long run”? Has that been a problem for you?
Helen Buck: Yes, it has, and I was going to raise that. Under the local housing benefit system, we have some branches that have better relationships than others, so we are expanding something we started last year to make sure that every branch has a named person who builds that link, because we know that can make a big difference. But universal credit has caused us some challenges. The delay to initial payments can put a landlord into arrears immediately, and that can cause problems if they are trying to pay mortgages.
The other thing that unnerves landlords is this. Under the housing benefit system, a tenant could elect to have the rent paid directly to the landlord or to the agent on behalf of the landlord. That gave them a lot of confidence, actually, but that is much more difficult under universal credit. One ask that we would have is trying to help the private sector understand the mechanics of universal credit and know where to go for help.
I had a lovely example recently on the south coast where a landlord was renting to a tenant on benefit and it was going smoothly. It had been a long-term relationship. The tenant had a baby and therefore the requirements were changed, and it went on to universal credit. I am not sure whether my team should have made this contact or not, but they did manage to get through to the caseworker of the tenant, and they were able to help them navigate their way through it. Of course, that meant that we could keep the landlord up to date, to explain that this wasn’t a problem. It would get resolved. It all ended quite happily, but our accounts team struggled with knowing quite who to contact. It is a system in transition. I appreciate that, but there is a lack of understanding about where to go, because things do go wrong, and that is when landlords get unnerved. We can play an important role in just helping to keep that communication.
Q76 Chair: Before I go back to Chris, you used a wonderful English phrase: “Caused us some concern.” Can you just evaluate? Is it growing concern, or not, because universal credit is being rolled out, Helen?
Helen Buck: It is. I know that we don’t understand the mechanics of it well enough. So while we have got great examples of really good practice with housing benefit and relationships with local authority teams, and we are making sure we expand on that, with universal credit we are struggling a little on who we contact. It is all done online.
Q77 Heidi Allen: So the DWP has not reached out to you at all?
Helen Buck: No, not to us individually, and I think with all the changes that are happening I am really keen that we can work closely across the industry on understanding how we can work, so that we can help our landlords understand, because our landlords want long-term tenants. They want tenants who will pay their rent, and they love tenants who are there for a long period of time, because they don’t want void periods.
Q78 Chris Stephens: Both your organisations have advertisements that contain the phrase “No DSS”. Do you consider that to be legal or illegal?
Helen Buck: We don’t have any adverts that say “No DSS”.
Q79 Chris Stephens: It is interesting that you say that, Helen, because Shelter provided us with some adverts from March 2019 that say “No DSS”: a bedroom property to rent in Essex—no DSS; a property to rent in west Yorkshire—no DSS; a property to rent in Romford—no DSS; and my favourite one, a one-bedroom property to rent in Telford: “Sorry no DSS. Small dogs considered.” Presumably the small dog has to provide some form of proof of income.
Helen Buck: They are shocking.
Q80 Chris Stephens: That is just a Google search, Helen, from Your Move, in March 2019, so do you consider adverts like that to be legal or illegal?
Helen Buck: Those adverts are not acceptable and I will need to go back and make sure that they are not appearing. We certainly have a policy of not having “No DSS” adverts. We do have to recognise that some of our landlords either can’t accept a tenant in receipt of benefit—and we have talked a lot about that, and that is changing—or we have landlords who may choose that they don’t wish to. That is where I believe we can play a role, if we understand the system better, in helping landlords understand why they should broaden their opportunity.
Q81 Chris Stephens: Do you think that adverts that say “No DSS” should be illegal? Do you agree with that proposition?
Helen Buck: They are not something that we as a business wish to promote.
Q82 Chair: Chris’s question is different. Do you think they should be banned by law, Helen?
Helen Buck: They could be banned by law. Given that it is our policy, it is not something that I would have a problem with. I think there is always the challenge—
Q83 Chair: The disadvantage of that, Helen, would be that you would therefore not be able to say “No DSS” but then some people who then stepped forward and said “Can I have the property?” you would then have to inform them of the landlord’s wishes, wouldn’t you?
Helen Buck: And that is what we do already, on the whole, where we act as a broker between the tenant’s requirements and the landlord’s requirements, trying to understand things such as length of tenancy. A landlord may want to consider someone for only 12 months, but a tenant might want less time. If the landlord cannot accept somebody on benefits, we need to have that conversation, because otherwise it would be a completely wasted journey.
Q84 Chair: Adam, can you answer Chris’s question?
Adam Hyslop: I am happy to. We distinguish in adverts and say whether the landlord has told us that DSS applicants will be accepted or not, and as I said at the start, we do that to put the consumer at the centre of everything we do. It is difficult for tenants to find property—it is a time-consuming and stressful process—and one thing that exacerbates that is people applying for properties when they do not stand a chance of being accepted. Our current position, which we believe is legal, is that if a landlord comes to us and says, “I don’t want to accept benefits claimants for this property,” it is better for us to be clear about that requirement. I mentioned the three reasons why a landlord might have come to the conclusion that that is their preference. They might have a contractual reason.
Q85 Chris Stephens: It is a simple question: do you consider the adverts you carry that say “No DSS” to be legal or illegal? Have you taken any advice about that?
Adam Hyslop: To the best of our understanding, it is not illegal to state that. If we had any reason to think that it was illegal, we would immediately not allow it to be a feature.
Q86 Chris Stephens: Do you think it should be illegal?
Adam Hyslop: That comes to the broader point of whether income from benefits is seen as equivalent to other sources of income. Clearly, mortgage lenders do not currently think it is equivalent—if they did, they would not be banning landlords from letting to benefits claimants. Similarly, insurers do not seem to see benefits income as equivalent. If somebody can prove a certain level of income through claiming benefits, and a certain level through earned income, dividend income, or many other sources of income, currently insurers will say, “No, I don’t recognise that income from benefits.”
That is the market as it is presented to us. Some things are outside our control, and while that is the case, the best we can do is save those people a lot of time when inquiring about properties. Ultimately, they could spend a lot of their own and the landlord’s time visiting properties and discussing things, and the landlord will turn around and say, “Actually, it’s always been my policy that, unfortunately, I am not able to rent to you.” That is obviously a huge inefficiency in the market that we are trying to correct.
Q87 Heidi Allen: It seems that today we have heard the mortgage companies saying, “Well, there is nothing in our policy that should make it difficult,” and large-scale landlords are saying, “Nothing that we are saying should cause a difficulty,” yet the reality on the ground is very different for would-be tenants. Perhaps these questions are for Glynis, Adam and Helen more than Matt. We have touched on the big stick of illegality, if that is what we need to do to say that you cannot discriminate. What would that measure do in practice to your operating models and businesses? Somehow in the mix, all the loveliness and good intentions are not coming out in the wash. Shall we start with Glynis and work through the panel? What would it do to your business model if it became illegal, or if we shone a light on the fact that these tenants are being indiscriminately discriminated against, and we made it loud and clear that that is not legal anymore?
Glynis Frew: Provided that also matched the consumer protection regulations—there will still be a number of landlords who will say, “Currently, I can’t let to benefits tenants because of my mortgage.” If you wiped that away, and if we are honest—we should be honest—that would not pose a problem to us. However, if we really want the property sector to work properly, we need to do three things. First, there has to be a code of practice that covers both landlords and agents as part of a redress scheme. We need a code of practice for everything.
Q88 Heidi Allen: Sorry, can you go into more detail on the code of practice and say what sort of things would be in there?
Glynis Frew: In the code of practice, everybody would be member of a redress scheme. It is pointless just having regulation for letting agents without having something similar for independent landlords. Landlords could still be independent under a code of practice, but it would include things like them having to be honest and open with their tenants and being part of a redress scheme. They must be fair when advertising and have similar things subject to contract. The minute someone is about to give you some money, those are the kinds of things you would have. That goes right the way through to, “I have a problem and I want to complain.” That would be an overarching code of practice that would include letting agents and landlords.
Q89 Chair: On that basis, if you are telling agencies that you are going to forbid saying “You mustn’t have DSS tenants”, you must also do that on landlords.
Glynis Frew: Definitely.
Heidi Allen: Yes, treat them the same.
Chair: So that is the first thing you would put in place.
Glynis Frew: That is the first thing I would put in place. The second is that I come back to the benefit system. I think there must be a better way than the way it is now. Corporate landlords are making something like 37% or 38%. The lady before was saying that most landlords are independent landlords; they are making 16% or 17%.
Q90 Heidi Allen: This is profit.
Glynis Frew: This is profit, yes. So to then say “plus every six, seven or nine months, we want you to just chuck in two grand” is not right. It cannot be right.
Q91 Heidi Allen: Sorry, describe what you mean by “chuck in two grand.”
Glynis Frew: Well, because of the arrears system. They are expected to pay the mortgage in advance, and the benefit system is paid in arrears. Arrears are increasing; I know we don’t want to think they are, but all the data says that they are increasing, to the tune of about £2,500. You cannot expect an individual just to bear that cost, so that is the second thing.
The third thing, which was mentioned this morning, is the standard of a property. To me, we cannot lose sight of the actual standard of the property itself. I am a member of the Lettings Industry Council, and we have developed—I think I put that in the letter; I have actually brought some copies here, if you would like to see them—
Chair: We have them. Thank you.
Glynis Frew: But we have developed something, and we are getting landlords involved, so that there is a minimum standard of a property that then is advertised on the portals that says, “This is a safety-certified property.”
Q92 Chair: Should that property include a kitchen?
Glynis Frew: Definitely, yes.
Chair: Because in my constituency, a kitchen is given as a shelf with a microwave and a kettle.
Glynis Frew: That is part of it. The difficulty we have now is that there are 145 laws and 400 pieces of regulation in the lettings industry, every time a let is made, but it is all offshoot—there is a bit of a law here and then there is something over there, and there is something across there. If only everybody would get together to do it properly.
Q93 Chair: To bring that together.
Glynis Frew: To bring it all together under a code of practice. We can sort out how benefits are paid, and we make sure that the standard of the properties is the proper standard for everybody.
Chair: That is a really good idea, isn’t it? Steve, did you want to come in?
Q94 Steve McCabe: I think that is a very good idea as well. There is a national qualification for letting agents, isn’t there? Presumably quite a lot of what you are describing is covered in that qualification. Does it include any training on the benefits system?
Glynis Frew: Yes, there is some training on the benefits system—well, it depends, actually. We have our own training that we cover ourselves, both e-learning and classroom, so we do cover some benefits training. The difficulty is that there are different systems nationwide, so we try to then make sure that the training is specific to the accounts department. That, in essence, becomes even specific to the tenant, because it can be different from one street to the next. So yes, there is, but it is very complex.
Q95 Chair: Have we stopped you giving us your list? It was very interesting.
Heidi Allen: Yes, I was keen to explore the second item—this money shortfall dilemma—which I am convinced is at the heart of a lot of the issues there. What do you think could be a solution to that? I will ask Adam and Helen too.
Glynis Frew: It is too complex; it is too complicated. As I was just mentioning when we were talking about the training, often that training has to be tenant-specific, because of the circumstances they happen to be in. There must be a simpler way, especially when there is so much money involved, and especially when, these days, most agents have software systems with which it is easy to track and follow payments right the way through. I do think that we as an industry would have to get together with everybody to work that through.
Q96 Heidi Allen: Would paying the money direct to landlords again help?
Glynis Frew: Yes, that certainly helps. Unfortunately, as far as universal credit is concerned at the moment, it could probably take up to two or three months for that to take place, but that definitely helps. I have had a number of tenants who have said, “I don’t want them to give me the money, because I like to spend it.”
Q97 Heidi Allen: It’s just safer if it goes direct.
Glynis Frew: Yes, absolutely.
Adam Hyslop: I guess the first thing to say is that the worst thing to do here would be to ban the terminology around benefits claimants, without actually sorting the underlying issues. Simply prohibiting phrases in adverts would actually just prohibit us from advertising properties accurately. What we are very keen does not happen out of all of this is that the underlying issues are left unresolved, and that we are not allowed to explain to people whether they are likely to be eligible for a property up front.
That wouldn’t damage our business—to your question, Heidi—but what it would do is basically mean that tenants were spending a lot of time going on fruitless viewings, phoning up landlords and trying to explain their position, when that would have been resolved up front by a clear advert, which is what we believe we currently have.
To take that to the next level down, what we are really keen to do is engage on those three areas I mentioned in terms of why landlords are coming to us and telling us that they don’t want us to send tenants who are claiming benefits. It sounds like, today, you might have made progress on the mortgage side of things.
With regards to being able to insure rental payments, we are now at a scale where we can work directly with underwriters and try to innovate within the insurance industry. We think that, later this year, we will have a product that allows landlords to insure rental income. They are obviously nervous about it because they have never written these policies before, but we do have the scale where we can put it—
Q98 Heidi Allen: The insurers are innovators?
Adam Hyslop: Yes, absolutely. They can be quite slow moving and risk averse.
Q99 Heidi Allen: I used to work in that industry, so I know.
Adam Hyslop: But we can bring the scale so they can run proper trials, and we can hopefully prove to them that somebody receiving income via benefits is not higher risk than somebody earning that income elsewhere.
The third piece is around convincing landlords that benefits income is equivalent to other sources of income. Some of the things that have just been raised are certainly worthy of further investigation. Perhaps almost more effective would be an education piece around making it less scary and understanding how systems work. Yes, obviously, it is important that agents are trained and up to date with how the system works but, ultimately, the people you have got to convince are the landlords who are making the final decision on whether to let their property to this person or this person. We already have quite a lot of procedures and content in place that try to reassure landlords of that. As we have already covered, it is completely rational for landlords to consider a wider range or tenants to let their property more quickly and to ensure that they are happy with who is moving in to their property.
That third area feels like the area where there is a kind of collaboration. I would like to stress that the worst thing that could come out of this would be to prevent us advertising properties accurately without actually addressing the underlying reasons.
Q100 Chair: I agree with you totally; that is a very important point, Adam. Helen.
Helen Buck: My fellow panellists have explained some of the things that would make a big difference. We absolutely support an industry-wide code of conduct. About half of properties in this country do not go through an agent. We believe that we play a valuable role in ensuring that our landlords do comply. We train them on how to comply, we help them comply and we won’t work with them if they don’t comply.
The agent sector is quite an important sector in getting those standards up, but any code of conduct must cover landlords as well. I have already touched on some aspects of the benefits system, particularly universal credit. Under the housing benefit system we had sort of navigated our way in our best branches on how to use it, and there is more we can do across the piece.
Universal credit is challenging. Why would landlords not want to have a tenant where the money is coming directly from the Government? That is really secure. There are a few other things such as clawback worries. Some of our landlords, if they have experienced it, have this concern that, if it has been overpaid, it could come back. I think those are much smaller issues, but they are worth looking at.
Glynis talked about the plethora of legislation. It is a lot, and it is our job to work through it and to ensure we help our landlords, but because it has come in over many years and is a bit piecemeal, we would really welcome something that stepped back and said, “How can we make sure this all fits together in a sensible way?” That needs to be across Government and industry, incorporating all the key players.
Q101 Chair: If we made some proposals where new laws were required, we could also make a recommendation, couldn’t we, Helen, that they consolidate into that Act all the other important bits and pieces from previous Acts, to codify into one Act what the arrangements should be?
Helen Buck: I agree. It has just been a long period of time. That was for good reasons, and we support trying to improve the quality of the housing stock available to tenants, but it has ended up being quite piecemeal, and there are complexities in it that we could simplify. Then we could help our landlords to ensure more easily that they are fully compliant.
Q102 Chair: Can I ask Matt to come in on this?
Matt Campion: The area where I have sympathy with the landlords is the administration of universal credit. In Shepherds Bush we run a debt and welfare benefits advice service that is not available just to our residents, but to any member of the west London community—
Q103 Chair: You must be overrun with cases and inquiries, aren’t you?
Matt Campion: We do have a lot of demand. We find that a lot of the cases that are difficult involve some kind of dispute over medical assessments from the client’s claim, particularly where there is an ESA or PIP—personal independence payment—claim. We find that a large number of cases are refused at the mandatory reconsideration phase, but then we go on to win at tribunal phase. I can see, for landlords, that means a long delay in getting that income and uncertainty as to whether they will get it. If you are an individual buy-to-let landlord or you only have two or three properties, you will not have the resources or the time that we would have at Shepherds Bush to navigate through that benefits system. While clearly I am a strong believer in not banning residents who are claiming DSS, the interplay with universal credit needs to be looked at to make that work.
Q104 Derek Thomas: Can I pick up on that? If we achieve this wonderful thing, so that in future there will be no “No DSS” adverts and that culture is gone from the market, do you see that we will end up with landlords insisting that the universal credit part of housing benefit be paid direct to them as part of the tenancy agreement? That is picking up on your point, Matt. Can you see that becoming the default position, to address some of those concerns?
Matt Campion: Potentially. My understanding is that, if a private landlord has a tenant who is working, they would insist that that person set up a direct debit to pay their rent every month, so I do not see why they would not insist that somebody who has a benefit-derived income could set up that direct debit. Certainly, within our ethical lettings, we find that residents on benefit-derived income can sometimes find that difficult, because if there is a delay in their benefit claim for some reason, their direct debit can bounce, and that causes all sorts of costs with their banking. But I suppose that would be the nirvana we want to reach, where people claiming benefits receive their benefits on time, without interruption and possibly in advance for their housing costs, where they have to pay a month’s rent in advance or pay a deposit.
Q105 Chair: If only.
Matt Campion: If only wishing made it so.
Q106 Derek Thomas: Would you be fairly comfortable, then, if we got to that point where part of the agreement was that you give permission for the housing part of your benefit to be paid directly to the landlord? Are you fairly content with that? It would help to reassure landlords and potentially open up more properties.
Matt Campion: I think so. That is probably a question that other panel members can answer better than I can.
Q107 Derek Thomas: You are nodding, so I assume you would.
Glynis Frew: Yes, I think it would be a lot better, because it minimises the risk. That is the thing, isn’t it? It minimises the risk.
Helen Buck: That is what landlords are looking for. All they really want is a secure source of income that comes in on time and can pay off the mortgage if they have one. So that helps enormously.
Adam Hyslop: If you boil it down to the motivations of different parties, whether mortgage lenders, insurers or landlords, if they see benefits income as equivalent to earned income, there is absolutely no rational reason—let alone a moral one—to discriminate based on the source of that income. Anything you guys can do to convince landlords, lenders and insurers that these things are equivalent would be welcome. Even better, to Helen’s point, if that money is coming direct from Government, you might be in a position where that is considered superior to income from other sources. I think the ideal outcome of this would be that those income sources are then on parity. Nobody is currently insisting that that money is earned in a particular industry, so why should they insist on whether it comes from benefit payments?
Q108 Chair: Taxpayers are always more reliable than anybody else, aren’t they? We have taken on board your point, Adam: we must not push this underground. If we are serious about this, we must get lenders and insurers to stop the discrimination.
Adam Hyslop: Absolutely, because currently we can educate landlords and say, “Look, you should be looking at benefit applicants,” but there are two places to hide, which we just highlighted, where currently we cannot really—
Chair: As we heard from our first witness, if the lender and insurer tell you that you can’t, what are you to do?
Q109 Heidi Allen: To summarise, between you, you represent a big chunk of the private rental market. Matt is an intermediary that you have created to navigate some of the issues. But it sounds like you have not had active involvement with the DWP in terms of helping. So I think one of our recommendations should be for you to be involved as a stakeholder partner with DWP so that the Government can fully understand not just the mechanics of how it works at the moment but the additional difficulties that universal credit is placing on top of this already difficult, dysfunctional market, to see the damage that UC is doing. It will only go one way.
Chair: They should have rent coaches as well as work coaches.
Q110 Heidi Allen: You have just given Matt a job. If that would seem useful, it should be a recommendation that your industry is more heavily involved with the DWP on how this works, because it is clearly dysfunctional and not working for great swathes of people who are on benefits.
Helen Buck: Yes.
Glynis Frew: Yes.
Chair: Huge thanks. This has been a fantastic session. I think we have got a report from you all. Thank you very much.