The supply of private-rented housing to low-income households is “unsustainable”, according to a report by the University of York’s Centre for Housing Policy. 

The loss of social housing stock through Right to Buy and reduced investment has resulted in a heavier reliance on the private-rented sector to provide accommodation for those on low-incomes and people in receipt of benefits, the report found.

However, its authors warn that some landlords are reluctant to rent to tenants who are on benefits, particularly because of some of the problems with Universal Credit.

The study, which was sponsored by Nationwide Foundation, revealed that a large cohort of “baby boomer” generation landlords are retiring from the market and are not being replaced by younger landlords because of lower returns and tougher regulation.

While some landlords seek to avoid renting to benefits claimants, there are some areas of the country where that is not the case.

The five local authorities with the highest levels of housing benefit claims – Redcar & Cleveland, Blackpool, East Northamptonshire, Enfield and Tendring – all have a private rented sector where 55 per cent or more tenants receive housing benefit. 

In some locations, increases in the housing benefit rates combined with low house prices mean that landlords can achieve better returns by letting to benefit recipients compared with letting on the open market.

According to the research, some landlords with low-rent lettings preferred tenants who received housing benefit. 

Indeed, some landlords particularly target the housing benefit claimants with the greatest additional needs, where it can be guaranteed that the rent is paid directly to the landlord, because this reduces the risk of arrears.

However, the authors found that the vast majority of low-income rentals falls outside of these housing benefit dominant markets. 

This means that in most places, landlords felt it was easier to rent to tenants who were not in receipt of support, because of concerns over delays in the payment of benefits and difficulties with Universal Credit. 

The report raises concerns that the number of landlords willing to rent to tenants on benefits in these locations is diminishing. 

It highlights evidence that landlords are withdrawing from buy-to-let more generally and from the housing benefit market specifically.

The researchers note that across the entire sector there was a fall of 30 per cent in the volume of buy-to-let mortgages between 2014/5 and 2018/19.

They found that larger landlords and landlords letting to housing benefit claimants were much more likely to be planning to reduce their properties and/or exit the market than to increase their lettings.

Only 9 per cent of landlords who have been in the market for three years or less said they currently let to people receiving housing benefit, but for landlords letting for 11 or more years, this figure was 28 per cent.

Lead author Dr Julie Rugg says: “This research has really helped us understand how landlords at the lower end of the market pay for and manage their property.

“It’s a real concern that many good, professional landlords are no longer letting to housing benefit claimants because of the way that Universal Credit is administered.” 

She adds: “Letting property looks altogether different to landlords now: it looks like a much riskier proposition, delivering a lower level of return and with a lot more hassle.

“As one landlord said to me, ‘stocks and shares may not deliver the same level of return, but they don’t phone me on a Sunday morning because the boiler’s bust’.”

A National Residential Landlords Association spokesperson adds: “No landlord should discriminate against tenants because they are in receipt of benefits. 

“Every tenant’s circumstance is different and so they should be treated on a case-by-case basis based on their ability to sustain a tenancy.

“More broadly, the government needs to take action to give both tenants and landlords greater confidence that benefits will cover rents. 

“This should include reversing the decision to freeze housing benefit rates in cash terms and ending the five week wait for the first payment of Universal Credit. 

“Ministers should also enable tenants to choose, at the outset of a claim, if they want the housing element of Universal Credit paid directly to their landlord. 

“We need also a renewed focused on developing new social housing, alongside the private rented sector.”