Are banks discriminating?
By Will Leyland, 23 October 2018
A story came to the attention of the national press recently in which an elderly woman was nearly evicted from her house simply for being on housing benefit. Given the current political climate it’s not particularly shocking that it caught the attention of the papers, but the nature of story perhaps is.
The issue arose after a landlord approached NatWest about the possibility of re-mortgaging her buy to let property, only to be told that she was in breach of her agreement by accepting a tenant on housing benefits. The bank allegedly told the landlord that she should evict her tenant immediately or take her business elsewhere.
According to The Guardian, she refused to evict her tenant, a vulnerable older woman who always paid the £400-a-month rent on time for more than two years, and instead moved her loan to another provider. She has since launched a petition calling for an end to such discrimination.
Following the national outcry from the incident the Residential Landlords Association (RLA) has launched an investigation into how widespread these practices are and has found, alarmingly, that two thirds of lenders representing 90% of the buy to let market prohibit the lease of properties to those in receipt of benefits.
It raises not only ethical questions but also legal irregularities, not least because there isn’t really any reasonable way for a landlord to know whether a tenant is in receipt of housing benefit as it is usually paid directly to the recipient. There is also now the matter raised by the RLA that such practices could breach the Financial Conduct Authority’s “treating customers fairly” agenda and may even contravene equalities law.
It’s an odd and outdated approach for such huge lenders to take as the majority of the market has accepted that there is little or no evidence to suggest that those in receipt of benefits are significantly more likely to default on rent payments or cause damage to a property. Stereotyping and stigmatisation has led to these expectations but most evidence doesn’t support it.
David Smith, the policy director for the RLA, said in The Guardian: “With growing numbers of benefit claimants now relying on the private rented sector, it is shameful that many lenders are preventing landlords renting property to some of the most vulnerable in society with little or no justification. The banks have had long enough to get their house in order. It is now time to take firm action to stop such unjust practices.”
Given that social rented sector properties are in such short supply and that evidence supports the fact that housing benefits have no influence over likely rent arrears, it seems somewhat archaic for banks to continue such a policy. Potential legal challenges based on equality legislation may well force the main lenders into a rethink.
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