Private Landlords Pocket £9.3bn In Housing Benefit

Record levels of taxpayers' money are being paid to private landlords, new figures show, with the bill for accommodating social tenants in the private rental sector having doubled in a decade.

New analysis by the National Housing Federation shows that the budget for placing social tenants in private rental accommodation has ballooned, doubling from £4.6bn in 2006, to £9.3bn last year.

The figures raise new concerns about government policy of shifting housing benefit recipients into the private sector, and whether the sector offers value for money.

Sky News visited an area of west London where private companies are converting small family homes into houses in multiple occupation (HMOs) consisting of cramped bedsits for vulnerable people.

Figures show benefit payments to landlords increased by 99%

A tenant, who lives in one of six bedsits in a property which used to be a two bedroom house, said housing benefit was covering his rent of £983 per month, which was paid directly to the landlord.

"It does seem like a lot of housing benefit for such a small bedsit," said the tenant, who did not wish to be named, fearful that he might lose his home if he criticised the landlord.

One local resident said the developments provided low quality accommodation at an extortionate cost to the taxpayer.

"Councils are are looking to the private sector to solve their housing problems… but in my view it's very short-term," said Jon Knowles, who has formally complained to his local authority about the conversion of small homes into HMOs.

"These landlords are driving up rents and they are taking away valuable housing stock on streets where people might otherwise buy their first home if they could."

The landlords in question did not acknowledge repeated requests from Sky News for a response.

But local authorities are increasingly relying on the private rental sector because of legal changes that compel councils and housing associations to sell off council properties.

Critics say this creates an incentive for private companies to maximise profit by squeezing as many small units as possible into small houses. 

"These houses are not appropriate for [social tenants] because they are far too small, they violate safe homes standards, they violate London homes standards," said Mr Knowles. "There is no sense of community being generated in these places."

Evidence shows that housing social tenants in privately rented accommodation costs more, amounting to an estimated £1,000 more per family per year than if they were placed in council or housing association homes. 

But landlords say that the higher costs are justified.

"It's more expensive to house people in the private rental sector than the social rented sector, because social rented properties on the whole have been subsidised when they are built. Private rental properties are bought on the open market," said Richard Lambert from the National Landlord Association.

"Unlike housing associations private landlords have to charge the kind of price that covers their costs and that inevitably means that private renting is going to be more expensive than social renting."

The Government said that whilst the bill for private landlords accommodating social tenants had increased between 2006 and 2012, it has since gone down.

"The reality is we have taken action to bring the housing benefit bill under control," said a spokesperson from the Department for Communities and Local Government. "Since 2012 the amount going to private sector landlords has actually been falling."