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Strategy Advice: How to rent to tenants on benefits

Most landlords shy away from tenants on benefits. Investors generally prefer professional tenants or Airbnb strategies. Tenants on benefits have a bad reputation and are seen as more trouble than they’re worth.

The reality is far more nuanced. Letting out your property to council tenants is a specialised strategy. Many landlords utilise this strategy and do very well out if it. Typical advantages include guaranteed rents from local councils and high rental yields. There’s a myriad of schemes around the country, that you can take advantage of.

In this article, I summarise the different strategies you can use.

  • Rent out to individual tenants on benefits
  • Rent to housing associations
  • Guaranteed rent schemes

I also talk about the law, and how you can get rent paid directly from the council to yourself. This strategy is a specialised area – it’s not for everyone. By the end of this article, you should know if this strategy is for you. You’ll also know what you need to do next, and how to apply the strategy.

If you’re still at the beginning of your property journey, you may want to read some introductory materials 1st. Don’t worry, I’ve got you covered! Check out these articles

The law

The law is very clear, landlords cannot discriminate against tenants on benefits – view this article from the BBC in 2020. This means that you can’t have a uniform ban on renting to tenants on benefits. You can’t say ‘no tenants on benefits’ in lettings adverts – previously this was very common. If a tenant wants to stay at your property, and you find out they’re on benefits, you are free to say no.

On a more practical level, certain types of properties are more likely to attract council tenants. A one bed flat in Mayfair is extremely unlikely to get an offer from a council tenant. They wouldn’t be able to afford it. However a family home in a poorer area, is far more likely to get an offer from someone on benefits. That’s the thrust of this article. If you decide to apply this strategy, then you should find properties that work well for people on benefits. In parts of the country, you can buy properties very cheaply, and get 10%+ yield from tenants on benefits.

Rent to an individual on benefits

If your tenant is an individual on benefits, then they’ll receive money from the Government, for housing costs. These are called Local Housing Authority (LHA) benefits. It used to be possible to get this payment made directly to landlords. The rules have changed, and the situation is now more complex. There are special circumstances where the LHA payments can be paid directly to you.

If the tenant’s rent is late by more than 8 weeks, the landlord can have the LHA payments paid directly for future rents.

Also, the tenant can request that LHA payments are paid directly to the landlord. Some landlords make this a condition of the tenancy.

If you can get the LHA payment paid directly to you, then it’s pretty great. It means you have a guaranteed rent, for the duration of the tenancy. The UK Government isn’t going to default on payments!

Guaranteed Rent Schemes

Across the country, councils have a myriad of guaranteed rent schemes. There’s all sorts of reasons why councils might need access to housing.

  • Maybe there are vulnerable or poor people that need somewhere to live
  • Maybe the council needs to house asylum seekers
  • Public sector organisations might need properties for employees to self isolate from Covid

The list of reasons why a council would want your property is endless. When you rent your property to the council, you’ll get a guaranteed rent from them.

Typically this rent will be lower than what you could get from a private tenant. This is definitely the case in the most desirable locations, like Central London and other city centres. However, this isn’t always true. In some poorer locations, guaranteed council rent might be higher than private rents.

Another factor to consider is that every council has different schemes with different rules. Some councils will manage your property for you (better). Other councils have strict standards that landlords must comply to.

It all depends on the local area. Consider a council in the North East of England with a poorer population. They might have a high number of tenants in need of accomodation. As such, they may need to offer better deals for landlords.

Rent to Housing Associations

Renting your property to housing associations is a very interesting proposition.

  • The housing association manages the property, and guarantees the rent for 3-5 years
  • They are meant to give the property back to you, in the same condition as they got it
  • The rent is not as high as market rents, but you receive consistency
  • Such a strategy could work well, with Ex-local properties
Advantages of strategy

As you’ve seen above, there’s some great advantages to tenants on benefits. In many cases, you get a guaranteed rent from the council. If you rent to housing associations, you might get a guaranteed rent for 5 years. As all property investors know, our biggest fear is having an empty property or a tenant that’s not paying. If you have a guaranteed rent from the local council, you can sleep easy at night.

To apply this strategy well, you’ll need to buy a property in an area with many people on benefits. Such areas tend to be poorer areas and have much lower property prices. In parts of the north east of England, you buy properties for under £50,000. This can make property investment accessible to many people.

Another advantage of this strategy is higher yields. Typically poorer areas have much cheaper property prices, and much higher rental yields. Yields of 10% and higher are not uncommon. For comparison, parts of London have rental yields of 2%!

Disadvantages of strategy

I’ve covered the advantages in the above sections, namely lower property prices and higher yields. But these benefits don’t come for free. There are a number of stresses and headaches with this strategy.

Tenants on benefits are more likely to be difficult. The tenants might be vulnerable individuals or ‘at risk’ tenants. These people are far more likely to not pay rent or damage your property. Not only will this cost money, it can cause significant stresses for the landlord. If you’ve evicted a tenant through the courts, you’ll know that it is time consuming, stressful and expensive.

It can be very difficult to vet tenants on benefits. They often don’t have references and would fail a credit check.

Another disadvantage with tenants on benefits is the additional bureaucracy. You may need to approach the local council to get the rent paid directly to you. You may have to deal with property damage or difficult tenants. These issues tend to be more common with tenants on benefits.

It’s true that rental yields are higher from this strategy, but it does come at a cost. That cost is more work, more stress and more hassle. It’s worth pointing out that HMOs and property refurbishments have a similar trade off – higher returns but more work.


Most landlords have an aversion to tenants on benefits. They fear that the tenants will trash their property and not pay rent. While there are risks with this strategy, that’s also potential benefits too. It’s possible to get rent paid directly from the council to you. It’s also possible to achieve very high yields, when you buy in poorer areas.

The key thing about this strategy, is you need to educate yourself about the rules. Once you do that, then you can do very nicely.

If you’re interested in other specialised property investment strategies, view the articles below

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