I don't know the first thing about housing benefit. Please help.

GolfGirl

I'll try to be concise.

My husband and I recently bought a second property – a one-bedroom flat – because we had a pension lump sum to invest. We paid 50% cash; 50% mortgage from equity in our own home.

Although we could rent it to tenants at £800–900 per month, instead we are letting our daughter live in it, paying us rent of £400/month. This is because she cannot afford to live in anything but a horrible studio in the area where she works. It's hopefully not a long-term arrangement – just for a year or two until her salary increases, at which point she'll move out or start paying us the going rate. (That's the plan anyway!)

Because of the low rent we are charging her, it's costing us around £250/month, in addition to the rent she pays us, to cover the mortgage and the service charge.

I think that, in financial terms, she may well be eligible for housing benefit. But will it be a problem that she is renting from her parents rather than a private landlord?

Before she moved in last week, she had been living in a horrible, run-down studio, and at my suggestion she filled in a form for housing benefit. She's had no reply as yet.

Does she need to reapply now she's moved into our flat? (It's in the same council area.)

Some of the questions on the form seemed a bit odd.

"Could you afford the rent when you first moved in?"

"Could your family afford the rent when you first moved in?"

I've drawn up a letter confirming that we are her landlords and the price we are charging her, though of course there is no formal tenancy agreement. Will this be adequate?

If anyone with knowledge in this area could help, I'd be very grateful.

Horseunderwater

The problem that you will both faced is that it will be seen as a contrived tenancy. a) because it is a lower rent than flats of a similar size
b) You're her parents & have not put a proper tenancy agreement in place. Are you prepared to evict her if she gets into rent arrears for example.
Others will be along who will know more than me.

Anchoress

As far as I know they'll only pay HB if she's renting for very near the market value of the flat. Also if she's under 35 she'll only get single room in a shared house rate anyway, but please wait for further advice from someone who knows more about it.

In the meantime, why don't you rent the flat out to tenants at market value, pay your mortgage/service charges and give her the balance c£150 - 200pm according to your figures, so she can rent a less grotty flat.

Personally, I can't see the need for claiming housing benefits just so your daughter can live more upmarket, it's not what housing benefit is for.

GolfGirl

Yes, I've heard of contrived tenancies but this is surely the opposite? We're deliberately charging her way under the market rate.

Anchoress, I don't think the issue is that we want our daughter to live "more upmarket" at the expense of the taxpayer. It's a small one-bed flat in a very ordinary block (some of which are actually rented privately by the council for single people), not a luxury penthouse.

Yes, we could do as you say (we've already thought of it) with regard to giving our daughter £150/month but we can't really afford it. Perhaps it's immoral of me even to think of my daughter applying for housing benefit so we could both benefit a little. I have to admit that I've struggled slightly with the whole concept. But you say that's not what housing benefit is for - what is it for exactly? Surely it's for people who work hard, with long hours, but who find it very difficult to afford the rent on a small, basic, habitable home.

Anchoress

GolfGirl wrote: »

Yes, I've heard of contrived tenancies but this is surely the opposite? We're deliberately charging her way under the market rate.

It's exactly what a contrived tenancy is. You charging less than the market rate so your daughter needs housing benefit which in turn pays your mortgage.


Anchoress, I don't think the issue is that we want our daughter to live "more upmarket" at the expense of the taxpayer. It's a small one-bed flat in a very ordinary block (some of which are actually rented privately by the council for single people), not a luxury penthouse.

Ordinary block or not it's more upmarket than what she was living in.

Yes, we could do as you say (we've already thought of it) with regard to giving our daughter £150/month but we can't really afford it. Perhaps it's immoral of me even to think of my daughter applying for housing benefit so we could both benefit a little. I have to admit that I've struggled slightly with the whole concept. But you say that's not what housing benefit is for - what is it for exactly? Surely it's for people who work hard, with long hours, but who find it very difficult to afford the rent on a small, basic, habitable home.

Surely though you won't be any worse off unless of course housing benefit is needed to make the situation viable - which brings us back to a contrived tenancy.

I don't think you've got any chance of getting housing benefit under these circumstances.

pmlindyloo

A contrived tenancy is one which has been set up to take advantage of the benefit system.

Some councils refuse point blank to give housing benefit to someone who rents from a close relative.

Some councils do allow it but it must be on a commercial basis. A lower rent than the perceived market rent in itself may not be a stumbling block but may be seen as a contributing factor.

What the council is looking for is a properly set up tenancy agreement (all the better if done through a letting agency) and your fulfilling all the requirements of a landlord - evicting for late payment of rent, having gas certificate etc etc - google for the requirements.

No one can tell you if your daughter would be allowed HB - only your local council could tell you that.

However, if your daughter is under 35 then she would only be entitled to the shared house rate of local housing allowance which is quite low- look it up on your local council website. As she is working she may not even be entitled to HB . Use this calculator to find out - https://www.turn2us.org.uk

Realistically your daughter is not going to get £400 a month HB.

In any case I am not sure how your daughter getting HB is going to change your financial situation or aren't you worried about that?

GolfGirl

It never crossed our minds that she would get £400/month HB! :-0

She has filled in an estimate form and it does indicate she is eligible.

Funny about the contrived tenancy thing. We actually thought we were being honest and decent by charging her half rent and being up front about it!

If she got some HB, she could pay us a little more rent. But I do see I've got things a little topsy-turvy here. I know nothing of the ins and outs of this sort of thing. I've never had anything to do with benefits except Child Benefit. It's all a bit of a foreign language.

Thanks for your advice, pmlindyloo.

NYM

GolfGirl wrote: »

Y

....... Perhaps it's immoral of me even to think of my daughter applying for housing benefit so we could both benefit a little......

How would you benefit ? Are you perhaps thinking that your daughter would continue to pay £400 p/m and the government funded HB would be used to 'top it up' and cover your mortgage payments/service charges ?

GolfGirl

If she got, say, £75/month HB, she could use that to top up the rent she pays to us.

I've got a feeling that won't make me very popular! However, she would have been eligible for HB in her previous hovel - where she was paying £200 more a month than she is paying us.

PasturesNew

No matter how you see it .... that's the way it works.

Under 35 = single room rate.
Contrived tenancy/used to own it/family own it = probably don't get anything anyway.

Why not rent it out at the £800-900/month and give her some extra money from that to go towards her rent?

GolfGirl

Yep, fair enough. I see the light! And thanks for the advice. It was worth a thought. Made sense to me, anyway! We'll just suck it up and wait for her to meet a rich man. :-)