Landlords take social option to combat rental market crunch

New scheme dangles the carrot of guaranteed income to persuade private sector offer affordable housing to struggling tenants

LANDLORDS struggling to fill rental properties as oversupply depresses prices are turning in growing numbers to a scheme using Edinburgh's private rented sector to tackle the capital's social housing crisis.

Nearly 200 landlords have signed up to the Letfirst housing scheme since it launched a year ago to help people having difficulty securing affordable housing.

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The scheme has attracted interest from landlords such as case study Alistair Hogg who have experienced lengthy void periods in a market distorted by the influx of accidental landlords when the housing market slumped two years ago.

Building on Edinburgh council's rent deposit guarantee scheme, Letfirst, run by Orchard & Shipman in conjunction with the council, is designed to prevent homelessness by offering those at risk of repossession or in unsuitable housing an affordable way into private rented properties.

More than 180 families have been housed so far, but with a growing waiting list of people looking for assisted private housing in the capital, Orchard & Shipman is looking for more landlords to sign up to the scheme, said Andrew Morrison, the company's director of policy and business development.

"It is mainly designed for people whose only barrier to renting in the private sector is financial, such as a deposit or references," he said. "There is a very long waiting list for social housing and in Edinburgh there is a greater supply of private rented housing, which also turns over more quickly."

Morrison admitted the scheme had benefited from the sluggish housing market, providing a greater supply of landlords than may otherwise have been the case. "However, the lack of available mortgages means many people who would have purchased are now renting for longer, so there is more competition," he added.

For those in need of private accommodation, the principle selling point of Letfirst – the first initiative of its kind in the UK – is that there are no upfront costs, with tenants responsible only for paying rent each month, many of whom do so with the help of housing benefits.

One tenant turned to Letfirst after having a baby daughter, in search of a more secure environment than the apartment building he was living in. With no savings and having lost his job, he had been unable to raise a deposit or pay several months' rent in advance, the typical requirements in the private sector. A friend's recommendation took him to Letfirst, through which he moved into a more family-oriented property with access to a garden.

The scheme also came to the aid of a single parent in Edinburgh who had experienced racial harassment in his previous tenancy, providing a furnished property in a location where he and his daughter could live without fear.

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Letfirst follows in the footsteps of the Private Sector Leasing (PSL) scheme. The PSL initiative, introduced in Edinburgh in 2005, uses more than 1,500 homes from the private rented market to house homeless families, with landlords leasing their properties to the council in three or five-year periods. The Letfirst scheme differs in that landlords have to commit for no more than six months, while the rent – set in line with market rates – is paid directly to the landlord by the tenant, rather than by the council, as is the case in the PSL scheme.

Landlords are guaranteed their first six months' of rent, which is paid by Orchard & Shipman in the event of the tenant failing to do so. But while landlords have benefited from letting their properties through the scheme, many are concerned about the long-term reliability of rent payments and the condition of their property. "The fact rent is guaranteed for the first six months, when problems are most likely to arise, has helped landlords feel more comfortable with it," said Morrison.

And not all rental properties are suited to Letfirst, which typically needs one and two-bed homes for individuals, single parents and small young families, preferably with good transport links. So far, however, evidence suggests the scheme has satisfied both tenants and landlords. "We already have quite a few properties that have been occupied for more than six months and most of those tenants and landlords have carried on with the scheme," said Morrison.

"It's a win-win scenario – the council is pleased because it prevents homelessness, landlords get guaranteed rent and tenants get decent private accommodation."

The prospects of attracting further landlord interest may be affected by a pick-up in the rental market, which John Blackwood, director of the Scottish Association of Landlords, claimed was showing signs of improvement. "If landlords can afford to afford to be choosy, they will be."

But he said that while landlords remained wary of taking on tenants on state benefits, schemes that help tackle housing problems were welcome. "We are supportive of any initiative that encourages landlords to help people find decent homes."