A benefits question: mum is downsizing, can she rent out the house to my sister who is in a council house?

[LylaLee]

Mum wants to move into a retirement sheltered accommodation. She has a 3 bed at the moment.

My sister lives in a 3 bed council house with 3 children and receives housing benefit.

Can mum rent the house to my sister and have housing benefit pay the amount they are paying sister right now? It would be cheaper than current rentals in the area, but the advantage to mum would be that she knows they won't trash the place.

Sister would be in a nicer area than where she currently is.

The council house is in a bad area but she can't afford to move somewhere nicer on housing benefit.

I could be wrong but I'm sure I have read that you can receive housing benefit if you rent to a family member if it's a formal agreement with a legal tenancy.

They would need a proper contract etc. and your mum would need to comply with all the normal rules for landlords.

Would your sister give up her council tenancy? What would happen if your mum's circumstances change and the house needed to be sold?

commonslibrary.parliament.uk/benefit-support-for-housing-costs-when-renting-from-relatives/

It's difficult to say. The housing benefit department could decide that the rent is not on a commercial basis and refuse to pay housing benefit. You wouldn't find this out until after your sister had moved, at which point she'd have given up her council house, so if your mum needed the rent money so had to ask your sister to move out, your sister could end up needing to rent in the private sector (which would be more expensive and insecure).

If your sister would move council areas and is under 66, moving would mean switching over to UC. Same risk still applies that UC would refuse to pay housing costs.

Assume her sheltered accommodation would be rented accommodation?

I would advise you speak to the charity shelter regarding your question because housing benefit can be paid to a relative but not in every circumstance. But then what happens if your Mother needs care because her house may need to be sold for fees and your sister would have given up her council tenancy but would probably not have the right to stay in the house unless she was over 60. I worked in housing but am retired and it was a long time ago as not my last job so it’s good to discuss here but you need absolutes and Shelter are a decent charity with up to date info.

No I don't think you can receive the housing element of UC or housing benefit if you're on the old system. If she's not entitled to that anyway then I don't think it would matter.

Your sister would be crazy to give up council accommodation. She would likely never get another. If she doesn't like the area tell her to get on all the exchange lists/websites/FB groups.

I've just swapped from a 2 bed flat to a 4 bedroom house!

Sorry just seen that she is on housing benefit. I think she should look into that first but I don't think she would be able to claim it. I think it's because she could end up inheriting it in future so housing benefit won't pay her rent and that's the reason.

Risky to give up a council tenancy then to find that housing benefit would not be paid due to it possibly being conceived as a contrived tenancy. She would need to be very confident it is going to be paid.

What will happen to your sister when your Mum's house has to get sold to pay for her care needs?

Yes this is something to consider. I don't know how old your mum is and whether it is reasonable to think she may need to pay for care in years to come, but a house she doesn't live in is clearly an asset and if she did need care could need to be sold to pay for care which would leave your sister in a precarious position. Obviously not all older people need care.

Yes it can be done but whether it is wise is a different matter. What happens to your sister if / when the house has to be sold?

Your Mum would need to prove that she would rent the house out to someone else if not your sister and generally that would be because it has been rented out in the past. The fact that she is not charging the market rent would be a real red flag. I have seen a few cases like this and in most of them housing benefit was not paid.

Bad area or not I'd not give up a council house. Your mum may have to sell her house one day to pay for care fees and your sister would be homeless. Also horrible thought but what about when your mum dies and your sister can't afford to buy you out of the house if you both inherited equally?

If you have a proper tenancy I believe she will get the housing element. But if not being charged market rates maybe not

Like others have said, your sister would be out of her mind to give up a council tenancy. It might not be a great location but I’d advise her to look for a house swap rather than give up secure accommodation. If your mums house has to be sold in the future she will never have that security again.

There’s so many potential financial drawbacks to this ,you would really need to get expert advice….but ultimately this is an asset of your mums, so the issue around paying for future care costs is going to be the main issue as people have already pointed out.

The rent would also then be classed as your mums income and she would possibly have to pay for her own care. Its not worth doing in the long run for either party

I think that your mum needs legal advice on this. Your sister should contact Shelter as well, to discuss her own interests. It could all get very messy.

Bear in mind that rules might be different in the devolved countries also (you don’t mention where they live).

My mum rents a house to my sister who pays with it with housing benefit. But, my mum rented the house to someone else first and I'm sure that was key to it being allowed. (This started a good 10 plus years ago so could be different now)

Thanks for all the advice. A lot to think about. We are in England.

If a proper contract is in place, yes.

No she wouldn't.

What happens if after your sister has given up her council tenancy, your mum's house needs to be sold?

I think its the case that some local authority's will refuse to pay housing benefit if the property is owned by a relative. I submit out housing benefit forms on a regular basis & one of the questions asked is you are related to the landlord. However, housing benefit forms are different dependant on the local authority. I would tread carefully & query anonymously with your local authority.

She would at the council I worked for. This was the basis that a number of housing benefit claims I saw were turned down. The only successful claim like this I saw was where the property had previously been rented to an unrelated tenant.

It's a tricky situation fraught with possible issues, not least the HB may not agree to pay the rent to a relative - could check with the relevant local authority and get a local solicitor to give clarity. Also surrendering a council house is a bad idea for your sister as she's got nothing to fall back on if anything goes wrong.