Buy house, install friend, housing benefit?

[anythinginapinch]

If I bought a house with cash, and let a friend - acquaintance really - move in with her two small DC, would she be able to claim housing benefit for rent?

I know nothing thankfully about UC or housing benefit.

I would imagine, if she has a tenancy agreement with you and it's all above board, then yes.

If it's free or cash in hand, probably not.

If you had a proper rental agreement then yes she could claim.

The flip side is that you would have to declare the rental income and pay tax on it.

to claim housing benefit you either need to be over 67 or living in assisted living place.

your friend would need to claim housing element if UC if they don’t fit the criteria for housing benefit

the housing element part of UC will only usually cover a set amount - you can google the amount for your area. In my area a two bed is £723 and with 2 beds private rentals must start at £995 so the tenant needs to put in the extra rent. Even housing associations are charging £775 for a 2 bed. It’s only council that seem to be under the limit

If you are new to renting out property I would suggest you start with tenants who don’t have children. If something goes wrong and you need to evict, which is a hard decision to make, it will be a lot harder if children are involved.

Do you know anything about housing or being a landlord? It's an actual job, not a hobby. You could get yourself into a terrible situation if you mess it up, especially renting to an acquaintance with children.

The housing benefit amounts are crazily low. Well it's more that rents have gone up crazily and it hasn't. Where I am it's about £715 for a two bed but the cheapest two beds that exist are £850. I don't understand how anyone who was actually relying on HB could afford to live - well presumably they can't and are stuck in poverty.

Also, near in mind that when you come to sell the house, you will be liable for capital gains tax as it was rented out

As a rented property you will need the various additional checks in place so crunch the numbers - adds up. You also pay income tax on the rent.

Check the local authority housing allowance for your area to see what they even pay, you might be shocked how low

You can't rent to family who claim the housing element of UC but you can to friends.

You do need to print out and both sign a legitimate tenancy agreement though.

If you fall out/she doesn't pay you can't just evict her without going through the correct legal process.

I would use an agency to make sure it's all above board

As long as the rules around it all were followed then yes.

That would of course include not claiming the rent is higher than it actually is, or giving her back any portion of the hb she would get.

As a pp said, it would be the housing costs element of Universal Credit, not housing benefit. You would need to be charging the market rate and there will likely be a shortfall between what UC will pay and the rent you will charge. Would that be a problem for her?

As a landlord I can say yes, of course you can do this, but you must:

Have a tenancy agreement of the standard type
Have a deposit placed in a deposit protection scheme
Have the relevant safety procedures carried out, EICR, Gas, Pat Testing (of appliances you own) correctly fitted Smoke & CO detectors.
Make sure any included furniture is fire safe.
You need to do self assessment for the income and pay any tax due
You need to allow for expenses such as boiler repairs and ongoing maintenance (unless the lease is maintaining, which is uncommon in short tenancies)
You need to get landlords insurance.

You are then good to go. But be cautious, getting dud Tennant out is a nightmare if they decide to dig their heels in, for which reason I would not let to a friend.

And to be slightly removed so as not to damage the friendship

I think it sounds lovely in practice but is full of pitfalls in reality. Can you afford to be a landlord? Boiler goes for example do you have the reserves? You will pay income tax on the rent minus some expenses. Will the taxed income cover the mortgage? CGT when you sell. I know someone who inherited his mums place and rented it out to a friend who was a single parent. She lived locally but he was a few hundred miles away. She really let it go, garden was a state, started jobs inside like stripped off old lady wallpaper but didn’t decorate. It took a lot to get it ready for new tenants.