Why Westminster Benefits from Tenant..

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By:  Madalena Penny

Current government housing & benefit reform is not lacking in irony, or so it seems.  As 102 MP’s have opted to rent out their state paid ‘2nd homes’ amid the falling house prices and a year of rent rises, the numbers of these unlikely landlords are swiftly gaining momentum as the new kids on the (Westminster) block.

Landlord breeds consisting of the seasoned to the accidental variety have come under scathing attack for the increase in rents.  An effect of government reform of social sector housing and national mortgage constraints has stabilised the private rented sector making it a popular choice and in most cases the only form of tenure.

However, the very same government which seeks to reduce the £21bn housing benefit bill by offering incentives to landlords to reduce LHA rents has inadvertently created a rental revenue stream for their own members.

The ‘Westminster Loophole’ allows MP’s to rent out their second home paid for by their allotted expenses to private tenants, while they themselves rent a third home at a lesser monthly rate than the mortgage repayments on their second home.

This new breed of landlord hails from the result of tenant-demand, rent rises and parliamentary expenses.  £3.1mn has been claimed by MP’s since May this year for expenses and an allowance of £24,000 for a second home.  MP’s can claim a maximum allowance of £1,450 per month for rent, which is still considerably less than the maximum housing benefit claim of low-income households.

Although MP’s can now only claim for rented accommodation, those which have been re-elected can still continue to claim for mortgages on their parliamentary second home until August 2012.  Any equity gained on the mortgaged property has to be paid back to the treasury regardless if the house is or is not sold, as MP’s cannot under strict regulation profit by an increase of property value on a parliamentary second home.  However if they stop claiming for a mortgage and claim for rented accommodation, the rule does not apply.

With housing benefit due to be slashed in order to reduce the massive national bill, the parliamentary landlords have come under attack by the press.