Mortgage to rent and housing benefit

Where a person makes a claim for Housing Benefit for a property that s/he has previously owned within the last five years, the regulations require her/him to demonstrate that the only way s/he could stay in her/his home was to give up ownership.[1]

On receipt of a mortgage to rent application, the mortgage to rent team will contact the relevant local authority to confirm if they will regard the regulation as satisfied if the transfer of ownership takes place. This is not a guarantee that full Housing Benefit will be paid; it is simply confirmation that the claimant would not be ineligible for Housing Benefit on this basis. A calculation would still have to be carried out based on the claimant's income and circumstances. For more information, please see the section on Housing Benefit.

The Housing Benefit guidance manual states that a claimant may be treated as satisfying the regulations if a housing association agrees to take over ownership of the property and take the ex-owner as the tenant, or if ownership of the home is transferred through a mortgage rescue scheme. The tenant must still demonstrate that there was no way s/he could reasonably retain ownership and that other means were explored in addition to the change of ownership. The claimant may be required to provide written evidence such as letters from the lender about the action that would have been taken in relation to mortgage arrears.[2]

In addition, the DWP has issued guidance for Housing Benefit staff on how to handle claims from people who have sold their homes through sale and rent back schemes. HB/CTB Circular A5/2009 can be downloaded here.