Renting accommodation to relatives

This page has technical information about the possibilities and limitations when renting to a relative.
Parents may be able to help sons or daughters set up their own home. This is the usual scenario, but these rules could apply to any relative who wants to enter into an arrangement like this.

In simple terms it is difficult to rent a room in the parental home to a member of the family and for them to claim Housing Benefit to pay the rent. However, it is possible for parents to buy another, different self-contained property and rent this to a son or daughter or other relative.

Commercial Arrangements

Where a person is renting a property they are usually entitled to claim Housing Benefit if they have a commercial arrangement and the Local Authority is satisfied that the arrangement was not set up to take advantage of the Housing Benefit scheme.

This would mean that the agreement would need to be enforceable in law in order to show that it was a commercial agreement. You may find that some authorities want more information or evidence of the agreement from you before they are willing to accept that the tenancy is a commercial one particularly where you are letting to relatives. Please note it is for the claimant/landlord to prove the agreement is a commercial one and for the Local Authority to show that the tenancy is set up to abuse the system.

Where a tenant is living in the same property as a close relative

There are additional rules where a parent lets a room to a son or daughter i.e. you are occupying the same property and renting to a close relative.

The question that the Local Authority has to consider is whether the landlord resides in the same dwelling as the claimant (close relative) Reg 7(1)(b). If they think they do then Housing Benefit is not payable. Under Housing Benefit rules resides with means sharing kitchens or other communal rooms.

This means that if you could show that you are renting a property which gives exclusive use of a kitchen and you do not share communal rooms, other than bathroom or lavatory or passageways you may be able to claim Housing Benefit.Close relative is defined as parent, parent-in-law, son, son-in-law, daughter, daughter-in-law, step-parent, step-son, step-daughter, brother, sister or the spouse or unmarried partner of any of these people (Reg 2 HB Regs 1987).

Where a landlord rents another property to their close relative

There is no legal rule which prevents close relatives entering into a legally binding agreement to pay rent and claim Housing Benefit where they do not occupy the same dwelling. The authority would again be looking at whether it is a commercial agreement and whether it was set up to take advantage of the Housing Benefit system.

Please note that Housing Benefit is not payable in the following circumstances:

• where a person rents their accommodation from a trust of which they are a trustee or a beneficiary (Reg 7(e))
• where a person rents their accommodation from a company of which they are a director or employee (Reg 7(e))
• where a person rents accommodation from a trust of which his/her child or partner's child is a beneficiary (Reg 7(f))
• where the person who rents the accommodation was previously a non-dependent of someone who still resides in the property. If you can show that the tenancy was not set up to abuse the system you should still be able to get Housing Benefit (Reg 7(g)).

Levels of rent

When considering the matter of whether the tenancy was set up to abuse the Housing Benefit system the local authority should look at the individual facts surrounding the particular case. For example they may look at whether the rent is very high compared to other properties in the area or whether the property is too large for the occupant/s. The fact that landlord and tenant knew that the tenant could not pay the rent without claiming Housing Benefit when the tenancy was set up would not be sufficient reason to refuse Housing Benefit on the grounds of abuse of the system.

This was decided in R v. Solihull Metropolitan Borough Council ex p. Simpson. Some Local Authorities tell people they cannot let to relatives in any circumstances and claim Housing Benefit. This may be challenged as it is only when they occupy the same dwelling that it is specifically excluded.All private lettings where Housing Benefit is claimed, including those between close relatives at separate addresses, will be subject to the caps imposed on the relevant accommodation type by Local Housing Allowance (LHA) (See also LHA Factsheet). This figure will set the maximum level of Housing Benefit payable on the dwelling.

If the rent payable exceeds LHA the claimant can ask for additional discretionary payments under exceptional hardship. These payments are from a cash limited budget and do allow the council to top up if the claimant can show they are in severe difficulty. People have no right to these and they can be withdrawn at any time.