When 500 landlords were asked about their concerns for 2013, 96% told the National Landlords Association they feared problems with the introduction of Universal Credit.
Iain Duncan Smith’s attempt to limit the social security bill began in parts of Greater Manchester and Cheshire from April. It will be rolled out across the rest of the country between October 2013 and October 2017.
Under the new system, most benefits, including Local Housing Allowance, will be rolled into one monthly payment. Direct payments to landlords will cease, with many tenants instead receiving benefits intended to cover their rent payments.
For the panel of landlords responding to the NLA’s quarterly survey, their concerns that this money might not be passed on were linked to the leading priorities they identified: arrears avoidance (64%) and minimising voids (56%).
David Salusbury, the chairman of the NLA, said: “Although we support the principle of encouraging people to take responsibility for their finances, landlords have to deal with the problems which arise when this doesn’t happen in practice.”
Direct payments to landlords had provided a reassurance that they feared was being removed. “If tenants fail to meet their rental commitments, we are likely to see landlords withdrawing from the Local Housing Allowance market.”
This week, the government announced that a mechanism to automatically recover rent arrears will be introduced alongside direct payment of housing benefit to tenants. It was responding to concerns raised in a report published in April by the House of Commons communities and local government select committee.
Inside Housing magazine reported that landlords will be able to contact the Department of Work and Pensions to request payment is made to them “once a prescribed level of rent arrears is reached”. The department will start to recover the arrears by docking Universal Credit payments. Six pilot schemes, now being extended from a year to 18 months, will allow the government to decide what level of arrears should trigger direct payments to landlords.
The government had already announced that “vulnerable” tenants can continue to have their housing benefits paid to landlords.
“We are not, however, seeking to define “vulnerability” for the purposes of administering Universal Credit. Any attempt to do so would risk some people with complex needs falling outside of the prescribed definitions and then not receiving help that they may genuinely need. As a result full guidance, including financial and vulnerability factors that would trigger a conversation with a claimant about their budgeting needs (including whether they need an alternative payment), will be made available to support staff handling these cases.” (This file is a pdf).
One of the arguments the government makes for the big changes in social security is that “the payment of benefits should mirror the world of work, as far as possible. The single payment is an attempt to end the so-called dependency culture by allowing claimants living in social housing to make the same sorts of decisions as those in work. “This is already the case in the private rented sector, where the vast majority of those in the private rented sector pay their own rent.”
What landlords can do when tenants in the private rented sector cannot pay their own rent and fall into arrears is the subject of my next blogpost.