Private sector landlords are pressing the Government to re-think its controversial reform of housing benefit payments.

For the new-style Local Housing Allowance – paid direct to claimants instead of landlords - is driving low-income tenants further into debt. And rising rent arrears are forcing landlords to withdraw their property from the claimant market.

Because the rent allowance is getting spent on other things … before it reaches the landlord.

Now, a new joint research project by the leading Residential Landlords Association - whose members own over 100,000 private rented properties throughout the UK - and the British Property Federation has highlighted confusion and contradictory information from Government departments.

And the two organizations are seeking a meeting with Ministers over fears of the “negative impact” on affordable housing in the existing ‘Pathfinder’ areas of Blackpool, Brighton and Hove, Conwy, Coventry, Edinburgh, Leeds, Lewisham, North East Lincolnshire and Teignbridge.

The new Local Housing Allowance - part of the ‘Pathfinder’ pilots which were phased in for evaluation from November 2003 - is due to replace the old housing benefit payments by 2008.

 But, say the landlords, the Government should note the “strong warning signs” that things are going wrong.

Last summer the Housing Benefit minister said: “The pilots of the new Local Housing Allowance are producing very encouraging results…. landlords’ fears about the new scheme have been allayed’.

But, on the same day, in the first months of the ‘Pathfinder’ pilots, a Department for Work and Pensions report announced that:

• 77 per cent of landlords with claimant tenants were reporting arrears.
• one landlord in 10 had decided to quit the housing benefit sector
• nearly a quarter of landlords had decided not to renew tenancies to housing benefit claimants - largely because of problems with the new system - so they had to look for somewhere else to live.
• 28 per cent had not let any new tenancies to benefit claimants because of the new allowance.
• and 56 per cent said they were less likely, in future, because the rent allowance was being spent on other things.

The case for reforming housing benefit for private tenants was originally driven by a view that payments were unjustifiably rising and needed to be brought under control. Reform was intended to safeguard against fraud and ensure that people on low incomes could afford a decent home, had more choice and more personal responsibility for paying the rent.

So the new flat-rate rent allowances, in the trial areas, are now paid direct to the tenants rather than the landlords - except in some special financially vulnerable cases. 

“But the Local Housing Allowance is failing to live up to Government objectives,” says Mark Butterworth, a director of the Residential Landlords Association and the British Property Federation’s private rented sector representative. “Yet, despite concerns – including from the housing and homeless organisation Shelter - the Government is rushing ahead with a second wave of ‘Pathfinder’ pilots.

“Landlords just can’t afford to take the financial loss of letting to housing allowance tenants who keep the rent to spend on other things. Responsible tenants should be allowed to sign over their rent allowance direct to the landlord – that might be all it needs. Otherwise there’s a risk of landlords withdrawing their properties from that market altogether.

“In that event, low-income benefit claimants would be deprived of an essential source of decent housing … and how can that be fair to an already vulnerable section of society?”