What is it?
The Government has announced new procedures for benefit payments under the universal credit system when it is rolled out from 2013 onwards. It means the end of direct payment to landlords for rent as we have known it. The intention for the new procedures will apply across the board to local authority tenants, housing association tenants and tenants in the private rented sector.
At the heart of the new procedures is the idea of promoting tenants' abilities to manage their own finances and to bring the benefit system in line with conditions that affect working people.
Download the RLA's universal credit guide, 'Bad news for landlords - The RLA's guide to universal credit for landlords'
Why should I care?
The key change for landlords is the proposal that there will no longer be any 'back stop', and landlords will no longer be able to insist on direct payments if the tenant is eight weeks or more in arrears.
Instead, 90 per cent of payments will be made directly to tenants and it will be up to them to pay their rents or not - meaning an increased possibility of some tenants falling into arrears.
Furthermore, tenants will no longer have the right to have their housing benefit paid directly to their landlords, meaning they will be denied a freedom of choice in how they wish to pay their rent.
The RLA's position
The RLA has a number of serious concerns about these proposals:
- They contain no 'back stop' provision under which a landlord can demand payment direct.
- There is a lack of clarity/individual discretion in operating these rules because "guidance" replaces regulations.
- There is no means of redress for landlords if things go wrong, and there are no rights of appeal.
- There is no proposal that the guidance should reflect the landlord's interests to make sure that rent is paid and that a roof is kept over the head of the claimant.
- The whole concept of trying to improve tenant's responsibility comes at the cost of much greater risk to landlords with strong likelihood of significantly higher arrears.
- There is much less likelihood of landlords being willing to take on benefit claimants. This could even translate into less likelihood of willingness to take on claimants who are in work especially part time work because the same rules will apply to them.
- There is no provision for first payment of benefit direct to the landlord.
- The RLA has argued with the DWP that there should be a right for landlords to be paid direct payments once there are six weeks arrears. Furthermore, the whole system of vulnerability should be assessed according to the tenant's interest of keeping a roof over their head and the landlord's interest to receive the money, as well as the public interest of making sure that the benefit is used for its intended purpose.
Richard Jones, the RLA's policy director, said, "We strongly believe that the Government's whole approach is flawed and although the objective of helping tenants manage their financial affairs is in isolation a laudable one, the Government has wholly failed to appreciate the consequences of this.
"There will be a much higher level of arrears, an unwillingness of landlords to house benefit claimants (at a time when there is huge pressure on social housing), increased unwillingness by banks to lend for this kind of property (or increased interest rate to reflect the risk), much higher levels of evictions and much greater homelessness."
What do landlords think?
Over 1,000 landlords responded to a universal credit survey undertaken by the RLA and its policy partners, the Scottish Association of Landlords, in October/November 2012.
The survey revealed:
- 65.2 per cent of respondents do not support the Government's plans for universal credit.
- 62.3 per cent of respondents said they would not lower rents in return for direct payments.
- 91.6% said the introduction of universal credit would make them less likely to rent to those on benefits.
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