Tenant News

Could Deposit-Free Tenancies Help with Rent Arrears Caused by Universal Credit?

Jess Goodridge - November 21, 2018

Ajay Jagota, anti-deposit campaigner and managing director and founder of zero deposit rent provider Dlighted, is urging buy-to-let landlords and letting agents to consider the benefits of deposit-free renting.

With recent issues of increasing rent arrears, thought largely to be caused by the new Universal Credit system, this could be a change that will help many looking for rented accommodation.

Recently, we reported on the BBC Panorama research into the problems that tenants claiming Universal Credit are facing. The figures show that such tenants have more than double the rent arrears of those who are still receiving benefits through the old system.

A survey looking at Universal Credit claimants shows that in every local authority area in which the switch has been made, these claimants owe their landlords an average of £662.56. This is in comparison to the £262.50 owed by those still receiving support through Housing Benefit.

On top of that, the results suggest that there has been a 55% increase in evictions, within the single year of Universal Credit being rolled out.

A report from the Citizen’s Advice Bureau has also revealed an increase in the number of tenants seeking advice about rent arrears. This has risen by 47% since Universal Credit was first introduced.

The Government is aiming to have almost seven million people on the new system by the end of 2023. However, many have seen delays to the payments, leading to the new Work and Pensions Secretary Amber Rudd admitting that it “can be better”.

Despite Rudd expressing an acknowledgment that the new system needs to be adjusted, Ajay Jagota is still concerned.

Jagota has said: “There’s a lot to be said for Universal Credit’s intention of making our benefits system simple and fairer, but there’s no getting away from the fact that its implementation is yet another thing that landlords and letting agents alike have to come to terms with.

“The deposit protection industry tells us that old-fashioned tenancy deposits are the only way to keep yourself safe from rent arrears – but in reality they only cover you for a month of rent arrears. What happens if you’re owed two months rent? Or three months?

“All the evidence suggests that there is a strong link between Universal Credit and rent arrears, and if deposits won’t protect you if your income is hit when Universal Credit arrives in your area.

“Deposit free renting is something which could be a real benefit to landlords and letting agents who find themselves faced with rocketing arrears following the rollout of Universal Credit in their area, offering them hundreds of thousands of pounds of protection against unpaid rent, property damage and legal fees, while also making it easier and quicker to find new tenants if eviction becomes unavoidable.”