Finance News

Government Announces Pilot Areas for Universal Credit

Em Morley - December 18, 2012

The areas in which direct payment to social tenants will be piloted, ahead of the introduction of Universal Credit next year, has been announced by the Department for Work and Pensions (DWP).

The proposal indicates that tenants, rather than landlords, will receive rent directly. This has raised concern amongst social landlords, who worry there will be a repeat of what has been happening in the private rental sector, in which arrears have increased since the change of rules in 2008.

Government Announces Pilot Areas for Universal Credit

Government Announces Pilot Areas for Universal Credit

Private tenants on housing benefit now automatically receive their Local Housing Allowance (LHA), and their landlords cannot act on missed rent until the tenant has built up at least two months of arrears.

To observe whether similar problems will arise, year-long pilot experiments will be conducted in Oxford, Shropshire, Southwark, Tofraen in Wales, and Wakefield.

The Government, however, seems committed to the idea that all tenants should receive their rent money, rather than it being paid to their landlord. This is despite 18 high-profile groups, including homelessness charities, campaigning to give the choice to tenants as to who receives rent.

Welfare reform minister, Lord David Freud, says: “Direct monthly benefits payments are a key part of Universal Credit, allowing claimants to prepare for the financial responsibilities they will face when in work and to encourage them to move away from often costly weekly and fortnightly budgeting.”1

In addition, a tenant eviction business has reported a 30% rise in cases involving LHA tenants.

Lee Daniels, of Helpland, explains: “Over the past four months, we have seen an increase of over 30% in instructions on serving notices on LHA tenants falling into rent arrears. With housing benefit caps coming in, we expect the number to increase rapidly over the next 12 months.

“Councils will only pay the housing benefit direct to the landlord if there are eight weeks of rental arrears. This is very bad news for landlords who rely on rent to cover their mortgages.

“We have lobbied Parliament to change the system, to allow housing benefit to be paid directly to the landlord.

“This would be a massive incentive for private landlords to let their properties to LHA tenants and would ease the pressure currently on local authorities, who are facing a negative response from private landlords.”1