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20 March 2015

Iain Duncan Smith’s universal credit: bad for landlords, worse for tenants

Iain Duncan Smith's universal credit is bad news for tenants and landlords alike – and I should know.

By Alan Ward

“Very little progress has been achieved on the front line.”

That was the damning conclusion of Margaret Hodge, Chair of the Public Accounts Committee following the committee’s most recent report on the roll out of the Universal Credit Programme.  It is a conclusion that sadly private sector landlords will concur with.

Over 25% of tenants in the private recent sector are in receipt of housing benefit and as an organisation, the Residential Landlords Association supports the principles behind Universal Credit. For too many years the benefits system has become a complex minefield to navigate and so simplification is an aim we can and should all be working to.

The question however is whether Universal Credit, as it is currently designed, achieves this aim. Based on results from an RLA survey of its members, the answer is, not yet.

Of those private sector landlords who had tenants on Universal Credit, 63% said that those same tenants were in arrears on their rent. Of this group of landlords, 85% had contacted the Department for Work and Pensions to have the housing element of Universal Credit paid directly to them.

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Over 57% of this group however said that it had taken the Department over 5 weeks to respond to the request; with 65% noting that they found the process either “tricky” or “very difficult.”

At the time that the Welfare Reform Act was passing through Parliament, Ministers persistently refused to allow tenants in receipt of Universal Credit to opt to have the housing element paid directly to their landlord. Such a policy, they argued, was designed to help tenants learn how to budget finances in preparation for the world of work.   

However laudable the intentions were, as the RLA’s survey shows, along with the experiences of a number of social housing providers, Universal Credit is leading to increases in rent arrears. This is particularly difficult for the almost 90% of private sector landlords in the country who are individuals renting out just one or two properties for whom having to face a prolonged period of rent arrears can be crippling.

To make matters worse, even when a tenant reaches 8 weeks of arrears, the Department for Work and Pensions still does not provide any assurances that benefit payments will be made direct to the landlord, leaving open the prospect of arrears building for an indefinite period. 

In short, the current system is needlessly putting tenancies in jeopardy.

Faced with such compelling problems, there can be only one responsible choice, namely allowing tenants in receipt of Universal Credit to have payments of the housing element paid directly to the landlord, a policy called for within the RLA’s own manifesto for the private rented sector.

Apart from it beggaring belief that a Government supposedly committed to enabling individuals to make their own decisions, it is a policy like no other in the rental market that enjoys support across the board.  

As the Money Advice Trust has previously told the RLA, such a policy “would enable many tenants to avoid housing benefit arrears and thus tackle their debts and manage their money wisely.”

Landlords want it because it will provide certainty of income and make them more willing to rent to those in receipt of benefits.  

And more recently still, a recent compelling report published jointly by Women’s Aid and the Trades Union Congress on the problems of women who face financial bullying at the hands of their partners argued that direct payment of housing benefits to landlord could play a part in addressing such a concerning problem.

It’s a policy that the Government in Northern Ireland is introducing and if it is good enough for tenants and landlords there it should surely be good enough for them across the rest of the country as well.

There is more that needs to be done to support the majority of private sector tenants who are under the age of 35.

According to the English Housing Survey, almost half of all households aged between 25 and 34 were renting in the private rented sector. Yet despite this, Ministers have presided over a welfare system that means benefit claimants in this age group can claim only for a room in a shared house, whilst simultaneously allowing local authorities to introduce planning rules that are restrict the growth of such housing.

It is time that the next Government got a grip of these contradictory policies and commit to a full review of whether there is enough shared housing to meet the increased demand that they themselves have created.

If it does not, the consequences for those in need of somewhere to live could be very serious as landlords conclude that renting to those on benefits is simply too risky to continue.

A DWP spokesman said:

 Universal Credit is paid to claimants directly each month giving them responsibility for managing all of their money, just as other people have to who are already in paid employment.
This measure will help them to develop simple budgeting skills in preparation for moving into the world of work themselves. 
Our research has shown that 78 per cent of claimants are confident that they can manage their own finances.

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