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Article > Universal Credits … Erm… Make That Arrears

Article kindly provided by Mike Clarke


With 3.4 million Private Rental Sector properties in England, Private Rental Sector Landlords and tenants are being warned to protect themselves against scams. Landlords and Lettings Agents are pushing rents ever higher with demand for rented property exceeding supply, even though the number of PRS properties has risen by a staggering 40% since 2006.
Landlords will turn away tenants or even withdraw from the social housing sector in droves by January 2012 when the Con-Dem Government’s welfare reforms really start to bite.

In 2013 payments for Local Housing Allowance, (LHA), or Housing Benefit will be under the new Universal Credit system, which aims to simplify the benefits system by combining all in-work benefits into a single payment and this will be paid to tenants rather than directly to landlords.

Landlords in the private rental and social housing sectors have been exposed to rental arrears under the current Local Housing Allowance (LHA) system because local authorities pay in arrears or pay money for the rent directly to tenants, who fail to pass on such payments to landlords. Under current proposals from the UK Government the Housing element of Universal Credit will be paid directly to claimants to encourage personal responsibility and help claimants make the transition to work. Although landlords will receive payments directly should the claimant fall into considerable arrears by persistently defaulting.

Welfare reform minister Lord Freud has announced that direct payments of the new credit system will be tested by six councils and their housing associated partners. These welfare reforms do little to guarantee any rental income for landlords and do even less to protect them from rent arrears. There are already enough tenant evictions clogging Magistrates courts citing a mountain of accumulated evidence supporting the fact that the majority of tenants facing eviction have been in receipt of housing benefit and have not passed payments on to their landlords. It is already too easy for tenants to spend housing benefit money on other things (mostly cigarettes and alcohol) rather than rent, blaming the increase in the cost of living expenses. The new welfare system reforms have chosen to ignore this fact.

Landlords have always been at risk of having their property repossessed due to tenants not passing over the housing benefit payments and the landlords have struggled to evict them in a quick fashion. The law still sees landlords as a bad money grabbing and evil stereotype from the 1970’s. It does not see things from a financial, moral or even sensible point of view. The law sees landlords as second class citizens and we are at the bottom of the pile when it comes to justice. Instead landlords are always made out to be the bad guy. Even in cases such as the murder of tenant Joanna Yeates in Bristol in January 2011, the first suspect was the tenant’s landlord Christopher Jefferies. (He was eventually cleared and another tenant from the same building, Vincent Tabak, was eventually charged with her murder). Landlords are the victims of many crimes against them including theft, fraud, vandalism and malicious damage. They are expected to suffer in silence and if they do raise any salient points to local authorities they are quickly dismissed and ignored if not forgotten.

When a landlord accepts a tenant who is claiming LHA or Housing Benefit, the first problem is the delay in obtaining payment from the local authority as new claims must be processed and all supporting evidence provided at the start of the claim. Depending on the authority this can take up to 6 weeks rather than the 14 days stated as a guideline by the Government. Delays do not help the landlord with their mortgage payments. If payments under the new system are not made directly to landlords, then many will be tempted to avoid housing tenants in receipt of social security benefits in favour of professional tenants in the Private Rental Sector (PRS), where tenants are more likely to have a regular income and a good credit history.

The UK has already seen a massive increase in people preferring to rent rather than buying property due to the lack of suitable mortgage products and high value deposits required by mortgage companies. First Time Buyers are suffering the most at the present but Buy-To-Let landlords are set to become the next victims. The result of landlords withdrawing from accepting tenants on benefits could plunge the social housing sector into meltdown. With rising unemployment local authorities would be unable to house vast numbers of people within their borough and chaos would ensue.

There is absolutely no reason why landlords should not receive direct payments for the housing they provide to those in need and there should not be any reason for them to be exposed to arrears because tenants have pocketed the rent. If the UK Government had some realistic faith in housing benefit tenants paying their rent and bills then they would already operate a similar system with council tax benefits. Surprisingly… this is not the case!

It is time for the UK Government to start listening to the concerns of landlords. Lobbying by The Residential Landlords Association, The National Landlord Association and other landlord groups is the only way currently open to landlords to get their voices heard.

Join the RLA today



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