Landlord Information Network (LIN) welcomes direct payment pilots but remains concerned over the lack of tenant choice
Welfare reform minister Lord Freud has announced that tenants would be paid the housing element of the Universal Credit directly from 2013 with the exception of pensioners and vulnerable tenants who will continue to see their housing costs paid straight to their landlord.
The Welfare Reform Bill contains a clause which would allow the housing element of Universal Credit to be paid direct to tenants. This clause had raised fears that the change would lead to increasing arrears, financial hardship and evictions and increase the cost to landlords of actually collecting the rent.
The demonstration projects will be launched in spring 2012. They will explore:
• ’Switch back mechanisms’, where payment reverts back to the landlord if arrears build up, and repayment of any arrears to social landlords
• The provision of financial support and advice to tenants • Exceptions, where the payment should still go direct to the landlord. Lord Freud will run demonstration projects with six councils and their housing association partners next year in order to find out how to best support tenants in managing their budgets and how the Government can support landlords if tenants miss their payments.
Lord Freud’s announcement follows an announcement by Iain Duncan Smith that under Universal Credit payments will be made monthly, rather than fortnightly to help people prepare for the working environment.
‘We welcome the decision to test this major policy change in order to identify the risks arising from making direct payments to tenants, but we remain concerned that direct payments to tenants will remove tenants choice of having housing benefit paid straight to their landlord, it may further compound difficulties faced by vulnerable families and young people in managing their finances and payments, potentially leading to an increase in rent arrears and homelessness. Polls reveal that over 90% of social sector tenants would prefer their housing benefit paid straight to their landlord.
In addition social sector landlords fear that the new Universal Credit will lead to an increase in arrears and cause a dent in lender confidence.
We await further details on how these changes will be implemented and whether the Government will continue with their pledge to safeguard landlords’ income streams.’