Private landlords have long argued the government’s decision backtracking their pledge to return the tenant’s choice on the method of payment of housing benefit. As a result of that decision, landlords have struggled with rent arrears and in some cases had their properties repossessed by lenders.
Earlier this week, welfare minister Lord Freud announced that social sector landlords would also fall under the same rules, whereas housing benefit is paid to the tenant and not the landlord, leaving the tenant responsible for making rent payments. Under this new universal credit system, the welfare minister stated that a failsafe would be provided if tenants fell into rent arrears and payments would then be paid to the landlord.
For private sector landlords, claimants of housing benefit have to owe 8 weeks rent before payment can be made direct to the landlord and this in itself has caused substantial financial loss for landlords.
However, social sector landlords have already taken a massive hit through budget cuts, are overstretched with lengthy waiting lists. The English Housing Report established that 70% of housing benefit claims is paid to social landlords and 12% paid to private landlords. With over 450,000 tenants in the UK already experiencing rent arrears, is this a government gamble gone to far, or clever progression intended to empower claimants? At a conference held at Birmingham this week by the National Housing Federation (NHF), Lord Freud stated:
“By removing the barriers to work contained within the current system, and making the experience of claiming benefits more like that of being in work, we will radically alter attitudes and crucially behaviours.”
Earlier this month, social and private landlords along with tenants formed an unlikely alliance in order to challenge housing benefit reforms along with the Council of Mortgage Lenders. The alliance aims to challenge the government’s decision on payment policy to landlords and encourage them to re-instate the ‘tenant’s choice’ of payment delivery.
The universal credit system is due to be introduced firstly through a pilot scheme in May 2013 and then launched completely in October the same year. The housing element of the system has come under strong attack from housing and financial sectors as well as homeless and charity bodies relating to poverty.