The Department for Work and Pensions has announced the areas where direct payment to social tenants will be piloted, ahead of the introduction next year of the Universal Credit.
The proposal that it will be tenants and not landlords who receive rent has concerned many social landlords, who fear a repeat of what has been happening in the private rental sector, where arrears have risen since the rules changed in 2008. Private tenants on housing benefit now automatically receive Local Housing Allowance direct and landlords are powerless to act until the tenant has run up at least two months of arrears.
Year-long pilot projects to see if similar problems arise will be held in Southwark, Oxford, Shropshire, Wakefield, and Tofraen in Wales.
However, the Government appears wedded to the idea that all tenants should receive their rent money, rather than it being paid to the landlord. This is despite campaigning by 18 high-profile organisations, including homelessness charities, to give tenants the choice as to who should receive rent.
Lord David Freud, welfare reform minister, said: “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.”
Separately, a tenant eviction business has reported a 30% rise in cases involving LHA tenants.
Lee Daniels, of Helpland, said: “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.”
See also today's blog about LHA caps.
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Comments
I tried to get rent paid directly to me, the tenant wanted that too but the authority said they would only do it if the tenant was 2 months in arrears. He went into arrears, I got the rent direct but when he left I never got that first 2 months rent!!. The next time the tenant and I agreed to lie, say he was in arrears to get the rent paid directly to me.
This is a disaster waiting to happen - no doubt about it. I manage 40 properties for myself and a small group of other landlords in an area of high LHA occupancy; around 75% of our properties are LHA. We have had plenty of problems with direct payments going to tenants and then not passing it on for rent. This often ultimately leads to evictions but not before the landlord has experienced losses and costs.
When the Universal Credit comes in, tenants won't know and some won't care, how this should be divided up. Many of thee tenants are just hopeless with their personal finances and in many cases their lack of organisation skills is a key reason why they are out of work in the first place. Just look at what happens every Christmas with a lot of these tenants. They spend the money for the roof over their heads on presents, fags, booze and whatever else they think they need to have.
Personally, I would rather have an empty property for a few months until I found the right, responsible, working tenant than take a risk with a potential workshy, feckless LHA tenant. I can see a lot of LHA tenants becoming homeless next year unless the government changes its thinking.
Having Local Authorities pay rents direct to landlords for LHA tenants, is like asking employers to deduct rents from salaries of private tenants and pay it direct to landlords.
This is implying that LHA tenants are less trustworthy than private tenants. Somebody should do a study on this to verify this one way or the other.
I've got 3 private tenants and 2 LHA tenants one of whom is working. The rent of the non-working LHA tenant is paid direct to me via the letting agent by the Council. The working LHA tenant pays the rent directly to me for the last 4 years without any problems whatsoever - touch wood.
There's a lot of negative hype against LHA tenants. It seems that the negative experiences are given more publicity than postive ones. Have you heard any landlord say what wonderful LHA tenants they have? That's why I started the ball rolling.
So go on, let's have that study and dispel these myths once and for all. I'm sure I've heard how private tenants play the system by acquiring tenancies with the intention of NOT paying any rent at all - the onus is for the landlord to evict them without harassment or threats.
In a period where housing for LHA tenants is in short supply, this idea will be disastrous..... no offence meant to the more responsible LHA tenants out there but it is my experience over 10years that if you give many of these tenants an allowance for a day, it'll be gone by the end of the day... give them an allowance for a week and in many cases it'll be spent way before the week is out....
So if you give them a rent allowance - many of them won't have seen so much money in one place before... temptation is too easy and self-discipline lacking...
If the government thinks the tenants deserve to be treated as being responsible they should underwrite the landlords losses when they turn out to be rather less so!