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Written by rosalind renshaw

Rent arrears among tenants of social landlords taking part in a trial of the Government’s flagship benefit reforms have soared.

The pilot is testing out the effects of paying the tenants their rent money, and trusting them to pass it on to their landlords.

Although private sector landlords of tenants on Local Housing Allowance have been familiar with this system, in the social sector landlords have been continuing to get housing benefit paid to them.

The trial in South Wales has resulted in a seven-fold rise in rent arrears in just seven months from £20,000 to £140,000.

Social landlords in the Torfaen area are now warning that there will be more evictions if the trend continues after the system is fully adopted when the Universal Credit system comes in.

Private landlords of LHA tenants have been arguing that the system is depriving them of rent, with arrears increasing, and that as a result, more private landlords are turning their backs on the benefits sector.

Government ministers say that receiving their own money for rent will help people on benefits to manage their finances better.

Torfaen is one of six areas where the Department of Work and Pensions is running trials ahead of the launch of Universal Credit this autumn.

Bron Afon Community Housing, the biggest social housing landlord in Torfaen with 8,000 properties, has 950 tenants receiving direct payment of their housing benefit.

Chief executive Duncan Forbes described the rise in arrears to almost £140,000 as “significant”, adding that a large proportion of the tenants had not been in arrears previously.

“That was a group of people who had a good track record of payment and pretty low level of arrears, thrust into a position where they are now in significant arrears,” Forbes told the BBC.

“At the same time we’ve increased our staff levels by about double what we would normally put into income recovery.”

Comments

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    I suggest all of you look at your local credit union, many are modernising and already work with landlords to process LHA. My credit union Rainbow Saver Anglia Credit Union, works with 80 private sector landlords to receive LHA into a jamjar rent account, which is ringfenced and passed to the landlord by BACS. We trade mainly in Suffolk and Cambs and charge landlords £5 per tenant per month, a modest fee which gives the landlord peace of mind. Tenants also like it as they don't have to worry about the rent, their bank taking the money to clear overdrafts etc. We are unlikely to turn anyone down for an account evwen if they are a bankrupt, and in the last 4 years we have provided a stress free LHA processing service. Main group to benefit from this jamjar account are people with an overdraft, people with a post office card account, or no bank account

    • 14 March 2013 16:57 PM
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    Perhaps Industry Observer would tell us exactly what is disgraceful about Jamie's posts? He is clearly NOT talking about those who get a top up benefit, but those who rely 100% on benefits.

    • 13 March 2013 12:32 PM
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    I have several HB tenants who all are now saying that they will not be in a position in April to open up a second account to receieve the new payments from the government as their credit history is poor and the bank wont open new accounts due to this, also should the new funds go into their existing accounts which run in un approved over drawn positions the rents will be swallowed by the overdrawn amounts and the tenant nor the landlords will obtain access to this money!! what will it mean but eventually two months arrears and a court action for possession. some one in government is being paid handsomely for making these decisions that are going to cause mayhem in the housing sectors across every region of the UK!! its madness

    • 12 March 2013 13:27 PM
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    Just one thought before I contat Ros and ask her to remove Jamies two disgraceful posts.

    In a TV discussion of some repute a few weeks ago, maybe Panorama, maybe Newsnight etc, an astonishing figure was quoted of how many benefit recipientsd actually work.

    No I don't measn illegally, full wages and full benefits claimed, I mean working but on low income so they need topping up. As opposed to sitting on their backsides all day watching TV which is what most of the posters here seem to think benefit claimants do.

    Go on start posting some guesses - clue start well above 60%

    • 12 March 2013 13:25 PM
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    Well this is where we say told you so, most people on social housing can not manage money and do not want to pay rent if they get it paid direct they will spend it, I have tenants who have said to me they cant wait to get it paid direct as they are going to go on holiday with the money as soon as they get it.

    • 12 March 2013 11:04 AM
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    Whoever thought it was a good idea to 'trust' people who can't, or won't even get a job? Abuse of the system isn't even a minority problem now, it's widespread because there is little or no penalty:(unless the Claimant has defrauded the LHA direct then they claw it back slowly from future payments). I've reported every past tenant who failed to pay over rent due to us which they'd received for rent, surely that's a fraudulent claim if not used for purpose. They should be prohibited from claiming in future. Instead though, once they go sufficiently in arrears we successfully evict, they leave owing more than 2 months rent and move-on to another Landlord or area. Its nigh on impossible to chase them for their debt, they rely on that fact and they carry on claiming and spending the money on themselves with little regard or intention to pay it to the Landlord (beyond maybe the first rent to secure the accommodation). This problem is huge. We've ceased taking any LHA tenants now due to the high percentage of rent not being paid over. Every sympathy with. Our losses not so extreme as Jamie Moodie who has posted but if we allow any more we'd quickly be out of business and unable to pay our bills. The Government need to wake-up and take action.

    • 12 March 2013 10:04 AM
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    As always the government will not speak to landlords or lettings agents to see what really happens with those tenants in receipt of benefits.
    As a lettings agent I see first hand that there is a minority that use the money paid to them for day to day living such as drinking, Sky TV, internet and other luxuries. I often carry our quarterly inspections and find that tenants are not working yet have the big TVs, laptops/iPads, nice cars and most of the time partners living with them that are working full-time and not declaring it. They are the ones that have pictures on the walls of nice holidays, get their nails & hair done once a week.
    The system is flawed, issue people with vouchers that cannot be used for alcohol, tobacco or luxury goods instead a voucher for rent, a voucher for food. Any change that they get is issued in the form of, guess what a voucher. This way there is no waste, no miss use and no fuss. If they want luxuries then they work for it. Screw their humans rights because sooner or later they'll be no money to go around to anyone.

    • 12 March 2013 09:25 AM
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    Lets reward failure!

    I have been a property manager for 25 years and I can assure you that the last thing on the minds of LHA applicants is to get a get job and pay their way in the world.

    Our social security system is a form of control over the un-productive people of the UK to prevent mass crime. If benefits were non-existent, our crime levels would be among the highest in the world.

    Generation after generation of parents have failed to educate their off-spring into jobs. Its their fault, not the teachers, not HMG, not the police..just the parents.

    • 12 March 2013 09:25 AM
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    PS
    Government ministers say that receiving their own money for rent will help people on benefits to manage their finances better.

    Before people learn to manage their finances, they first have to earn it! With no skin in the game for social tenants and knowing it will keep on coming no matter what you do, then there is no incentive or consequence to condition the desired behaviour.
    Isn't it sweet of all these Huhne esk politicians to experiment with OUR money, what a scam. These lying pricks can do what they want with impunity it seems, bar swap a few points it seems!

    • 12 March 2013 08:54 AM
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    Surprise surprise. We ordinary landlords have been telling the Govt this for 6 years. I have lost over £120,000 due to this ridiculous system instigated by morons with no idea as to how the world turns. The reason most of these people are on housing benefits is that they have given up and are content to have it all done for them, even raising their kids. Given £700 into their bank accounts, what would you do if you had a drink or drugs problem, you can't manage a single day of finances, have a binge, buy a new mobile, an iPad, a 50 inch TV, or pay your rent? Mmmmmmmmm answers to Jamie@7days2exchange.com
    Idiotic in the extreme and punishing for all landlords who have absolutely no recourse. Financial rape of landlords best describes this lunacy. I won't ever take on a social tent again!

    • 12 March 2013 08:40 AM
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    This is really no surprise to private landlords who used to take benefit tenants, but now chose to only have working people, purely as a business decision.

    • 12 March 2013 08:37 AM
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