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.