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Landlords Warned To Get Ready For Universal Credit

Landlords Warned To Get Ready For Universal Credit  Chaos!

National Universal Credit Roll-Out
Starts February 2015 

Department of Work and Pensions (DWP) Secretary, Iain Duncan Smith surprised commentators with an announcement that Universal Credit (UC) will be rolled out to all Jobcentres and local authorities in the UK by February 2015 following the apparent success of the pilot scheme that was originally trialled in the North West.

Many Universal Credit detractors predicted that nothing significant would happen, before next year’s General Election, however, Iain Duncan Smith stunned everyone by announcing that Universal Credit will be rolled out to all Jobcentres and local authorities across the country, starting February 2015.

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MP’s Claim Universal Credit Is Another Government White Elephant

MP’s Claim Universal Credit Is Another Government White Elephant

Universal Credit Roll-Out faces major delays

The current Local Housing Allowance (LHA) benefit system is likely to continue until at least 2017 for the majority of private rental sector (PRS) landlords and tenants in most of the UK, following major delays to the roll-out of the new Universal Credit system.

Universal Credit was originally due to be rolled out nationally to all new tenants claiming benefits from October this year, however due to continued problems, the controversial welfare reform measure will just be extended to an additional six jobcentres.

The delay is being blamed on poor IT by Government ministers, leading to claims that Universal Credit is just another Government white elephant.

Universal Credit was heralded by its proponents as an easier way to deliver state benefits including housing benefit or LHA and tax credits into one lump sum paid monthly to claimants, but its proposal saw an immediate backlash from PRS landlords, letting agents and landlord associations over the abolition of direct rent payments to landlords.

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Government Offers Direct Payment Guarantee For Social Landlords

Government Offers Direct Payment Guarantee For Social Landlords

Private Rental Sector Landlords
Expected To Fend For Themselves

PRS landlords were left furious after the Government Welfare Reform minister offered social landlords the opportunity for direct payment of housing benefit under the Universal Credit scheme, but there was no such offer for private landlords.

Government Welfare Minister, Lord Freud has offered landlords a series of small concessions over Universal Credit, with payment of housing benefit to tenants temporarily suspended if rent arrears exceed two months. However, this only applies to social housing landlords, i.e local authorities and housing associations and not private sector landlords.

Lord Freud confirmed that direct payment of housing benefit to tenants who are at least two months’ behind with their rent, would be suspended, with the total amount of rent outstanding paid back to social landlords within six to nine months.

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Uncertainty Remains Over Recovery Of Universal Credit Rent Arrears

Uncertainty Remains Over Recovery Of Universal Credit Rent Arrears

The UK Government are to introduce a mechanism to automatically recover rent arrears, alongside the direct payment of housing benefit to tenants.

Details released last week by the government explained that under the welfare reforms landlords will now be able to contact the Department for Work and Pensions (DWP) to request Universal Credit benefits designed to cover housing costs of tenants are paid to them once a prescribed level of rent arrears have been reached.

At this point the DWP will recover the arrears by docking universal credit payments to tenants.

In its response to a Communities and Local Government (CLG) select committee report on the implementation of universal credit, the government says deductions can be up to 5% under existing legislation, but the government are considering whether this level of deduction is appropriate for tenants claiming universal credit, or if it should be increased in the future.

Under the new universal credit scheme, which is being rolled out nationally in the UK from autumn 2013, a range of benefits, including Housing Benefit (HB) or Local Housing Allowance (LHA), will be combined into a single monthly payment termed “Universal Credit”.

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Welfare Reforms Could Increase Fraud

Welfare Reforms Could Increase Fraud

The Government’s controversial welfare reforms will leave the benefits system more vulnerable to fraud, according to a group of MPs.

The Government decision to press on with welfare reforms means that Universal credit is set to be implemented nationally from October 2013 and replaces a string of existing benefits such as local housing allowance (LHA), housing benefit (HB) and child tax credits.

Changes to IT system for universal credit could make it harder to distinguish fraudulent claims from those that are genuine, and there are calls for the government to give swift assurance that the introduction of Universal Credit will not cause a rise in benefit fraud,

MPs issued the warning after a report by the Communities and Local Government (CLG) Committee into the extent of the welfare reforms highlighted several concerns about the new Universal Credit scheme.

The first trial of the new system begins on 29 April 2013 in Ashton-Under-Lyne, Greater Manchester.

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Universal Credit Will Backfire Warns Think Tank

Government Welfare Reforms Set To Backfire As Claimants Don't Want Universal CreditThe proposed welfare reforms are not wanted by the majority of claimants or their landlords according to research by the Social Market Foundation.

Tenants with low incomes and families claiming benefit will be pushed further into financial difficulties and debt by the shift to monthly benefit payments under Iain Duncan Smith’s welfare reforms.

Attempts as part of the new Universal Credit system to encourage claimants to budget properly and make their own rental payments risk backfiring, the Social Market Foundation said.

It called for the introduction of an online budgeting tool allowing claimants to set the frequency of payments themselves and allocate income to different items of expenditure.

However the foundation stopped short of calling for landlords to continue to receive direct payments for tenants that were considered vulnerable or at risk.

Under the Universal Credit there will be one single monthly benefit payment – rather than weekly or fortnightly as at present – and all tenants will have to pay landlords themselves.

The Government says it will be “flexible” with those who struggle to manage their money.

Research by the Social Market Foundation, entitled Sink or Swim: the Impact of Universal Credit, found that most low income households were opposed to the moves, expressing fears that they would not be able to budget properly and could end up in rent arrears and even face eviction.

Nigel Keohane, the think tank’s deputy director and co-author of the report doubted whether plans by the Government to provide special arrangements for certain vulnerable individuals was adequate, stating: “The Government’s laudable aim that Universal Credit should prepare families for work, boost their resilience to financial shocks, and simplify the system is at risk of backfiring. By moving to a single monthly payment for all benefits, the Government is removing the markers and aids that families currently rely on to budget effectively. Our research shows that this will throw people in at the deep end leaving them either to sink or swim. This laissez-faire approach will create real problems not only for families themselves, but also for public service organisations, such as social and private sector landlords and childcare providers, that families will end up owing money to. Instead of mandating monthly payments and centrally planning which families to exempt, the Government should allow low income families to take the decision themselves through an online budgeting tool,” he said. “This would allow the reforms to work with the grain of wider government objectives like personal responsibility and increased financial capability rather than working against them as the current system seems set to do.”

A Department for Work and Pensions spokesperson said: “Universal Credit will be paid monthly because most people in work are paid that way and the system should help people get used to the patterns of working life. But we will make sure that no one falls through the cracks, and we are working with local authorities and the financial industry on how best to support individuals. We have always said we would be flexible with people who might struggle to manage their money.”

Hmmm…..If that last statement is true, then the DWP had better start preparing to open a separate department to deal with struggling landlords as the Universal Credit system is severely flawed and the majority of claimants don’t want direct payments because they are unable to cope at the present time, so what happens to them in 2013?

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Universal Credit Row Rages On

Universal Credit Payment Row Rages On

MP’s Fight Among Themselves As Universal Credit Row Gets Heated!

A parliamentary debate held earlier this month (September) saw MPs from both sides of the house getting a little hot under the collar, arguing about how payment of the new Universal Credit benefit, due to be introduced next year, should be made.

Universal credit is set to take over from Local Housing Allowance (LHA) and controversy surrounds the fact that ALL payments will be made directly to the claimant rather than to their landlord or the letting agent managing their rental property – just as LHA payments are paid now.

During the debate, Labour MP Alex Cunningham raised the concern that the new Universal Credit could result in large rent arrears being accrued and an increase in tenant evictions if payments are made directly to tenants, and claimants living in private rental properties should be given the option to have the payments made direct to their landlords.

Department for Work and Pensions (DWP) minister Iain Duncan-Smith however vehemently defended the decision for direct payment stating that “Benefit claimants shouldn’t be treated like children who can’t manage their own pocket-money. Claimants would benefit more by showing them trust, and that by doing so they would be more likely to cope better when they return to work.

The Residential Landlords Association (RLA), the National Landlords Association (NLA) and homeless charities Shelter and Crisis, have all lobbied the Government to give claimants the ability to choose how the benefit is paid, but they require the support of all UK landlords.

Property professionals, letting and managing agents, property investors and landlords need to get the weight of support behind the campaign and your help is required, please Sign the e-petition here.

UK landlords are warned to prepare for the worst case scenario and act quickly to evict tenants if rental arrears exceed 8 weeks, as it remains to be seen if the current rental arrears problems will worsen with the new Universal Credit benefit system.

If you have a problem with tenants in more than 8 weeks rent arrears please contact us and we can start eviction proceedings for you. Call Now on 0844 567 4001

The UK's leading tenant eviction specialists

The UK’s leading tenant eviction specialists

Despite the exorbitant claims about lower LHA rents and the acceptance of them by private rented sector, (PRS), landlords made by the coalition government Prime Minister David Cameron in Parliament on January 11th. Only a handful of landlords with tenants on Local Housing Allowance are actually accepting lower rents in exchange for getting rent paid to them directly.

The claim by the Prime Minister David Cameron that private rents are falling as a result of welfare reforms was wrong!

Mr Cameron had claimed in Parliament on January 11th 2012 that: “rent levels have come down, so we have stopped ripping off the taxpayer”. Apparently he was quoting rental data from LSL Property Services, which had only been quoting falling private sector rents.

The data published by LSL Property Services does not take into account LHA rents.

In an attempt to get landlords to lower rents, councils have temporary powers to pay landlords, rather than tenants, the LHA in exchange for lowered rents.

A later statement from 10 Downing St said: “Private landlords were reducing rents – lessening the impact of benefit cuts – in return for local housing allowance being paid directly to them.

The prime minister made his wildly inaccurate claim in the middle of the Welfare Reform Bill’s rough ride through the House of Lords at a time when his government was desperately seeking to convince peers that the package of reforms would not increase homelessness as tenants would be left struggling to meet their rents under the new benefit caps.

Mr Cameron’s claims that private rents are falling as a result of the governments welfare reforms were difficult to swallow for a number of property professionals, prompting one magazine to take action.

The same data was quoted again on 30th January 2012 by Housing minister Grant Shapps, who seized on the same survey by estate agency LSL Property Services, citing it as the evidence Mr Cameron had used to support his claims.

The survey did indeed show rents fell by 0.8% in December – the second successive monthly fall.

However, if the data is examined correctly, the figures reveal the seasonal drop in private sector rents before Christmas was actually less than the 2.3% drop in December 2010 and rents overall had actually risen 4% year-on-year.

The magazine Inside Housing, used the Freedom of Information Act to request information on LHA rents from the Department of Work and Pensions (DWP), and every local authority in England following Mr Cameron’s claim in the House of Commons.

204 local authorities responded, with only 36 reporting any rent reductions in return for direct payment of LHA. Of the 36, 12 reported a combined total of 65 landlords cutting rents, an average of fewer than six landlords in each area.

The DWP says it has ‘no data records’ of how many landlords have reduced rents, but it has collected ‘anecdotal evidence’ from around 80 councils.

It states: ‘The majority have reported that they have used the new safeguard to help claimants negotiate down rents and all plan to use it during 2012 as transitional (payment) protection runs out.

The Inside Housing survey suggests that most PRS landlords are not even remotely tempted to accept lower rental payments for their properties, either directly from local authorities or not.

The National Landlords Association (NLA) and the Residential Landlords Association (RLA) have each disputed the claim rents are falling and believe landlords are more likely to reduce the number of tenancies let to benefit recipients, warning that landlords would rather re-let their properties at the full market price to working tenants, and are able to do so in the current climate of high rental demand.

Labour’s shadow housing minister, Jack Dromey, has already written to number 10 about the issue but received no response and will raise the matter in parliament demanding that Mr Cameron corrects his statement or justifies it.

Mr Dromey said: “Now we know the truth. The nationwide Inside Housing story exposes the reality of rising rents in most areas of the country and explodes the myth that rents are falling”.

 

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