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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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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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The Residential Landlords Association (RLA) say that cuts made to local housing allowance payments by the government last year have left many landlords with tenants financially struggling to make ends meet.

However the proposed changes to the way in which LHA payments are due to be made, come into force in 2013, will leave more private sector landlords who choose to rent to LHA tenants even more out of pocket.

At present private landlords who have LHA claimants that fall more than 8 weeks into arrears in terms of rental payments can apply to have future LHA payments made directly to them, cutting out the possibility of further arrears.

As of 2013 though this direct payment option will be taken away from UK landlords and it is this change that the RLA has criticised.

Asked for his views on the proposed changes, Richard Jones, policy director for the RLA, said that “The government approach is flawed, and there will be a much higher level of arrears, an unwillingness of landlords to house benefit claimants (at a time when there is huge pressure on social housing), increased unwillingness by banks to lend for this kind of property, much higher levels of tenant evictions and much greater degree of homelessness. Although the objective of helping tenants to manage their financial affairs is in isolation a laudable one, the Government has wholly failed to appreciate the consequences of this.”

UK Landlords Need To Sign Up To Force The Government To Listen To Common Sense

UK Landlords Need To Sign Up To Force The Government To Listen To Common Sense

Under the next wave of welfare reforms, new rules set to be introduced next year, mean that the housing benefit allowance of the new Universal Credit system, will not be paid directly to landlords.

Instead the Government proposes that all payments will be paid directly to tenants, even if they are vulnerable or in arrears!

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This will not only expose the landlord to the threat of tenant rent default, it will increase financial pressure on all parties involved and the possibility of repossession proceedings if the rent is not passed over to the landlord.

The proposed welfare reforms will also increase the likelihood of landlords refusing to take any further applications from DSS/LHA/Housing Benefit tenants, in the future as well as bringing to an end existing tenancies, further increasing the pressure on local councils and housing associations, who under the same proposals, will also not be able to request direct payments for non paying tenants.

The Government needs to take on board UK landlords views, that tenants who receive housing benefit directly and who do NOT pay their rents are not financially responsible and therefore it should be allowed that rents can be paid directly to their respective landlord, when tenants are vulnerable or in arrears, as per the current rules.

Failure to take note of this common sense approach will cause more issues for the Government, Local Authorities, Homeless Charities, Tenants and Landlords.

This is a common sense and a logical solution for all concerned – Pay rent direct to landlords where it is needed please!

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Responsible department: Department for Work and Pensions

Landlords’ right to receive direct rent payments from Local Authorities will be scrapped under the new benefit system.

As correctly pointed out to “Spotlight” by reader Paul Barrett, the details of the Government’s new procedures for the implementation and payment of Universal Credit have been released and a private landlord’s right to insist on direct rent payments will be scrapped.

There will be increasing amounts of landlords that will now refuse to take Housing Benefit claimants because of the system rather than the claimants themselves

The Residential Landlords Association (RLA), which represents around 15,000 private landlords, have reacted angrily to the proposals, stating that when the new benefit system is introduced in April 2013, payments will be made directly to tenants and it will be up to the tenant to pay their rent or not.

Currently, Private Rental Sector (PRS) landlords can ask for Local Housing Allowance (LHA) to be paid directly to them if the tenant is more than 8 weeks in rent arrears or if the tenant is deemed vulnerable.

With the new Universal Credit system due to come into force next year, including  benefits such as local housing allowance, the new procedures will apply across the board to local authority tenants, housing association tenants and tenants in the private rented sector.

The RLA have raised a number of serious concerns about the proposals, saying that there is no right of redress for UK landlords if things go wrong, and that the whole concept creates risk for landlords. It has also attacked the proposals for lack of clarity, saying they have replaced ‘regulations’ with ‘guidance’.

It says that landlords will become increasingly unwilling to accept tenants on benefits.

RLA policy director, Richard Jones, said: “We strongly believe that the Government’s whole approach is flawed, and although the objective of helping tenants to manage their financial affairs is in isolation a laudable one, the Government has wholly failed to appreciate the consequences of this. There will be a much higher level of arrears, an unwillingness of landlords to house benefit claimants (at a time when there is huge pressure on social housing), increased unwillingness by banks to lend for this kind of property (or increased interest rate to reflect the risk), much higher levels of evictions and much greater homelessness.”

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Landlords want to avoid LHA tenants

UK Landlords Want To Avoid Tenants Claiming Benefits

A survey conducted by the National Landlords Association (NLA) revealed that nearly half of its members felt that they could no longer afford to rent their properties to tenants receiving Local Housing Allowance or Housing Benefit, and as a result they would almost definitely stop considering LHA tenants for their properties.

Similarly almost 70% of the landlords that responded to the survey felt they would completely withdraw from the UK benefit sector within the next 3 years.

The recent cuts in LHA payments has meant that benefit claimants can now only be awarded a maximum of 30% of the local average rent, whereas before the cuts it was 50%.

Also, the age at which claimants can claim for more than a single room in a shared house has been increased from 25 to 35, meaning more people are being forced to share…a prospect that could result in some landlords needing to register their property as a House of Multiple Occupation (HMO).

David Salusbury, Chairman of the NLA, commented on the findings saying; “It’s concerning that so many landlords appear to be planning to withdraw from the LHA market within just three years, as they can no longer afford to let their properties to tenants at the reduced benefit rate.”

Local councils have been given permission to contact private landlords with the option of direct LHA payments in return for slightly reduced rents, however it seems that only 25% of councils in the UK have made any effort to speak directly with landlords about the matter.

And those local authorities that have contacted landlords, have offered such lowly reduced rental payments, that UK landlords are refusing to deal with them.

UK Landlords avoid housing benefit tenants

Private Rental Sector Landlords Avoid Tenants Claiming Benefits

The results of a recent survey show that due to misconceptions over Government Welfare Reforms increasing numbers of private rental sector landlords are now refusing to even consider applicants claiming Local Housing Allowance (LHA), when searching for new tenants.

The Spareroom.com survey showed that out of 1000 UK landlords surveyed:

  • 87% had problems with non-payment of LHA by tenants at some time
  • 47% refused to even consider LHA tenants because of the potential payment problems.

This shows a real lack of understanding from UK landlords as many LHA claimants are often far more reliable than employed tenants, and all the media hype surrounding the Government’s welfare reform package has a lot to do with it.

Mike Clarke from Castledene Property Management, who are letting agents specialising in LHA tenants, explains: “UK landlords have often felt that tenants claiming benefits were far too much trouble and effort, as granting a tenancy (AST) meant endless forms and supporting documents had to be submitted before a claim could be processed. Landlords operate under the assumption that there will be delays in payments and if tenants were paid directly, there is also the risk that the landlord would not see any money for the rent. They only see the negatives and often ignore some of the positive aspects.”

  • LHA tenants generally remain in a rental property long term as they view the property as a home rather than just a place to live.
  • LHA tenants also care for the rental property as if it was their own.
  • The rental income from LHA tenants can still be significantly higher than from employed tenants.
  • Contrary to popular belief, Landlords can still get direct payments from local authorities.

Legal 4 Landlords recommend that UK landlords should always conduct thorough tenant referencing and always take out Rent Guarantee insurance for their tenants as a back-up in case there are problems with rent payments or delayed LHA claims in the future.

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