Currently viewing the tag: "welfare reforms"

TV Show 'Benefits Street' Stigmatising The LHA MarketTV Show ‘Benefits Street’ Stigmatising
The LHA Market

 Channel 4’s highly controversial ‘Benefits Street’ is stigmatising the LHA market and misrepresenting tenants according to Aki Ellahi, Director of Dssmove.co.uk and his statement has sparked a huge debate on PIN Academy, a private members forum. 

The heated debate also covers the fallout after Fergus Wilson, the Kent-based professional landlord, recently announced that he will no longer be accept benefit tenants due to increasing rent arrears. 

Many property investors feel that the Channel 4 docu-soap and the media rhetoric surrounding Mr Wilson’s decision are giving a heavily distorted impression of the UK’s LHA market, much to the chagrin of other property professionals. 

Aki Ellahi has stated that:

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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 That Affect Landlords

Welfare Reforms That Affect Landlords

A basic round up for all UK Private Rental Sector (PRS) landlords of what is and what will be happening to affect tenants that are in reciept of benefits during the 2013 Welfare Reforms. 

Council Tax Benefit April 2013

 

  • Local authorities will become responsible for their own Council Tax schemes under the welfare reforms. Anyone of working age will now have to contribute towards their own council tax – All PRS tenants should have received a letter from their local authority if this affects them.

Disability Living Allowance

  • This benefit is being replaced by Personal Independence Payments.
  • All new and existing claimants will be reassessed using stricter rules so fewer people will qualify. The new assessment will focus on an individual’s ability to carry out a range of key activities necessary to everyday life.

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Specialist Insurance can help landlords profit from property

Specialist Insurance can help landlords avoid tenant rent default

In the UK private rented sector, the average rent for a residential property now stands at a staggering £777 (GBP) per month across the whole of the country but there are some regional differences.

Private sector rents in Greater London rose by 6.7% during the last 12 months to reach a regional average of £1,224 (GBP) per calendar month (pcm).

In stark contrast, PRS tenants in the North-East living in similar sized properties are paying an average rent of just £512 (GBP) pcm.

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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.”

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.

Rent arrears fall again in 2012

More UK Landlords Using Rent Guarantee Products

Private Rented Sector (PRS) rent arrears dropped in February with 9.3% of all rent late or unpaid at the end of the month, down from 10.7% in January.

With household bills increasing, UK unemployment still rising and the whole country still struggling to avoid a double dip recession as a result of the Eurozone crisis, together with the government’s welfare reforms and public sector belt tightening, there hasn’t been a great deal of optimism around, especially from landlords.

However, figures released by LSL property services show that UK landlords have a little less to worry about, with the amount of rent arrears and late payments falling again.

Either private sector landlords are having an excellent run of good fortune, having tenants who are able, paying the rent in full and on time, or they have become smarter and are now utilising the range of Rent Guarantee products that are currently on the market, to ensure they get paid and their monthly cashflow doesn’t suffer.

Being a landlord and letting a property in the UK means there will always the risk of the tenant not paying the rent, (rent default).

Even the best tenant referencing service cannot predict if a tenant will lose their job and fall on hard times and not be able to pay their rent.

How do landlords cover their expenditure if this happens?

In today’s struggling economic climate, many UK landlords are finding their tenants struggling with rising unemployment and increased bills. Often leading to the rent not being paid and the tenant facing eviction when the amount of rent arrears exceeds 8 weeks.

Recovering arrears can be difficult and costly for landlords, without any guarantee of success.

At Legal 4 Landlords, our Rent Guarantee Insurance will cover landlords against their tenant defaulting or failing to pay the rent.

Why Does Housing Benefit Cost Taxpayers £22 Billion (GBP) A Year?

The latest figures from the Department for Work and Pensions, (DWP), show there are close to 5,000 families still claiming more than the £400 Housing Benefit cap.

According to a report in the Daily Mail

  • At least 100 families are living in luxury homes and raking in enough housing benefits to fund a £1 Million mortgage each
  • Of the 100 families, 60 have their rent paid by the state to the value of £5,000 a month, according to the Department for Work and Pensions
  • More than 30 of those families are given a staggering £1,500 a week (£6,000 a month) to live on and at least 60 families receive more than three times the national average wage, getting £5,000 a month
  • Unemployed living in luxury homes in upmarket parts of London such as Kensington, Chelsea and Westminster
  • Poor families should not be allowed to live ‘swanky’ lifestyles in postcodes beyond their means, says campaigners
  • Calls for the Government’s £400 per week cap to be properly enforced

Although almost four out of every five people on housing benefit pick up less than £100 each week.

At a time when millions of people are struggling to get on the housing ladder, the handouts would easily cover the monthly payments on a £1Million (GBP) mortgage.

Government ministers last year announced a sweeping range of welfare reforms that included housing benefit, which costs the taxpayer £22 Billion (GBP) every year, should be capped at £400 per week.

The figures have been criticised by campaigners and raised concerns that the Government’s plan to cap housing benefit is not being enforced.

Public opinion has been riled by the cases of immigrants and asylum seekers who have been allowed to live in lavish flats at the expense of taxpayers.

The Government handouts have allowed families to live in upmarket parts of London such as Kensington, Chelsea and Westminster alongside wealthy neighbours such as Roman Abramovich and George Michael.

WHERE HOUSING BENEFIT CASH GOES EVERY YEAR 

  • NORTH  EAST………………………….. £923.8m
  • NORTH WEST……………………….. £2,371.5m
  • YORKSHIRE…………………………….. £1,497m
  • EAST MIDLANDS………………….. £1,112.6m
  • WEST MIDLANDS…………………. £1,736.6m
  • EAST…………………………………….. £1,632.6m
  • LONDON………………………………. £5,539.0m
  • SOUTH EAST………………………… £2,536.9m
  • SOUTH WEST……………………….. £1,525.9m
  • WALES…………………………………….  £892.9m
  • SCOTLAND ………………………….. £1,660.6m

TOTAL  £21,429.5m

 

The figures will raise calls for the Government’s benefit reforms to be bulldozed through the Commons – despite pleading from Liberal Democrats.

The data, made public under the Freedom of Information Act, show the areas of the UK that pay out the most in housing benefit are

  1. Birmingham – £469 Million per year
  2. Glasgow       £337 Million per year
  3. Brent            £306 Million per year
  4. Westminster £281 Million per year
  5. Hackney       £267 Million per year
  6. Newham       £264 Million per year
  7. Enfield          £258 Million per year
  8. Haringey       £254 Million per year
  9. Liverpool      £254 Million per year
  10. 10.  Manchester £248 Million per year

The DWP says the new rules which have been put in place mean that those families currently getting more than £400-per-week will be gradually taken out of the system and moved into cheaper accommodation.

A DWP spokesman added: ‘These figures underline exactly why our Housing Benefit reforms are so necessary’.

Emma Boon of the TaxPayers’ Alliance said: “This is further evidence that it is right to cap benefits. It is unfair to ask taxpayers to pay for swanky central London homes for others when they can’t afford to live in those postcodes themselves. Many middle or low income families have to decide if they can afford to house their family in town, or if they have to move out to somewhere more affordable. It is not unreasonable to ask those on benefits to make the same choice.”

 Read the Full Daily Mail article here

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