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”.
This will mean tenants will receive monthly payments intended to cover their rent and living costs themselves, instead of the rent money going direct to their landlord.
In its original report, published in April 2013, the Government select committee raised concerns about direct payment under the universal credit scheme, saying private sector landlords and housing associations could face increased rent arrears and collection costs.
In a response to the report the Communities and Local Government department stated that the government was committed to direct payment to tenants, but it also want to ensure universal credit is introduced in a way that protects the finances of private sector and social landlords.
The government is running six pilot projects to assess the impact of direct payment of housing benefit, and recently announced these will be extended from 12 to 18 months to allow it to look more closely at the protection that is needed for landlords and tenants.
This includes calculating what level of rent arrears should trigger the switch in benefit payments from tenants directly to landlords.
The first full universal credit pathfinder project, which was launched in Greater Manchester at the end of April, is using two months of arrears as the trigger point, however a final decision on the threshold to be used for the national roll out will be made after the direct payment pilots have been evaluated.
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