A perverse incentive in the Universal Credit pilot scheme has already emerged which will mean that social housing tenants who go into rent arrears will be able to have the housing element of the new benefit sent direct to their landlord.
Universal Credit will feature Direct Payments, meaning that council or housing association tenants will receive a monthly cash payment towards their rent. At present Housing Benefits for social tenants go directly to social landlords in most cases.
This senseless move is based on yet another of Iain Duncan Smith’s pet obsessions, which is that housing benefits going direct to tenants will teach claimants to manage their money.
Housing Associations have been horrified by the changes, issuing warnings that they expect rent arrears to soar. The DWP’s panicky response to this has been to decide that claimants who fall two months in arrears will automatically have payments switched back to landlords.
This means that tenants concerned about the impact of Direct Payments can simply avoid paying their rent for a couple of months. This will automatically trigger their benefits to be directed back to their landlords, removing a stressful and senseless burden for already struggling claimants.
To be extra sure that their tenancy is not affected, claimants can keep hold of the cash and as soon as the two months are up then simply pay off the arrears. Alternatively they could arrange to pay back the money owed in installments and use the two month’s housing benefit as an interest free loan.
It is not clear if tenants will be switched back to Direct Payments once rent arrears are paid off. If they are then they will just have to stop paying their rent for a couple of months again. As long as there is a continuous willingness to pay, and arrears stay around the two month mark, then few social landlords will launch formal eviction proceedings. And just in case they do, the canniest tenants will make sure the rent is safely in the bank to be handed over any time the situation gets a little too hot for comfort.
In fact with Housing Associations also set to take a hit due to the new payments system, it would even in be their interest to support tenants to go into short term arrears. Social landlords are likely to ignore rent arrears once they hit five to six weeks, knowing that the trigger point, which will clear up any future rent problems, is just a fortnight away.
This is exactly the kind of perverse incentive that the Government promised would be brought to an end due to welfare reforms. In truth it will be the first of many as 50 year’s of steady development in the Welfare State is thrown away overnight in favour of Iain Duncan Smith’s endless back of the envelope crazy schemes.
The DWP have made clear that this arrangement may not stay in place as Universal Credit is fully rolled out. The alternative however could leave some social housing providers on the brink of bankruptcy as the most marginalised tenants – who may have well documented drug, alcohol, gambling or debt problems, are given a huge monthly cash sum intended to pay their rent. The reality is for some this will be a temptation they are unable to resist and lead to huge rent arrears.
Ultimately this will mean more evictions, which will be devastating for those tenants most in need of help, and hugely expensive for both social landlords and the tax payer alike. Those evicted are likely to be shunted into the far more costly private sector or even face the extortionate rents charged by temporary accommodation and hostels.
Iain Duncan Smith and Lord Fraud are about to learn a stark lesson which will no doubt teach them exactly why the welfare system was quite complicated. Unfortunately by the time that happens it will be too late for all of us, as the Daily Mail inspired delusions of two desperately out of touch rich men plunge millions of claimant’s lives into chaos.
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