Tag Archives: rent arrears

How Universal Credit Will Incentivise Rent Debt

rent-bookA 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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8% Less New Houses Built Due to Universal Credit Warns Housing Association Boss

eviction_noticeA director of one of London largest housing associations has warned that house building and provision of new properties has been scaled down due to fears about the upcoming changes to the benefits system.

Speaking before the Public Accounts Committee today, Mike Donaldson, a director of social housing provider L&Q, warned of a double whammy with evictions and arrears set to rise under the new regime.  The impact of this will be that housing associations will be unable to spend cash building new homes meaning a toxic combination of fewer homes and more homeless people.

Such are his organisation’s fears of the oncoming debt tsunami that Donaldson claimed they had already cut the number of new properties provided over the last year from 1000 to 920, a fall of 8%.

Benefits are to be paid monthly under the new system and payments will go direct to tenants, leading to fears that some of those on the lowest income may find managing money difficult and fall into arrears.  On top of this a ‘bedroom tax’ will mean claimants having money docked from benefits, leaving them with either a weekly shortfall or forced to move.

Donaldson’s shocking admission comes on the day that information from pilot schemes to test the new payment system was announced by the DWP.  The figures suggest that rent arrears have doubled in the pilot areas, even though many of the most vulnerable tenants have not been included in the pilots.  No tests of the new system had taken place for tenants in the private sector, where around 30% of claimants have rent payments sent direct to their landlords.

With homelessness already soaring it seems that everyday this Government does something to make the problem worse.  The cardboard cities which emerged in London under the last Tory government may yet become a feature of every major city in the UK.

You can watch the meeting of the Public Affairs Committee, which also includes questions on the Work Programme (haven’t watched it yet so don’t know what was said) at: http://www.parliamentlive.tv/main/Player.aspx?meetingId=12123

Join the Housing for the 99% protests in London tomorrow (Tuesday 18th December)