Ever since the Universal Credit concept was announced, abolishing direct payments to landlords, it was clear it was destined to be a disaster. It was an immensely ill-conceived plan created in some Westminster ivy tower. I was always confident that sense would actually prevail in the long run: surely the government couldnâ€™t be so blind as to continue with it once they appreciated the practical ramifications of trusting benefit recipients to pay their landlord directly. For months I have been saying that I thought they would backtrackâ€¦ and the signs are that they are (thanks largely to the sterling work of The Residential Landlordâ€™s Association) in fact now heading for a complete u-turn.
Whilst to date, changes have been made only to the trial scheme Richard Jones, policy director of the RLA, said the change was significant. He added â€œWhilst Government promises of automatic direct payments do not yet extend to the national roll-out of Universal Credit later this year, we are eager to ensure that it will apply when this happens.
â€œAt the same time, the RLA will continue lobbying for a shorter time period in which automatic payments can be triggered, and for more details about the direct payments process.
â€œIt is important for landlords to know that if tenants fall into arrears an immediate stop will be placed on further payment of housing costs to the tenant until direct payments to the landlord have been established.â€
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A Universal Credit trial in Torfaen South Wales has resulted in an increase in arrears from Â£20,000 to Â£140,000 in just seven months from July to January.
CEO of Brofn Afon Housing, Duncan Forbes said, â€œThat was a group of people who had a good track record of payment and pretty low level of arrears, thrust into a position where they are now in significant arrears.Â At the same time weâ€™ve increased our staff levels by about double what we would normally put into income recovery. Weâ€™ve been very successful up to now in getting the number of evictions right down, but we can see that inevitably steadily rising. The difficulty for us is that if thereâ€™s no long-term solution to paying that rent we canâ€™t sustain business as a landlord.â€
Despite the obvious disaster Universal Credit will be for both tenants and landlords, the Welfare reform minister Lord Freud (I thought the Freuds were known for being intelligent!) is still supporting Universal Credit and said: â€œMillions of people will be better off on the new benefit.â€ Â To which we have to agree – yes millions of benefit claimants who keep the money and don’t pay Landlords their rent will certainly be better off.
Should we as landlords of DSS tenants be worried? Well it is a concern. But, taking into account the possibility that the government will not come to its senses in time and cancel the whole misguided notion before the Autumn, we have a plan in place to ensure we still get paid. Â Many landlords will not have a plan and will either suffer financially or simply stop renting to DSS tenants.