The announcement by work and pensions minister Lord Freud this week at the National Housing Federation’s annual conference that he is launching six pilots to test the introduction of direct payment of housing benefit to tenants was a definite plus.
Test the benefits
True, he also said that ‘direct payment to tenants is on its way’ as part of the introduction of the universal credit, but it has been clear for a while now that an about-turn is sadly not on the cards.
The task now facing social landlords is to ensure the year-long pilots rigorously test Lord Freud’s approach. Few would challenge the aim of smoothing the path into work for those on benefits. What is certain, however, is that this path will be paved with increasing rent arrears - particularly among the 20 per cent or so of tenants for whom the Department for Work and Pensions estimates the switch will present most upheaval.
It is welcome that Lord Freud has finally begun to outline some of the detail about how he feels the roughly £4 billion in housing benefit payments this group represents will be safeguarded. However, we are still talking about £4 billion - and an increase in arrears of even a few per cent will have serious implications for social landlords.
The use of a ‘trigger’ to pay housing benefit direct to social landlords, as is already the case for private landlords under the local housing allowance, is welcome, but several weeks worth of arrears are likely to build before the trigger kicks in and this money will have to be reclaimed. These additional costs could be mitigated by allowing the administration of the housing element of universal credit to remain with the local authority teams which have built up strong expertise in working with vulnerable tenants.
The pilots will also, by definition, occur before the universal credit is rolled out from October 2013. Its success rests on the quality of its supporting IT infrastructure. It is a laudable goal to say the new system will respond to the flexible needs of tenants in terms of fluctuating income levels causing the amount of universal credit to alter accordingly, but quite another to deliver this in practice. After all, the government’s track record on procuring large IT projects is not exactly reassuring.