Direct payment could double rent arrears
Housing associations are anticipating rent arrears could double as a result of moves to pay housing welfare payments direct to tenants.
David Orr, chief executive of the National Housing Federation, told a conference on welfare run by the umbrella body that ‘a number of housing associations’ are modelling for the impact that a change on this scale would have on their operations.
He warned that the three biggest challenges facing the sector are ‘welfare reform, welfare reform and welfare reform’ and said on the arrears modelling: ‘Who knows if that is right or not, but I think it is rational to be exploring things in this way.’
Landlords are concerned that government moves to pay the housing element of universal credit direct to tenants could damage their financial viability and affect their ability to borrow money for development.
Welfare reform minister Lord Freud repeated his promise that direct payment ‘will not end up undermining the finance of social landlords’ at the conference, but insisted ‘direct payment to tenants is essential for universal credit’.
The government has set up six pilot projects to test the impact of direct payment, and Wakefield and District Housing chief executive Kevin Dodd gave details of how its trial will work at the conference.
He said the housing association is going to move 346 tenants to direct payment next month. The landlord contacted 1,698 tenants about the move, but only 830 responded, and many of these were not deemed suitable because they are vulnerable or are already eight weeks or more behind on rent payments.
Mr Dodd also said around 90 per cent of tenants had asked why they should shift to the new model rather than continuing with the current system of payments.
He added that lenders have indicated they are looking for margins to remain with half a per cent of current levels ‘and that is a very tight margin’.
The pilots will be assessed by academics at Sheffield Hallam University. This analysis will consider the impact on the financial viability of social landlords, although it will not rule on whether the minister’s commitment to avoid financial harm is likely to be met.