Friday, 06 March 2015

Direct payment could undermine universal credit

Making housing benefit payments direct to tenants as part of universal credit could lead the government’s flagship welfare policy to ‘backfire’, a think tank has warned.

A report out today from the Social Market Foundation says the majority of social tenants who are receiving housing benefit want payments to go to their landlords.

Research carried out by Ipsos Mori to inform the report found the thirty low-income households interviewed were ‘strongly opposed’ to receiving their rental payments.

Most were concerned the change would lead people to spend housing benefit payments on costs other than rent, increasing arrears and evictions.

Under universal credit a range of existing welfare payments will be combined into a single monthly payment. The reforms, which come in from October 2013, will also see the housing element of the credit paid direct to tenants.

The SMF report also found families were concerned about how moving from a weekly or fortnightly to a monthly payment would affect their ability to budget. Last week work and pensions secretary Iain Duncan Smith said the government would allow fortnightly payments to continue on an interim basis in some cases.

The SMF is calling for the government to set up an ‘online budgeting tool’ for households on benefits. This would allow them to determine how often they receive payments, and also set aside money for purposes such as housing costs.

Dr Nigel Keohane, deputy director at SMF and co-author of the report, said universal credit is at risk of ‘backfiring’ and would ‘throw people in at the deep end leaving them either to sink or swim’.

‘This laissez-faire approach will create real problems not only for families themselves, but also for public service organisations, such as social landlords and childcare providers, that families will end up owing money to,’ he said.

The report notes the changes to housing benefit payments are also likely create ‘significant problems’ for social landlords, and could damage their credit ratings as their income would be seen as less stable.

It states: ‘The result would be that housing associations would have to pay more to borrow money, with knock-on implications for the building of affordable housing and new dwellings.’

Readers' comments (29)

  • Melvin Bone

    The claimants should be given the option to choose to pay their landlord direct.

    Is that not sensible?

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  • Rick Campbell

    Coalition government, sensible -- not likely Melvin!

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  • Melvin Bone

    They got to the truth about Hillsborough so there is hope for the coalition yet...

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  • Rick Campbell

    Might take over 2 decades to get UC working then?

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  • I used to respect IDS as a politician, however one of the issues with UC regarding insisting that the housing benefit element is paid directly to the tenant, has forced me to think again.

    We have first hand experience of both vulnerable and dishonest tenants who will simply withold tax payers money that has been set aside for their housing. The idea of UC is to give tenants choice who can decide on day one of their tenancy to have their housing benefit to be paid directly to the landlord. IDS states (when questioned in Parliament this week) "We dont want to treat these people like children". In fariness some will pass the rent on but the majority will try every trick in the big book to not pay.

    The cost to allow these direct to landlord payments is nothing. The cost of landlords refusing benefit tenants and the guaranteed massive increase in evictions will be massive for the government.

    The principle of UC is very good but there are fundamental flaws that MUST be addressed.

    Please copy and paste link below to petition against this ridiculous situation. I have spoken to a number of housing benefit officers who also believe this proposed rule to be preposterous. The man in the street knows the housing benefit element of the payment will not be paid in so many cases.

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  • Joe Halewood

    Melvin, the full truth has yet to come out and what has emerged was nothing to do with government at all. It was an independent panel and lest we forget in October 2011 Cameron was still saying the evidence wasnt there - a blind man looking for a black cat in a darkened room was his choice of quote - and then he was also moaning that Andy Burnham was getting all the publicity for allowing the independent panel and not him!

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  • Chris

    Absolutely - choice is what is required.

    But Direct Payment is essential to the government agenda of cutting welfare payments. If housing benefit continued to be paid directly to landlords, but was cut by the extent the Tories would wish, then recovering the arrears from (for instance) benefit payments would be limited to a value less than the amount needed to complete the rent.

    Exposing rent arrears as being a result of benefit cuts and the claimants inability to pay would rather spoil the Tory Party and Press desire to run endless stories about how these feckless tenants have had so many thousands lavished on them but they could not even bother to pay the rent. Despite £Millions being spent on budgeting lessons and £Millions spent of transitional arrangements, and the government's achievement of lower private rents and more affordable homes built, these tenants have failed to play their part and therefore do not deserve to be housed - the Tories will argue.

    Isn't this exactly what they have been arguing for years? Now they are enacting their dreams - they are not going to spoil it by offering tenants choice!

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  • Given London Councils (collective) supports around 30,000 (2011/12) people, I refer to and of which some councils raised the bar on it FACS criteria to critical or substantial it will be interesting to see how this develops, will numbers increase/decrease?

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  • Of further interest on this topic, I refer to

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  • Melvin Bone

    Joe: 'Home Secretary Jack Straw backed Stuart-Smith's (1998) findings and said that "I do not believe that a further inquiry could or would uncover significant new evidence or provide any relief for the distress of those who have been bereaved'

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