Monday, 06 July 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.’

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