Wednesday, 01 April 2015

Direct payment pilots report increased arrears

Landlords testing direct payment of benefit failed to collect 8 per cent of rent on average in the first four months of the six pilot projects.

Data released today by the Department for Work and Pensions showed 6,220 tenants across the UK were paid directly in the first four months of the projects. Of these, 92 per cent of rent was collected on average overall, meaning arrears were around double the normal figure. A total of 316 tenants have been switched back to payment of benefit to the landlord.

The year-long projects are testing direct payment of housing benefit ahead of the roll out of universal credit next October. Universal credit, which combines a number of benefits into one monthly payment, will be paid direct to tenants in a bid to encourage claimants to be responsible for their finances. This has raised concerns that landlords’ rent arrears could rise, affecting credit ratings and their ability to borrow cheaply.

Each of the projects are testing different circumstances under which payment can be switched back to the landlord. They are also being used to test which groups of people should be exempt from direct payment and what kinds of support they need.

Rent collection levels in the project ranged from 88 per cent to 97 per cent.

Projects, involving teams of social landlords, are taking place in Scotland, Wales, southern England, west midlands, London and northern England.

Lord David Freud, minister for welfare reform, said: ‘Direct payments of benefits will help people to step into the workplace without the many institutional barriers that now exist.

‘However, we have always been clear that exemptions must be in place alongside the right support for those who need it and the demonstration projects are showing us and the housing community the steps that must be taken.’

The DWP has come under pressure to reveal findings from the project. It had indicated it would publish data last month, but attracted criticism from housing sector figures when it only published findings from a survey carried out before the pilots instead.

Gavin Smart, director of policy and practice at the Chartered Institute of Housing, welcomed the publication of the latest data.

‘The arrears percentage in this report is too high and would be hard for landlords to support in the longer term, but the pilot projects are still in their early stages and we hope collection levels will increase once the new systems and approaches begin to bed in,’ he said.

‘The six areas are trialling different rent collection processes and switchback mechanisms and as the pilots continue we hope more information will be released about how each system has worked.’

DETAILS FROM THE PILOTS

SCOTLAND

Dunedin Canmore  and Edinburgh Council

  • 1,832 tenants invited to take part
  • Payment switched back if tenant not paid before 25th of the following month or if tenant failed to engage
  • 63 ‘switchbacks’ so far

SOUTHERN ENGLAND

Oxford Council and Greensquare Group

  • 2,000 tenants will eventually take part
  • 907 council tenants and 370 Greensquare tenants involved in initial phases
  • Payment switched back if tenant has 8 weeks of arrears
  • 67 ‘switchbacks’ to date

WEST MIDLANDS

Shropshire Council, Bromford Group, Sanctuary and The Wrekin Housing Trust

  • 1,166 Shropshire Council tenants on the project, 562 Bromford tenants, 378 Sanctuary and 156 from The Wrekin Housing Trust.
  • Payment switched back after 12 weeks of arrears
  • 15 ‘switchbacks’ to date

LONDON

Southwark Council and Family Mosaic

  • 1999 tenants identified to take part, but only 89 per cent (1772) have responded.
  • Payment switched back after eight weeks of arrears, but after four weeks of arrears they receive support from an income officer. When payment is switched back the tenant is placed in a ‘probationary’ category, meaning officers help with management of finances.  If the tenant pays rent for two months they then receive direct payment again.
  • 39 ‘switchbacks’ so far

WALES

Torfaen Council, Bron Afon Community Housing and Charter Housing

  • 1,837 tenants to take part with 535 tenants involved in the first payments
  • Payment switched back if tenants underpay by 15 per cent over 12 weeks suggesting switchbacks for underpayment .
  • 59 ‘switchbacks’ so far

NORTHERN ENGLAND

Wakefield and District Housing and Wakefield Council

  • Around 1,000 tenants have received direct payment of benefit
  • Payments switched back in the event of eight weeks of arrears, where there has been no payment for eight weeks, where there is a 15 per cent underpayment over three consecutive four week periods.
  • 97 ‘switchbacks’ to date.

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