Thursday, 05 March 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.’



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


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


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


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


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


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.

Readers' comments (17)

  • Usual Suspect

    Thats the pilot too! with all the extra attention and doesent incude christmas period.

    In the words of Taylor "do i not like that"

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  • There has already been 30 years of welfare reform , so why bring
    in more drastic changes ?
    Previously, all working age claimants must use DWP / Jobcentre plus
    offices to claim benefit , and these offices work closely alongside
    local council revenue services to administer Housing Benefit , which
    has all been very accurate and helpful for everyone involved,
    including the public , and the different benefit staff.
    So how will this new system of direct payment change these
    existing provisions ? What will happent to the staff working at
    these local councils ? ....... and how will civil servants know
    how much each claimants rent is / especially with rents increasing
    so frequently ?

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  • Direct payment pilots report increased arrears – you did not need to be a rocket scientist to realise this would happen.

    James -happen to the staff working at these local councils. More work - if LA's own their own stock they will be chasing up rent arrears. If they don't then they will be housing more homeless cases.

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  • Chris

    Another IDS/Shapps success - that someone else will clear up the mess from.

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  • Can they not just take the LHA element of UC, which is after all tax payers money to be used SPECIFICALLY for RENT and pay this DIRECTLY to the landlord when vulnerability or dishonesty is suspected or confirmed.

    There is NO cost for the government to do this, but the costs to them for not doing this are massive to the landlord, the tenants and the government.

    This is one SHOCKING and unnecessary element of UC and should stopped in its tracks as it simply wont work in so many cases.

    If you have to live on benefits then you are 'vulnerable' by definition.

    Freud and IDS are sailing down a blind tunnel believing they are right on this. Its not too late to come to their senses and they may even be applauded for it. The concept of treating UC like a living wage is very 'nice' on paper but it WILL NOT work.

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  • You have a bunch of people who can't even manage to pay their rent on time despite it being paid in full by UC. They are totally dependant on the state for such a simple task. If they don't know how pay their rent on time how are they going to prepare for working life where they will probably get a monthly salary? I can understand direct payments for the severely learning disabled or the severely mentally ill and oaps but not everyone on benefits. That people will find it diffcult to budget is a reason for doing this not a reason for not doing it. The rest should be made by UC to start managing their finances because, save short term hardship for some, in the longer term they will develop the ability to budget properly and therefore prepare for a life off benefit and in work. This will also help to fix generational worklessness for the hardcore too. Direct Payments create dependancy.

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  • Usual Suspect

    P Righteousness.
    Whilst i understand your point it is the speed of introduction that is the problem.

    Education for people who cant manage should come first. Then phased introduction to people who can mange and are responsible. It should be a ten year program . governement short termisim is a major issue in this country and that all parties

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  • Usual Suspect

    typo " that's "

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  • I was at a conference last week when two of the RSLs involved presented on their experience of the pilots and what the above story doesn't really reveal is the extent to which those involved in the pilots "stacked the decks" by excluding those tenants who were deemed as unable to manage direct payments due to being vulnerable(Oxford) or those who didn't already have a bank account (Wakefield). This cohort management has obviously had the effect of "improving" the results but still arrears have doubled.

    Some RSLs involved in the pilots have also admitted that they provided support to those getting direct payments to pay rent above and beyond that which would/could normally be provided (eg: driving people to the bank to set up a direct debit!) and at a level that "unequivocably" wouldn't be scalable across their wider tenant group.

    How is it a legitimate pilot when so much of it is managed not to look like real life?

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  • Daedalus

    james cunningham | 17/12/2012 4:35 pm
    There has already been 30 years of welfare reform , so why bring
    in more drastic changes ?

    Perhaps because the previous government had the 10 most prosperous years this country has ever seen and emerged with greater debt than there was before?

    This may be a possible reason!

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