Sunday, 01 March 2015

Direct payments dropped if tenant in arrears

Housing benefit payments will be switched to landlords if tenants fall into arrears once the universal credit is introduced.

Welfare minister Lord Freud unveiled the move at the National Housing Federation’s annual conference today, and announced a series of demonstration projects that will test how the new approach will work.

Universal credit, which will combine various welfare payments including housing benefit into one sum, will be paid direct to tenants. At present many tenants have their housing benefit paid to their landlords, and there have been concerns in the housing sector that the switch to universal credit could result in an increase in arrears.

Lord Freud acknowledged the concerns, but said the government is committed to making direct payments to tenants the default position. ‘I remain absolutely convinced that there are mechanisms available that will allow us to introduce a single universal credit while also providing protection for the housing sector,’ he said.

He called for housing associations and local authorities to volunteer for ‘half a dozen’ demonstration projects that will assess how this can be achieved. A key element of these will be a ‘trigger’ that switches payments from tenants to landlords if arrears mount up.

Lord Freud said government research suggests receiving housing welfare payments direct will be entirely new for only around 20 per cent of tenants, and the demonstration projects will evaluate how best to support this group. Direct payment will be introduced for new tenants from 2013, then phased in for existing tenants.

David Orr, chief executive of the National Housing Federation, called on the government to go further. ‘Why not give people the choice to ask to have their rent paid direct to their landlord,’ he asked.

‘Retake the opportunity for individual tenants to choose to have their rent paid direct, then we will be with you all the way.’

In numbers: who will be affected by direct payments?

The Department for Work and Pensions has analysed how tenants will be affected by its payment rules for the housing element of universal credit. Its figures break down as follows:

  • 35 per cent will be unaffected because they don’t claim housing benefit
  • 10 per cent are working age adults who already have experience of managing their housing costs
  • 10 per cent are working age adults who are deemed vulnerable and will continue to have their housing welfare payments made direct to their landlord
  • 25 per cent are pensioners, how their benefits are paid will not change
  • 20 per cent have their housing benefit paid to their landlord at present but will receive the money directly under the new system

Readers' comments (12)

  • Usual Suspect

    Be very interested to see how quickly this would happen in practice, i suspect this could still be absolute disaster for rent collection. No rent = no funding for services and it is the good bill paying tenant that suffers in the long run

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  • Rick Campbell

    A bit of a departure for mr this ... this idea is sensible (and is more or what happens now in similar circumstances) -- about time there was a glimmer of sense -- some more sense is needed in relation to this,

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  • Jimmy Cricket

    I would be interested to see how in practice this would work, and at what level of arrears it would be implimented. I'm sure the administrative process will be tortuous no matter what. More paperwork **groan**

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  • Rick Campbell

    The paperwork mechanism exists already but it lies within the remit of councils who are the those who deal with housing benefit.

    I would have thought that rather more consideration would have been given to the praacticalities rather than force existing DWP staff to do this work on top of their own (and thereby making thousands(?) of housing benefit workers out of work) and come out with a nonsensical statement that 80% of it will be done online.

    There will still have to be council tax benefit staff but were will the jobs be to replace those housing benefit staff who have been made redundant?

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  • Peter - I wholeheartedly agree.

    Lord Freud needs to get into the real world. Any excuse for 75% of tenants not to pay, the excuses come out. A compromise would be if landlords could allow a ruling stating that tenants MUST be 2 months in advance of rent, then I would feel more comfortable with direct payments. This way the most vulnerable would end up less vulnerable. Those that can manage their finances can then be given a chance.

    Freud MUST consult with landlords who work with tenants in this area.

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  • Rick Campbell

    Serious question this, honest.....

    What happened when there was no housing benefit or council tax benefit?

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  • Rick Campbell

    I have an awful feeling that the answer is that they were included in the state benefits that existed at the time.

    I suppose there was a lot of fuss made when such amounts were hived off to councils to administrate?

    I don't suppose that rent rises were as high as now and that there were stricter controls on rent rises?

    Mind you, wasn't there a guy around called Peter Rachman?

    And, did Cathy ever come home?

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  • Alpha One

    There's that U-Turn again!

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  • Joe Halewood

    Does anyone have a link to the statistics which show the average time it takes for a HB claim to be processed?

    The reason I ask is rent is always paid in advance if you look at a tenancy agreement and when you add on the average processing time - which in the past for new claims has been over 100 days in some cases - then the likelihood is that direct payment will become the norm for all new claims.

    Additionally as HB is abolished and replaced by the housing element of UC then the processing time on renewed claims will be very relevant as this needs to be considered e the arrears position.

    Further, whether a new claim or a renewal will see direct payments for all those tenants that are currently in arrears.

    And of course we have never seen a new IT system as UC will create work properly from day one or even in the first year as 'teething' problems always occur.

    The key factor of course is when direct payments will kick in and this is what we havent yet got confirmation of - For example will it be 8 weeks or 4 weeks or 24 weeks, who knows? Based on the experience of UC the government do know as for example the move to monthly paymens was only announcedd this week and IDS and Freud didnt just dream this up overnight but must have considered this for some time.

    It is this deliberate withholding of process and fact that I am deeply concerned about. Such information has been withheld from Parliament and not been debated and when such matter have serious consequences, such as the move to monthly payments. then this is akin to despotism and denying debate. Thats not a party political attack but a genuine political attack on legitimacy and democracy which it seeks to deny.

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  • Rick Campbell

    Most Parliamentarians don't appear to care Joe -- many of them have their comfortable second homes, allowances for expenses, travel, staff, overnight stays, etc.

    Not forgetting the cheap booze and food at the greatrest club of all -- the Houses of P.

    They are certainly taking the P.

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