Is Universal Credit still failing landlords?

The Government announced, in 2010, its plans to replace six means-tested benefits with a single benefit namely for those of working age: Universal Credit (UC). Today, 4 years on from the start of the roll-out across England, the new scheme is still riddled with operational problems.

According to the latest research, the biggest losers, apart from tenants, are landlords, Social and Private.

Housing Benefit is one of the benefit payments being replaced by UC. Research suggests that 86% of council tenants in receipt of Universal Credit (UC) are now in rent arrears. Shockingly, the report also suggests that prior to claiming UC, only half of those households had pre-existing rent arrears and the amount of arrears has, on average doubled.

Research by the Residential Landlords Association (RLA) last year found that 25% of landlords with tenants in receipt of UC have said that they have tenants in rent arrears.

Lord Freud former Welfare Reform Minister who was part of the team rolling out the scheme back in 2010 admitted in February 2017 that there was a “problem” with arrears, he stepped down in December. Months later the problem seems to be worsening. To mitigate losses and improve administration, Department of Work and Pensions (DWP) have recently launched two versions of new forms for landlords to apply for direct payment, namely UC47. A secure version applies to councils and a handful of Housing Associations who operate secure e-mail addresses, typically those with in the domain.

A non-secure version applies to most Housing Associations, Private landlords and Letting Agents. The non-secure version can be sent by e-mail but any supporting evidence, like letters (e.g. confirming vulnerability) either have to be incorporated into the body of the accompanying e-mail or sent to DWP’s Freepost address where the evidence is uploaded and associated with the UC47 non-secure form. Not what you would expect in 2017!

Landlords are still left confused with the process for receiving direct payments, especially when the claimant is in rent arrears. The system is anything but reliable with claims being refused for what appears as inexplicable reasons.

Caridon Landlord Solutions was established to help find solutions for the range of issues all landlords may face and have seen the number of landlords that have approached them regarding UC has increased dramatically in the last few months.

Recently a landlord got in touch, seeking our help, having made a request for direct payment of the Housing Costs. This was refused by DWP, despite the tenant accumulating more than 2 months arrears. By the time the landlord contacted us, the tenant had incurred more than £6400.00 in arrears. We intervened and succeeded in persuading DWP to redirect payments to our client, with an additional amount to offset the accrued rent arrears.  

The new system is putting some landlords and letting agents off from leasing to benefit tenants, which is a pity. A recent survey conducted 68 per cent of landlords are less likely to rent to those who are in receipt of benefit.

This is partly because of DWP’s remote and ambivalent approach. It’s not the most welcoming or helpful of organizations. Its processes and procedures, are completely different to council administered HB/LHA schemes. Under the Housing Benefit system, landlords found it easier to secure direct payment of rent and communication channels are certainly much better.

With Universal Credit it has been a totally different ball game.  DWP’s excuse for not engaging and sharing information is, it is bound by data protection and claimant confidentiality. But so are councils and its never hindered their willingness to help. In contrast, DWP seem to insistent on making life as difficult as possible to secure information. Landlords, in many instances, can’t get basic answers such as “has the Alternative Payment Arrangement been actioned and “when can I expect payment”.

Given the shortage of social housing, many Local Authorities have been leaning more and more to the private sector to help them fulfil their responsibilities under Homeless Persons legislation. But Universal Credit makes that much more difficult. For example, in temporary homeless accommodation, the rules permit payment to the temporary resident. Despite warnings this wouldn’t work, Government persisted.

LB of Croyden was one of the first boroughs to feel the adverse effects of the transition to Universal Credit. Its Mark Fowler, Director of Gateway and Welfare Reform, has openly spoken about the challenges the Local Authority has faced since the roll out within the Borough. Croydon has approximately 221 live UC claims with Housing Costs. Mr Fowler reported that the Borough had lost £2.5M in much needed revenue and that this loss could not be sustained. He urged the Government to quicckly review and revise the situation.

In March 2017 Ministers announced new guidance was being produced that would ensure those in temporary accommodation, in full service areas, will have their rights to housing benefit restored with payments being redirected to the council. This is being regarded as a major U-turn, and something which will eventually be repeated for private sector claimants.

Caridon Landlord Solutions, supported by Bill Irvine, UC Advice & Advocacy and Property Tribes is currently campaigning for Private landlords to have similar rights to Social Landlords. Despite initial promises, we would be operating on a level playing field there is no doubt the private sector is being discriminated against, causing significant rental loss to landlords and Letting Agents providing accommodation to UC claimants.

Universal Credit was set up to create a fairer benefit system empowering those in receipt of benefit to become independent, manage their finances and incentivise people to work. Four years on, it’s apparent that many tenant claimants and their landlords are being penalised by the new system.

Rent arrears are rising at an alarming rate; tenants are being evicted; landlords are struggling to meet their obligations to lenders; and lenders are stipulating BTL loans will not be available where tenants are benefit dependent.  

It’s surely time for DWP Ministers to take cognisance of what’s happening and take steps to remedy the obvious flaws in the structure of Universal Credit and DWP’s administration of this new benefit, which has to date been a bit of a disaster.


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