Tenant Referencing Imperative if Universal Credit is Introduced
The Welfare Reform Bill provides for the introduction of a ‘Universal Credit’ to replace a range of existing means-tested benefits and tax credits for people of working age, starting from 2013.
The Bill follows the November 2010 White Paper, ‘Universal Credit: welfare that works’, which set out the Coalition Government’s proposals for reforming welfare to improve work incentives, simplify the benefits system and tackle administrative complexity.
The intention is that this payment – which will include an element for housing costs – will be paid as an integrated payment to the tenant.
This marks a significant change from the current system in which many social housing tenants choose to have their housing benefit paid directly to their landlord.
“By creating a single, integrated benefit, households who claim Universal Credit will now automatically receive everything they are entitled to. The new system ensures that someone either claims everything (because they are eligible) or nothing (because they are ineligible). In effect, there will be ‘automatic passporting’ for people who currently claim some, but not all, of the benefits or Tax Credits to which they are currently entitled. Hence with this much simpler system, households will be more likely to claim their full entitlement.”
~Excerpt from Chapter 7 – The Impact of Universal Credit~
The controversial bill has been criticised by homeless charities, which claim that plans to introduce universal credit and an overall benefit cap could see 40,000 people forced out of their homes.
In a leaked letter to the prime-minister, from the office of Communities Secretary Eric Pickles, it was revealed that instead of producing a predicted £270million saving, the benefits cap is likely to ‘generate a net cost’ to the taxpayer as councils are forced to pick up the tab for thousands of homeless families.
It also said half the 56,000 affordable homes planned for the next four years will not be built, as developers fear that the new rules will mean tenants cannot afford to pay their rent.
Although Downing Street remain ‘fully committed’ to driving through these reforms, and Housing Minister Grant Shapps dismissed the claims made in the leaked letter, saying that the statements were “not true” and the figure based on an internal memo “speculated on what might happen if the cap was introduced at a certain level” – the second reading of the bill was rescheduled from the middle of July 2011 to the 13th September 2011; prompting speculation that the House of Lords are undecided over these controversial changes to the benefits system.
For a more in depth look at the Welfare Bill; http://www.parliament.uk/business/news/2011/march/welfare-reform-bill-second-reading/
We at LandlordReferencing are also highly critical of the universal credit bill, as we believe tenants should have the right to decide if their rents are paid directly to their landlord – to help tenants on low incomes avoid debt and arrears.
Principally, this is deeply worrying for residential landlords across the UK, because if this bill is passed un-amended not only will it drive up rent arrears, evictions and homelessness, it also threatens the delivery of affordable housing in high-value areas.
A pilot scheme stopping direct payments to landlords for a temporary period, conducted by L&Q Housing Association in London found arrears in some areas more than doubling; from just over 3% to more than 7% when housing benefit was paid directly to tenants rather than directly to their landlord.
It’ s also important to remember that an estimated 15% of local authority tenants and 13% of housing association tenants don’t have bank accounts, and so would be unable to pay their rent via direct debit.
We at LandlordReferencing do not favour this idea at all; because if this bill is passed it will fundamentally mean that tenants receiving housing allowance will be virtually getting paid on a pay packet basis.
This in turn will be too much temptation for those dysfunctional people out there (even more so than it is now), creating more heartache for the residential landlord in the form of higher rent arrears.
We expect property damage to rise as well, as from more people being made homeless there will be an influx of rogue tenants coming into the private sector.
If this bill is passed then it will bring a multitude of problems for landlords right across the UK and the only true way to be able to reduce the amount of tenants in arrears or bad tenants being taken by new landlords will be for all UK landlords to network with one another.