Tenant Referencing Imperative if Universal Credit is Introduced

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.


Read our EXCLUSIVE Interview with a Local SW Property Manager; “New Government Policy will breed rogue landlords.”

 

 

 

 

 

 

Author: SamiiB-P

Senior PR Officer at TenantReferencingUK.com & Admin at NLCEuk.co.uk . Any queries email me at: samii.boydprice@nlceuk.co.uk / samii@landlordreferencing.co.uk or give me a call on: 0800 9994 994 (option 6).

11 Comments

  1. Pingback: Welfare Reform will "rot the soul" says "poverty czar". | LandlordReferencing.co.uk

  2. Pingback: An average of 9 people are chasing each private tenancy.

  3. Pingback: Confirmed: Universal Credit ends direct payment of housing benefit to landlords.

  4. Pingback: Priorities not pasties!

  5. i agree that the system is all wrong, i had 2 dss people, one paid via housing and the other himself. guest which one lapsed, yes the one who paid himself. some tenants are aware that they are not good with money and want the housing to pay. meanwhile joe bloggs isnt paying rent, feeding his alcohol and smoking habit as well as his pet dog! on housing benefit. meanwhile spending the day watch daytime tv with similiar buddies. why create more homelessness.

  6. Pingback: New Government Policy will Breed Rogue Landlords. | LandlordReferencing.co.uk

  7. This Universal Credit is going to cause many hundreds of thousands of pounds of losses to landlords.
    My advice is get rid of your LHA tenants and source private tenants and advise the new tenants that if they end up on Universal credit they will be evicted should they fail to pass on the full contractual rent.
    Until the useless county court system in the UK is improved to the extent that a non-rent paying tenant may be evicted after 2 months non-payment of rent; and I mean literally the day after the 2 missed rent payment.
    This means that a tenant would be evicted after 1 month and 1 day.
    This WILL NEVER happen so therefore you must have at least £6000.00 available to cover mortgage payments and damages.
    This you will need per tenancy.
    If you don’t there will be every liklihood of of your property being repossessed.
    Obviously ideally you should use the excellent RGI policies that LRS sponsors.
    The BIG PROBLEM here is that it is extremely unlikely that ANY of our tenants will qualify for RGI due to the onerous income requirements.
    After all how many of your tenants earn gross £2.5 times annual rent.
    I would suggest 99% of tenants would not be able to meet this requirement and therefore as a landlord you are completely exposed to the risk of a tenant defaulting.
    Therefore you should self insure to the tune of £6000 per tenancy as it will take up to 7 months to evict a tenant; who clearly won’t pass any rent onto you!!
    You should also obviously use LRS as I believe this is the only realistic way we stand a chance of protecting ourselves from wrongun tenants!!

  8. Name: Paul Barrett

    Message: Would it be a good idea to specify to prospective tenants that before they signed an AST they would be required to sign 2 electoral roll forms.
    One for the tenant and one for the landlord.
    The landlord would send the form to the council.
    Clearly any tenant who refused to sign you would reject.
    They should be prenotified that this will be a requirement.
    If they refuse could one register with LRS the fact that they failed to sign up to a legal requirement namely the electoral roll?
    Also if you advised a prospective tenant that this would be a requirement and they then failed to carry on with the referencing could you again apply this information to LRS even though they were never a tenant because of advice that they would be required to register before signing an AST.
    Clearly a propective tenant would normally sign up and to not want to do so is clearly suspicious.
    Also if such a tenant also did not sign an AST if they were advised that LRS was to be used that again LRS should be advised that the tenant refused to carry on with referencing once they were aware that LRS WOULD be used?

  9. As an ‘amateur’ landlord, I have been affected by LHA tenant defaults and see no likelihood that will change. I have tried to ensure I do not take LHA tenants, but with the jobs market as it is, even if they are employed when you take them on, there’s a chance they will end up on benefit, and the first you know is when the rent doesn’t arrive that month.

    Many young people, as we have seen this week, have little or no sense of responsibility, and believe they are owed a living without earning it. My most recent problem tenant had a guarantor who paid the deposit, and provided employer details. She insisted on having her own beds, so I removed mine. Despite the flat being perfect, she presented a list of problems; electrics, lights, water, broken keys and locks, and demanded new carpets, despite the fact she had stopped paying rent and told my agent she was waiting for her benefit. We served notice to quit, and after 6 months and very little rent, she threw the keys into the agent’s office and ran down the road.

    On inspection, in addition to damage, she had put lovely tiger print wallpaper in the lounge. She was a tenant; why did she think she was entitled to do that?

    It’s simply something you have to live with …and it will get worse! If you can’t cope, sell up, because the stress will ruin your life.

  10. I can’t believe this is even a possibility! It would be ludicrous, why does a tenant even need to touch their rent, if the payment is for rent then why put temptation in their hands.
    When is this government going to start considering the Landlords, who provide the accommodation and the tax payers; without whom there would be no Benefits!
    Like Pete I too am totally fed up with the system as a whole!

  11. Samii,

    If that insane law gets passed whilst the rest of the country struggles to make ends meet it will be like gifting a bonus every month to all those who claim benefit and don’t pay their way.

    We could refer to this time in history as the period when the austerity measures made hay for the “BANKERS AND THE BUMS” the very two factions of our society which brought about this countries demise in the first place. Hooray for logic eh!! .. I could be known as 5 P Pete

    P#s#ed off Pete the pot -less property person