Universal Credit
Posted on: Category: Landlord News, Universal Credit, Rent Arrears, Benefits
Universal Credit
Taken from an article by Josh Hall, Simply Business
Universal Credit will change the way in which landlords deal with tenants in receipt of benefits.
Universal Credit is a complete overhaul of the benefits system. Under Universal Credit, six separate benefits will be rolled into one monthly payment.
The Universal Credit scheme is already being rolled out and will be introduced in stages. The first stage began in April 2013. Universal Credit is paid each month directly to a bank, building society or Post Office account.
There are around 1 million tenants in the private rented sector who rely on benefits for at least part of their rent. Universal Credit represents a major shift in the relationship between landlords and tenants in receipt of housing benefit. In the past, many private and housing association tenants had the option to have their housing benefit paid directly to the landlord. Under Universal Credit this will no longer be possible. Payments will be made to the tenant, and it will be their responsibility to pay the landlord on time.
It is also important to understand that Universal Credit will be subject to an overall benefits cap. This means that recipients will not be able to receive any more than £2,167 per month for couples with children or single parents, and £1,517 for single people. It has been suggested that the cap will make it even more difficult for some claimants to make their rent payments.
Universal Credit has been widely criticised on a number of fronts. The first major criticism concerns implementation. The rollout process has been problematic and it is now clear that the scheme will be completed well behind schedule, if at all. The application process has also been criticised for being lengthy and complicated. It takes around 45 minutes online. Problems with the application process have led to speculation that prospective claimants will be left without Universal Credit because of their inability to make a claim.
Universal Credit’s replacement of housing benefit and the government’s insistence that it will only be paid to tenants has also been widely scrutinised. It is important to understand that tenants in receipt of housing benefit are overwhelmingly against the introduction of a system through which they will be responsible for making payments. This is particularly prominent in the social housing sector, in which, according to a Polis report for the National Housing Federation, 86% of tenants “believe strongly that it is better for housing benefit to be paid directly to the landlord so that they are secure in their income.” Half of all social housing tenants who have previously missed payments are “not confident that they can keep up rental payments if they receive their rent direct.”
Understandably, landlords are concerned about the implications of Universal Credit. Some of the country’s biggest landlords have already stated that they will no longer rent to tenants in receipt of benefits as a result of the change.
Landlords who continue to rent to claimants should be prepared for a spike in arrears. If a tenant builds up arrears, you may be entitled to contact your tenant's Jobcentre Plus to request that payments be made direct to you. You should contact your tenant immediately if you think that they are in financial difficulty.
