Guest article by Gary Silver of Ashley Property Services
Whilst the idea of grouping all benefits under one umbrella, organised by one organisation, the DWP seems a very good way forward, there are some serious questions that have not been properly addressed.
As a landlord, the BIG question is the ‘direct payment of the LHA element’ being paid to the tenant.
The basic principle of UC is very good as it merges all of the complicated benefits recipients receive into one i.e.. JSA, Tax Credits and Income Support. My wife works for CAB as an advisor (over 10 years experience) and still finds it very complex. It has also been decided to include Housing Benefit LHA within this payment and take the work away from the local Councils. From October the LHA element of the bulk payment MUST be paid directly to the tenant. The tenant is to be empowered with paying their rent and bills. As the rules say, they must treat their bulk payment like a ‘wage’ to get them used to the world of work. I think this is quite possibly one of the most naive sentiments I have ever heard. In my opinion over 50% of tenants would cease the rent payments after a few months. You would certainly have no chance of getting the rent in the last month or two when the tenant know they are moving in so many cases.This rule has the potential to end our business.
We take many tenants on from homeless units, drug/alcohol rehabilitation department, ex offenders and young single mothers. In the past when many of these people have received direct LHA payments, the rent simply is NOT paid. I have had so many excuses and can tell so many horror stories regarding this topic, I could write a small book. Tenants on benefit are vulnerable by definition and they have failed to survive life’s jungle, many for a temporary amount of time and many since birth. How can they survive when offered such a great temptation, namely, cash that they are supposed to pay as rent. The LHA element of Universal Credit is in there to pay the rent. The cost of the ‘split’ of payments is negligible and choice should be given to the landlord and tenant when they sign a tenancy or if a tenant falls into arrears the ‘direct to landlord’ element should kick in.
The repercussions will be dramatic as these needy people will become homeless very quickly and demand for property will massively increase. The use of expensive bed and breakfasts will become excessive and these cost a lot more than the standard LHA rates.
This system will NOT work and unless this decision is reversed well before Oct 2013 when UC comes in, we will be switching our properties to student lets and selling a chunk of our portfolio whilst we can. Whilst we are not a housing association, it has become apparent that their credit rating is to be downgraded as the financial institutions know that the results will mean a much weaker cash-flow situation due to massive arrears and much higher admin costs. It seems that only a very small number of people, namely Iain Duncan Smith and Lord Freud are so blinkered on this topic. We do not live in an ideal world and a single payment will not work. The LHA is ‘taxpayers PUBLIC’ money that is to be used specifically to pay the rent.
Surely, to spend this money on anything other than rent is FRAUD. Tenants have enough protection, yet landlords have so little.
We ask and demand this change to the ‘direct payment’ that will cost the government NO more money but will cost millions when evictions increase dramatically. If the government do back down on this one policy, this will not be a U turn as the rule is not policy yet.