Universal Credit – Direct Payments

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.

Gary Silver discussing direct payments on the BBC News channel



  1. Terry Clay says:

    We heard on Thursday from Daphne Hall, Welfare Rights Adviser with Bristol City council that, once a tenant is four weeks in arrears for two weeks, that direct payements can be reinstated (plus as long as it takesDWP to action it). This may still represent a massive hole in a RSL’s income stream but it appears the issue has at least been partly recognised.

  2. Peter Arkle says:

    Gary, I could not have put it better myself. As you say, this is taxpayers money that is going to be misappropriated. All landlords know, as do the LHA officers that I personally deal with that the rent is not going to be paid in enough cases to make it matter. The pilots are showing this to be the case, as if we need the proof.
    I hope that when the government realise that the payments will have to go to the social landlords, they do not miss out the private sector. It is so important for us to to be treated fairly and give the landlords and tenants the option to allow the LHA part of UC to be paid to us. Many landlords make it a condition of tenancy.

    From the governments point of view, LHA is a drain on the countries public money. Caps and bedroom tax will help dramatically and their is some sense in this policy. They just need to make sure that the LHA when paid is used for its proper purpose.

    Keep up the good work Gary

  3. James Melly says:

    As a landlord I really do not understand why the government are allowing us to be legally robbed. I also find it extraordinary given all the cuts at the moment that ministers are gambling public money in this way. If they are so hellbent on pursuing a policy of social responsibility perhaps they should take the gamble and when tenants spend their LHA they foot the bill. In addition, I have still received no justification as to why this naive policy hasn’t been extended to social landlords. This blinkered view of how the world should be is indicative of a government who represent the elite. Some of my tenants will never ever work they have neither the ability nor the desire to do so. If you want to change the benefit system that’s an honourable thing but let’s think by paying the most vulnerable in society a lump sum per month they will suddenly see the light and manage their bills properly. They are laughing at the government it’s free money they know they can spend their rent award and nothing can be done about it. UC will be delayed its obvious. The main guy in charge of the IT died at Christmas and now an outside private company is mashing the process. No doubt this organisation is receiving a fortune in public money and today unsurprisingly the pilot scheme roll out as been delayed. Strange that given its a mess and that’s more money for the firm involved. I want to know where’s the due diligence here? Why does the whole IT rollout fall apart because one guy dies? Madness. I have wrote to all the ministers involved neither of which have replied just a letter from the office of ministers. I’m confused though because if they pursue this policy landlords won’t accept DSS tenants so who will look after them then? It’s a great sound bite on TV we need to stop the benefit culture. I agree, but these people still need to be housed. Some of this people are so vulnerable they could never hold down a job. It’s just not that simple. When direct payments first came in I couldn’t pay mortgages as I didn’t get rent in. It’s now years later and a missile ha been fired at my credit rating all due to some idealistic fool thinking a social experiment and council run courses on how to manage money will change people’s actions. Maybe the LHA award should simply be handed out between betting shops, off licences and drug dealers because its used to feed addictions pure and simple.

  4. Jane Clout says:

    I have been in receipt of LHA since I became ill in 2009. I am now a pensioner and still getting the LHA paid to my bank account. I have never been a day late with the rent. Not all HB tenants are a bad bet.

    Those that can manage their money already do. Those that can’t, won’t.

    It is very different living on subsistence benefits and living on a regular salary. Benefits by design are the minimum the law says you need to live on. No spare money to save for holidays (what’s that?) and emergencies, no wonder people get into difficulties. Servicing extortionate debt is not sustainable, yet it is so easily available. Wonga.com and co must be rubbing their hands with glee at the current changes. Executives of certain such loan companies do donate to the Tory party. Adrian Beecroft springs to mind as an example.

  5. Mr Jim Brown says:

    I quite agree with Mr James Melly’s outlook on this matter. What makes a small group of Government Officials, think this idea will teach all concerned, how to run an houshold budget if they put all their rent and rates allowance into their bank account along with all their other allowances they receive.
    This idea is supposed to help them when they get a job, so they will know how to properly manipulate their wages from their new jobs, what jobs? Does this government think they will produce the bulk of 2.500.000 jobs during the rest of their two year tenure? They must be on ‘The Yellow Brick Road’, that will never happen, technology is moving too fast. What mekes them think all people think alike, the drug-addicts, alcoholics and gamblers, will think they have been given some extra spending money and their receivers will really appreciate that and the sufferers will be the councils, for they will not be getting the money they neeed to maintain their housing stock.
    I think there should have been a lot more thought gone into this before anything like this was decided.

  6. James Melly says:

    Hi Jane

    I hope my comment didn’t tar all HB claimants with the same brush. I have some tenants who do indeed ensure their rent paid. That said, if I was in their position and I needed to dip into my rent to put the gas on I would. Trouble is, tenants should not have this money. It’s been provided by the local council in order for them to pay their rent. For some reason this whole issue has hardly any air time. I am sure that if UK taxpayers money was being wasted on a social experiment that means a tenant can spend 2 months rent and there’s nothing either the council, landlord or police can do about they would be shocked. The government needs to create work program’s for people employing them if you will road projects etc. The money could be found by paying landlords direct (saving the annual robbery) and by pulling out of Europe who we pay £13 billion a year to. intersting point from June about these loan companies. These companies prey on the least educated people in society and the amount o tenants I come across who sign up to this companies is huge. I try and explain APR to them but they haven’t a clue. Take direct payment away and the sign ups will drop through te floor.

  7. david shaw says:

    I totaly agree with what you have written. I am a landlord who has a number of properties rented with direct payments of Local Housing Allowance. Iwill not be taking any more tenants on LHA due to the goverments decision to pay tenants direct as I have heard so many lies as to why some tenants have not got the rent in the past. This idea of direct payment was tried under the Labour goverment & was a complete disaster , I had a tenant spend all the rent at the bookies , one went on holiday , some spent in on drugs , one went on a bender & then got robbed. I could as you say write a book about the excuses I had & that is why the elements of protection were put in like direct payments if,
    You have difficulty managing your affairs , for people with disadilities , addictions , financial difficulties , medical conditions.
    You are unlikely to pay your rent with your housing benefit
    You are 8 weeks in arrears with your rent
    There is also one wich the goverment brought in when they reduced the amount they pay in LHA which is ,
    Direct payment if you have negotiated a lower rent with your landlord.
    On the last one I am not sure what the legal situation will be as the contract was give under this agreement the goverment may have a problem with it.
    I do not have all tenants on LHA paid direct as some can manage their money but as a landlord or a tenant there should be a choice.


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