A landlord’s right to receive direct rent payments from a local authority for tenants in receipt of Local Housing Allowance (LHA) or Housing Benefit (HB) will be scrapped under the proposed new Universal Credit (UC) benefit system.
Therefore it is widely predicted that even more landlords will potentially withdraw from the LHA market as there are so many systemic problems with Housing Benefit claimants that it is not worth landlords having the hassle.
There are more than enough working tenants in the private sector who require housing and providing that the applicants have a good Tenant Reference then the landlord can use Rent Guarantee Insurance to make sure of an income from the rental property.
There will be increasing amounts of landlords that will now refuse to take Housing Benefit claimants because of the new system rather than the claimants themselves.
Tenants and landlords are both victims of an inadequate system which essentially fails to protect the landlord against some miscreant Housing Benefit tenants.
The Residential Landlords Association (RLA), which represents around 15,000 private landlords, have reacted angrily to the proposals, stating that when the new benefit system is introduced in April 2013, payments will be made directly to tenants and it will be up to the tenant to pay their rent or not.
Currently, Private Rental Sector (PRS) landlords can ask for Local Housing Allowance (LHA) to be paid directly to them if the tenant is more than 8 weeks in rent arrears or if the tenant is deemed vulnerable.
With the new Universal Credit system due to come into force in April next year, the new procedures for benefits such as local housing allowance, will apply across the board to local authority tenants, housing association tenants and tenants in the private rented sector.
The RLA have raised a number of serious concerns about the proposals, saying that there is no right of redress for UK landlords if things go wrong, and that the whole concept creates risk for landlords. It has also attacked the proposals for lack of clarity, saying they have replaced ‘regulations’ with ‘guidance’.
It says that landlords will become increasingly unwilling to accept tenants on benefits.
RLA policy director, Richard Jones, said: “We strongly believe that the Government’s whole approach is flawed, and although the objective of helping tenants to manage their financial affairs is in isolation a laudable one, the Government has wholly failed to appreciate the consequences of this. There will be a much higher level of arrears, an unwillingness of landlords to house benefit claimants (at a time when there is huge pressure on social housing), increased unwillingness by banks to lend for this kind of property (or increased interest rate to reflect the risk), much higher levels of evictions and much greater homelessness.”