Prevention being better than cure is a view for which there is a general consensus. However, it seems that the Department for Works and Pensions (DWP) doesn’t get it.
Under Universal Credit, housing benefit payments direct to landlords will end in all but exceptional cases, with the payments being made to tenants who must then pass them on to their landlord.
The aim behind this is worthy – to ensure that claiming benefit best prepares individuals for work. When in work, a tenant must budget his or her income and make the necessary payment to their landlord. It is proposed that this experience is replicated for those in receipt of housing benefit.
Unfortunately, the experience of some pilots is showing that a small minority of tenants are not keeping up with their rental payments. The DWP is piloting direct payments to tenants in six demonstration projects, and has found a rent collection rate of 95% across 4,719 tenants.
City West Housing Trust undertook its own pilot with 52 of its own tenants. They achieved a very impressive 99.18% collection rate. However, its spend on housing management soared during this pilot, from £179 per tenant to £755 per tenant. This was due to the need for more home visits to tenants to collect rent and to provide support. City West says that if this intensive housing management approach had to be spread across its 2,000 tenants likely to receive direct payments, the cost would be around £1.2 million.
If the 95% collection rate was to be the norm across the country, some housing associations would go bust, financial institutions would be more reluctant to lend, and landlords faced with concerns over their viability would either have to spend huge amounts on increased housing management costs, or become far more ruthless in evicting tenants, or both.
Affinity Sutton, one of the country’s largest social landlords with 69,000 homes, has invested £700,000 in mitigating the effects of welfare reform. Multiply that across all social landlords and you would get a staggering amount that isn’t being spent on new homes.
While I support the motive behind this change, in typical DWP fashion, the warnings and the facts are trumped by ill-founded optimism that all will be alright on the night. The DWP has said that in addition to certain exempt categories of claimants where payments to landlords will continue, other tenants experiencing serious problems will also see payments returning direct to the landlord. However, by that stage, the tenant will already have significant rent arrears.
Direct payments to tenants, along with the sanction regime, is one of the main reasons why an increasing number of private landlords are saying “No DSS”.
It is a shame that the DWP doesn’t work WITH social landlords to phase in this transition. For example, at BHT we could identify, say, the 20% of tenants with the best track record of payments to receive direct payments. Then each year a further group of tenants could be put forward, thereby allowing us time to manage the process and limit the risk of a wholesale meltdown which the DWP’s pilots point towards.
It will cost landlords much more to administer (money that could be spent on new homes or refurbishing older ones). It will cost tenants more as they are now being encouraged to set up special accounts for which a charge is often made for transactions.
At the same time the new housing minister, Brandon Lewis, is urging housing associations to “think about how they can make every pound go further” to build more affordable homes. Housing associations will and are doing their part. Perhaps, Minister, you could review what your predecessors have bequeathed to you that has the opposite direction of travel.