A government U-turn on Universal Credit housing cost rules has given a massive boost to landlords struggling to collect rent.
Staff at the Department of Work and Pensions (DWP) have received fresh instructions for handling the ‘housing costs’ element of Universal Credit.
This means landlords using the Alternative Payment Scheme (APA) to take direct payments via Universal Credit housing costs no longer need ‘explicit consent’ from tenants.
Why the changes were necessary
Previously, the DWP would not process APA applications unless a tenant had pro-actively agreed to direct housing cost payments.
The upshot was that thousands of landlords were losing out on substantial amounts of rental income because tenants put off making a decision, or simply refused to give their permission.
Many landlords suspected tenants were misusing their housing costs and spending cash earmarked for rent on other things. A recent survey of 700 landlords by the National Landlords Association (NLA) indicated that 80 per cent were reluctant to let to tenants receiving housing benefit or Universal Credit.
The problem of monthly Universal Credit payments
Universal Credit was implemented in 2013 when it replaced six different types of benefits, including housing benefit and income support.
The government’s intention was to encourage claimants to become responsible for managing their own finances by making monthly payments, mirroring the workplace in which three quarters of workers receive monthly salaries.
Claimants were urged to prioritise making prompt rental payments, but anecdotal evidence from landlords suggests this did not happen, resulting in significant arrears.
Limited awareness of new system could cause teething trouble
While the scrapping of the explicit consent clause is welcome news for landlords, it is important to keep in mind that the change has been decidedly low-key.
There has been little communicated so many landlords and tenants will not know about the change.
Nonetheless, when the new system has bedded in, both tenants and Landlords will benefit. Landlords having difficulty collecting rent can apply for an APA with greater confidence, while tenants leading volatile lives will be less vulnerable to building up arrears.
There’s also a number of other initiatives landlords can implement to deal with tenants who aren’t paying the rent.
For further advice on residential tenants not paying rent, call Daniel Long on 0161 761 4611, or email him at daniel.long@whnsolicitors.co.uk
