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BBC report on Universal Credit raises fears for landlords

A recent investigation by the BBC into Universal Credit has raised the prospect of upcoming difficulties for landlords. However, Buy to Let Club managing director Ying Tan says that “landlords should not be vilified for protecting their own livelihoods.”

The BBC’s ‘Panorama’ programme has revealed that in Flintshire, one of the first counties to have its benefits claimants put onto the controversial Universal Credit scheme, average rent arrears have more than doubled.

The problem appears to stem from the fact that, unlike housing benefit, where rent funds are paid direct to the landlord, the UC scheme sees all funds go direct to the claimant, who is then responsible for budgeting, which increases the likelihood of human error occurring. Additionally, UC is being paid to the claimant in, some cases, six weeks’ arrears.

The BBC reports that Flintshire council’s rent arrears have gone from £1.6m in 2017 to over £2m today, with those on UC owing an average of £1,473 compared to the £334 owed by those on the old benefits system. Evictions have increased by 55 per cent over the year.

The council’s head of housing, Neal Cockerton, told the BBC that, “We do undertake a lot of intensive support before we get to that stage [eviction], but there is a degree of inevitability.

“There’s a bit of an ostrich situation that develops – you put your head in the sand and it will go away. It won’t go away, the rent has to be paid.”

While the BBC’s data details issues with social housing and councils, there is some fear that it provides a snapshot of issues that many lenders and landlords could face as UC is rolled out across the UK.

“The newspapers are keen to pick up on stories of landlords refusing to cater to tenants on benefits, with many banning UC recipients from renting one of their properties,” comments Tan.

“It’s easy to be shocked by these stories. The UC system is certainly flawed and as a society we need to ensure we are protecting the most vulnerable amongst us. However, it also needs to be recognised that landlords cannot run their businesses at a loss.

“Indeed, there are many landlords who are letting to UC recipients and are dealing with delays in payments for weeks on end. The system needs changing, housing benefit should be standalone and paid to the housing provider – but in the meantime, landlords should not be vilified for protecting their own livelihoods.”

Spicerhaart Corporate Sales managing director Mark Pilling says: “Last month, the Residential Landlord Association revealed that 61 per cent of landlords with tenants receiving UC have had problems with non-payment and arrears, and on average, these tenants owe 49 per cent more than they did a year ago.

“Universal credit has been plagued by problems since it was introduced, and while the government announced in the Budget that more money will be dedicated to the new welfare system, it is clear that much of the damage has already been done.

“From a lenders point of view, it is important that they keep a close eye on their BTL customers who have tenants who are on or are soon to be moved onto UC so they are able to work out the best solution for those who are struggling so that repossession is a last resort.”

London & Country associate director of communications David Hollingworth says: “The BBC research relates to local authority tenants but does highlight some of the issues that can be thrown up by the introduction of UC. The delay in payment is causing some of these tenants an issue and resulting in arrears, which will clearly be of concern to landlords.

“Given the coverage earlier this year around those on housing benefit being turned away by letting agents and landlords, this issue looks unlikely to help increase supply in the private rented sector.”

North London estate agent Jeremy Leaf is also critical. He comments: “’The general perception is that universal credit is making many tenants worse off and causing hardship. The relatively few private landlords who let to benefit tenants are struggling because tenants are not managing payments particularly well.

“We understood payments were supposed to be paid directly to landlords if required but this doesn’t seem to be happening on a larger scale. As a result, we hear private renting is becoming even more inaccessible for tenants and obliging local authorities to pay extra to rent properties to meet their legal housing obligations.”

BespokeFinance founder Adam Hosker adds that, “[Considering these reports], landlords should be prepared to dip into savings to meet financial commitments.

“Given the change in benefit entitlement causing higher arrears, the [nascent] campaign to lenders to remove the ‘No DSS Tenants’ stipulation may hit a hurdle as mortgage lenders wait and see the consequences.”

Hosker also points out that, using the alternative payment arrangement scheme, with UC in place, landlords can request deductions from a tenant’s other benefits in order to help repay existing rental arrears to a maximum of 20 per cent of the standard allowance.

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