The rollout of universal credit has been mired by problems from the beginning. Designed to make work pay and give people financial independence, universal credit’s proponents claimed it would simplify six separate allowances including housing benefit, Income Support and Jobseeker’s Allowance into one upfront payment to people.
In practice the transition wasn’t so simple. Landlords reported sharp rises in rent arrears as tenants on universal credit didn’t pay their rent. Claimants complained of delays in the payment of universal credit, pushing them into arrears. The speech by work and pensions secretary Amber Rudd last week on the future of universal credit was an attempt to address these concerns, outlining plans to allow landlords to request rent be deducted from universal credit and paid directly into their bank account.
Delays and Freezes: the problems with universal credit
A 2017 survey by the Residential Landlords Association found that 38% of landlords had experienced universal credit tenants falling into rent arrears in the last 12 months. A major criticism of universal credit by landlords is about the way that housing support is paid directly into the account of tenants. 63% of landlords said that the lack of direct payments of universal credit to themselves made them less likely to rent to tenants on universal credit.
According to the National Landlords Association, only between 18-20% of landlords are willing to accept tenants who pay rent with the local housing allowance – the housing benefit that will eventually be replaced by universal credit – down from 46% in 2010/11.
The changes announced by Amber Rudd follow in the footsteps of Scotland where the devolved administration already allows people claiming universal credit to request that their rent be paid directly to the landlord.
However, the problems universal credit causes landlords don’t stop there. New claimants of universal credit have to wait 35 days before their first payment is received. As the amount of universal credit claimants are eligible for is on a sliding scale according to income, four weeks must pass to assess claimants’ last month’s earnings and a further week to process the payment.
The shortcomings of universal credit may even go beyond how it is paid. In 2007 Richard Lambert, chair of the National Landlords Association, said that the government’s benefits freeze has meant universal credit hasn’t kept up with annual rent increases of around 2-3%. The benefits freeze was introduced in 2015 by then chancellor George Osborne. Amber Rudd has hinted that this may soon be coming to an end, using her speech to say she wants it to end next year.
Should landlords be excited by Rudd’s proposals?
Until specific details about how the new rent payment options for universal credit are revealed, it’s difficult to say. Rudd says she has asked the Department for Work and Pensions ‘to build an online system for private landlords,’ which will allow them to request that tenants rent be paid directly. How soon this system will be up and running, how easy it will be to use and how much real control landlords will have over the decision is not yet known.
But with 61% of landlords with tenants on universal credit reporting rent arrears according to the Residential Landlords Association’s latest figures, up from 27% in 2016, landlords everywhere will be hoping for the best.