Landlords should brace for major changes to the benefits system set to come into force this month.
April will see the rolling out of a raft of new measures introduced in what the government claims is the "biggest welfare revolution in over 60 years". The changes have been widely criticised by landlord groups and housing charities.
The changes will affect landlords who rent to those in receipt of benefits, and consist of two parts:
- From 15 April a cap will be introduced on the total welfare payments a claimant can receive. The cap will be placed at £500 per week for families with children, and £350 per week for individuals. Exceptions are made only for those in households in which at least one person qualifies for the working tax credit. The cap will be introduced in Bromley, Croydon, Enfield, and Haringey first, and will be rolled out across the country by the end of September. In the event that a claimant's payments currently exceed these limits, their housing benefit will be reduced and they will be expected to make up the difference in their rent.
- From 28 April the way in which benefits are paid will change. From this date all in- and out-of-work benefits will be rolled into a single payment known as the Universal Credit, which will be paid direct to tenants. Although private landlords already operate in this way, social landlords are anticipating an increase in arrears as a result of the introduction of the Universal Credit.
Landlords who rent to tenants in receipt of housing benefit should be attuned to the changes, and ready to take action to minimise their impact. It is important to understand that the changes instituted this month are likely to lead to a significant rise in rental arrears. So how can you deal with this new set of challenges?
Be up front
If you are aware that your tenants are in receipt of benefits, contact them about the changes. Ask them frankly whether they will be affected by the cap and, if so, whether they believe that they will continue to be able to pay their rent. Demonstrate that you are aware of the changes, and that you want to work with your tenants to find a mutually agreeable solution to any problems that might arise.
It is important that you are prepared for the changes. The ideal outcome, of course, is that your tenants are not affected, or that if they are they are able to cope with the changes and are still able to pay their rent. You should, however, ensure that you make some financial provision for the worst case scenario.
Finally, remember that it often pays to be flexible when it comes to rent negotiations. If your tenants are finding it difficult to pay, you should try to accommodate them as much as possible. Try to agree on a payment proposal that will see the tenants make the relevant payments over a longer period.