Half of all tenants do not fully understand the new Universal Credit system, according to new figures from the National Landlords Association.
The survey also found that one in five are completely unaware of the changes – and it is thought that the picture is not much better for landlords.
Universal Credit will dramatically change the way in which landlords deal with tenants in receipt of benefits. So how will the new system affect landlords, and what do you need to do?
What is Universal Credit?
Universal Credit is a complete overhaul of the benefits system. Under Universal Credit, six separate benefits will be rolled into one monthly payment.
The Universal Credit system has already started to be rolled out; the scheme will be introduced in stages, and the first stage began in April 2013. The government originally expected that the rollout would be completed during 2016, and that all benefit claimants would move to Universal Credit by the end of 2017. Delays have meant that this timeline is no longer realistic, but firm new dates are yet to be set.
Universal Credit is paid monthly into a bank, building society, or Post Office account.
How does Universal Credit affect landlords?
There are around 1 million tenants in the private rented sector who rely on benefits for at least part of their rent. Universal Credit represents a major shift in the relationship between landlords and tenants in receipt of housing benefit. In the past, many private and housing association tenants had the option to have their housing benefit paid directly to the landlord. Under Universal Credit this will no longer be possible – payments will be made to the tenant, and it will be their responsibility to pay the landlord on time.
It is also important to understand that Universal Credit will be subject to an overall benefits cap. This means that recipients will not be able to receive any more than £2,167 per month for couples with children or single parents, and £1,517 for single people. Many commentators suggest that the cap will make it even more difficult for some claimants to make their rent payments.
What has the reaction been to Universal Credit?
Universal Credit has been widely criticised on a number of fronts. The first major criticism concerns implementation. The rollout process has been riven with problems, and it is now clear that the scheme will be completed well behind schedule, if at all. The application process has also been criticised for being lengthy and complicated. It takes around 45 minutes online, and there is currently no save function. Problems with the application process have led some commentators to suggest that prospective claimants will be left without Universal Credit because of their inability to make a claim.
Universal Credit’s replacement of housing benefit, and the government’s insistence that it will only be paid to tenants, has also been widely scrutinised. It is important to understand that tenants in receipt of housing benefit are overwhelmingly against the introduction of a system through which they will be responsible for making payments. This is particularly prominent in the social housing sector, in which, according to a Polis report for the National Housing Federation, 86% of tenants “believe strongly that it is better for housing benefit to be paid directly to the landlord so that they are secure in their income.” Half of all social housing tenants who have previously missed payments are “not confident that they can keep up rental payments if they receive their rent direct.”
What do I need to do?
Landlords are concerned about the implications of Universal Credit. Some of the country’s biggest landlords have already stated that they will no longer rent to tenants in receipt of benefits as a result of the change. Kevin Green, a landlord with more than 700 properties, will continue to rent to claimants, but told the Guardian that “most other landlords are changing now. At least 90 per cent of landlords are considering it.”
Landlords who continue to rent to claimants should be prepared for a spike in arrears. Read more about spotting tenants in financial difficulty.
If a tenant builds up arrears, you may be entitled to contact your tenant's Jobcentre Plus to request that payments be made direct to you. You should contact your tenant immediately if you think that they are in financial difficulty.