What is Universal Credit?
Universal Credit is a new single benefit system due to be implemented firstly in the North West and then across the rest of the UK at various dates through 2013. The Government has stated that it is trying to help claimants and their families to become more independent and simplify the benefits system by bringing together a range of working-age benefits into a single streamlined payment.
The government states that the main aims of Universal Credit are to
improve work incentives
smooth the transitions into and out of work, supporting a dynamic labour market
simplify the system, making it easier for people to understand, and easier and cheaper for staff to administer
reduce in-work poverty
cut back on fraud and error.
It will be launched in 2013 and will replace:
income-based Jobseeker’s Allowance
income-related Employment and Support Allowance
Child Tax Credits
Working Tax Credits
On the official Government website it also states that the main differences between the existing benefits system are:
- Universal Credit will be available to people who are in work and on a low income, as well as to those who are out of work. Most people will apply online and manage their claim through an online account Universal Credit will be responsive, as people on low incomes move in and out of work, they’ll get ongoing support – giving people more incentive to work for any period of time that is available.
- most claimants on low incomes will still be paid Universal Credit when they first start a new job or increase their part-time hours
- claimants will receive just one monthly payment, paid into a bank account in the same way as a monthly salary
- support with housing costs will go direct to the claimant as part of their monthly payment.
All these points illustrate how the government intends to help people in receipt of benefits and to also streamline the benefits system as a whole but has anyone in government actually given any thought to the landlords that provide accommodation for the five million people in receipt of housing benefits?
One of the main points of Universal Credit is to instil a sense of responsibility in those receiving the benefit and encourage them to manage their own funds responsibly and distribute them amongst their bills at their own discretion. Undoubtedly in an ideal world this is an ideal situation, unfortunately in the real world things aren’t quite so black and white.
Several independent surveys have been undertaken on the risk to Landlords that renting to Local Housing Authority tenants poses and each survey has found that Landlords have taken the view that this is a thoroughly bad change in the benefits system. Landlords and Housing Associations are acutely aware of how much time, money and effort is involved in evicting non paying tenants.
The biggest issue for Landlords regarding the new system is that payments will no longer be made direct to the Landlord, apart from under scrutinised circumstances. Unlike the existing system where a tenant can nominate payment direct to a landlord and the payment transferring automatically the process will now be made by decision makers. If a tenant is deemed incapable or unable to manage their finances then payment may be made direct but for a limited time only.
Many thousands of landlords have begun the process of removing tenants in receipt of benefits out of their houses for fear of not being paid rent when the changes come into action. One tenant The Property Lifeline spoke to explained that he had spoken to every Letting agent and landlord within 30 miles of his current house but had been unable to find someone willing to house him due to the benefits he has been receiving.
To further compound the risk involved with letting to Local housing authority tenants, should a tenant not forward on the rent they are told by the local council to squat in the house until such time as a bailiff removes them. To get to this stage costs a Landlord hundreds, sometimes thousands of pounds and many months, during which they will not be receiving any income from the property. With the existing system the rent would be paid direct whilst the tenant is evicted.
With the huge number of professional benefit cheats working out ways to abuse the system there is growing concern that 6-8 months after Universal Credit kicks in there will be a huge number of evictions taking place. For a example, a tenant may take up a tenancy in January and be receiving £1000 per month in benefits, his rent is £800. If this tenant does not pay his rent and it takes 8 months to evict him, he will have stolen £8000 in benefits, the landlord will have lost £6400 in rent, plus the costs to evict.
Landlords across the country are tightening up the criteria they use to determine if a tenant is suitable and within 8 months they will not be accepting anyone that does not have a good reference from a previous landlord. This will ultimately result in a massive increase in homelessness by the end of 2013.
Should you have any questions and concerns about repossession, please feel free to contact The Property Lifeline for a free consultation.