Impact of Direct Payments – let’s think about who wins and who loses

Impact of Direct Payments – let’s think about who wins and who loses

The government is proposing that the future Housing Benefit element of Universal Credit payments will be paid direct to landlords where the tenant falls into arrears. Welfare minister Lord Freud announced the move at the recent National Housing Federation annual conference.

The key issue for landlords will be how the government defines “in arrears” and how long the changes take to process once this point has been reached. A series of pilot projects will test how the new approach might work.

Universal credit, which will combine various welfare payments including housing benefit into one sum, will be paid direct to tenants. At present many tenants have their housing benefit paid to their landlords, and there have been concerns in the housing sector that the switch to universal credit could result in an increase in arrears. There are fears that direct payment will double the amount of tenant debt, and that this will have a serious impact on future build programmes, particularly for larger properties where the impact of payment caps may be greatest.

The Government has acknowledged the concerns but continues to state that it is committed to making direct payments to tenants the default position.

Analysis from the Department for Work and Pensions has identified that 20 per cent of tenants who have their housing benefit paid to their landlord at present will receive the money directly under the new system.

Older people and vulnerable people will see no change in the way that their benefit is paid through the Universal Credit system although the current Public Consultation on Housing Benefit reform for Supported Housing is likely to have a further impact. The Government believes that the higher levels of Housing Benefit for this group compared to mainstream accommodation, no longer fit the way that personal care and support are now commonly delivered and require review.

For those needing low levels of support the consultation document proposes to pay the Local Housing Allowance but with fixed additions which will continue to recognise the higher costs of providing this type of housing. For those needing higher levels of support the proposal is that additional payments decisions to pay above the standard Local Housing Allowance will not be made by Housing Benefit but determined by the Local Authority within the commissioning process for supported and specialist housing.

The Public Consultation closed on 9th October and we will summarise the results in a future bulletin.

Jim Lashmar is a Director at Altair