Landlords are increasingly reluctant to rent to tenants on benefits because of frustrations with the Department for Work and Pensions’ ‘Direct Payment’ scheme.
Under DWP rules if a tenant receiving Universal Credit accrues more than two months’ rental arrears the landlord can apply for the housing costs element to be paid to them, in what’s known as the ‘Alternative Payment Arrangement scheme’.
Before December 2017 tenants needed to give their “explicit consent” before such an arrangement could be implemented, leaving the landlord powerless if they chose not too for any reason. Although the need for consent was removed, some DWP staff apparently still apply the same approach of refusing redirection where the tenant objects.
This is according to Bill Irvine, ex-government advisor on housing benefit, and the NRLA’s Universal Credit consultant, who says it’s a big problem.
Irvine told Property Investor Post: “Some private landlords are saying ‘I’m not taking tenants on benefits.
“There’s loads who would be willing to take the risk but are now backing off because rental losses are getting too high and are no longer sustainable.”
Mick Roberts, a private landlord with a portfolio of properties in Nottingham, has grown especially frustrated with the DWP.
He said: “It’s so hard to get this direct payment because you have no one to talk to – you don’t know whether your application has been accepted or not.
“Many of us used to take benefits tenants, but now we’ve stopped – I can’t go on forever with this torture.
“You just cannot talk to anyone at the DWP when there is a problem.”
When tenants on benefits run into more than two months’ arrears landlords can make their online application for redirection, but Irvine and Roberts say it’s not formally acknowledged.
Irvine said the current rental arrears situation is the worst he’s witnessed in 30 years, as numerous tenants are falling well behind on payments but continue to receive their housing costs directly.
He added: “Some landlords have lost their businesses and had their properties repossessed, and there’s virtually nothing they can do about it.”
According to Irvine, complaints to the Independent Case Examiner (ICE) take 2-3 years to secure an outcome, while maladministration is often accepted by ICE, but no recommendation of compensation is made.
Landlords who have attempted to sue DWP through small claim actions have been rejected by the courts on the basis that ‘housing costs’ is the tenants’ money, not the landlords – so no sanction is applied if the DWP’s actions leave landlords out of pocket.
Some 33% of social landlords use Alternative Payment Arrangements, compared to just 5% of private landlords, data from the House of Commons shows.
Social landlords have a portal they can use to establish Alternative Payment Arrangements and exchange information about tenants to the DWP, explaining the big gap between the two.
Irvine said: “The system needs to work the way parliament designed it – safeguarding the interests of both tenants and landlords and avoiding the need for legal action for repossession.
“If the DWP simply complied with its own safeguarding criteria, improved its lines of communication with landlords, and was more willing to engage, things would improve dramatically.
“Council Housing Benefit sections have no difficulty engaging with landlords in very similar situations, so DWP has no excuse for its current stance of keeping them at arms-length.
“Continuing to ignore the pleas of desperate and frustrated landlords and facilitating public funds misuse is wholly unacceptable”.
He claimed that the DWP’s frontline staff often remark on how they’re sympathetic to landlords.
A DWP spokesman was approached for comment on the issue.
The spokesman said: “Alternative Payment Arrangements are already available, making it easier for landlords to apply to be paid directly, and reducing the chances of claimants falling into arrears.
“The vast majority of Universal Credit claimants are able to manage their own finances, but for the minority who can’t APAs can be put in place.”
He went on to note that claimants can object to Alternative Payments being set up if they are in dispute with the landlord.
Ex Secretary of State, for Work & pensions, Amber Rudd, was sympathetic to private landlords on this very issue back in 2019.
At the time she said: “One third of UC claimants in social rented housing have their rent paid directly to their landlord. But in the private sector, that number is only 5%.
“People in the private rented sector already face a far higher risk of losing their tenancy, and I know from talking to claimants and landlords that the current system isn’t working for some of them.
“So, we need to make it easier for tenants in the private sector to find and keep a good home, by giving landlords greater certainty that their rent will be paid.”