Exclusive – Why landlords don’t feel safe to rent to tenants on Universal Credit

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.

Bill Irvine

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.”

Mick Roberts

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.”

Comments 5

  1. “The vast majority of Universal Credit claimants are able to manage their own finances” may or may not be provable “but for the minority who can’t APAs can be put in place.”

    The problem which DWP and politicians seem either oblivious or do not care about is that for a social housing provider they will have hundreds if not thousands of tenants. If a few of them default the landlord does not have zero income. Most private landlords own 1 to 4 properties at most. If one or two of their tenants on benefits default that may be the entirety or a substantial proportion of the landlord’s income.

    Even when landlords who accept tenants on benefits manage to have rent paid direct to them, they face the unquantifiable risk that the DWP has overpaid either through the DWP’s incompetence or the tenant’s failure to provide correct information. This may lead to a clawback of “public money” months after and perhaps after the tenant has left.

    The moratorium, the substantial delays in getting to court, the propensity of judges to accept the tenant’s lies at face value and delay ordering possession and the delays in enforcing possession all contribute to the fear that landlords have in this sector.

    Rational landlords who depend on the rental income to service their mortgages and to provide an income are rightly wary of taking on tenants on benefits.

    Which other business is asked, nay compelled by law, to be an involuntary creditor and to extend thousands of pounds of credit over many months to uncreditworthy people?

  2. Tenant campaign groups for letting to UC claimants would better serve them if they looked at the REASONS why landlords are reluctant and actually campaigned against the DWP’s process of dealing ( or Not ) with claims for Direct payment.

  3. Ian is, of course, correct so why would anyone wish to be in that sector of the market by choice. Just wait until abolition of S21 and it will become a whole lot worse. When problem tenants will be almost impossible to remove; see how housing investment goes then. Landlords are already selling up. Reducing stock = increased rents for the brave landlords who stick it out. The effects of the Rent Act from the 1970’s demonstrates just how stupid politicians can be when they effective did away with rental property almost completely – No one would invest in residential lettings and lettings to companies existed for the few who could avoid rent controls. We are now seeing councils, like Croydon and others, not maintaining their stock properly and could be rightfully be considered as Rogue landlords; and it is these organisations to enforce housing standards (or perhaps I should say double standards!).

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