Rent arrears among tenants of social landlords taking part in a trial of the Government’s flagship benefit reforms have soared.
The pilot is testing out the effects of paying the tenants their rent money, and trusting them to pass it on to their landlords.
Although private sector landlords of tenants on Local Housing Allowance have been familiar with this system, in the social sector landlords have been continuing to get housing benefit paid to them.
In one trial in South Wales, there has been a seven-fold rise in rent arrears in just seven months from £20,000 to £140,000.
Social landlords in the Torfaen area are now warning that there will be more evictions if the trend continues after the system is fully adopted when the Universal Credit system comes in.
Private landlords of LHA tenants have been arguing that the system is depriving them of rent, with arrears increasing, and that as a result, more private landlords are turning their backs on the benefits sector.
Government ministers say that receiving their own money for rent will help people on benefits to manage their finances better.
Torfaen is one of six areas where the Department of Work and Pensions is running trials ahead of the launch of Universal Credit this autumn.
Bron Afon Community Housing, the biggest social housing landlord in Torfaen with 8,000 properties, has 950 tenants receiving direct payment of their housing benefit.
Chief executive Duncan Forbes described the rise in arrears to almost £140,000 as “significant”, adding that a large proportion of the tenants had not been in arrears previously.
“That was a group of people who had a good track record of payment and pretty low level of arrears, thrust into a position where they are now in significant arrears,” Forbes told the BBC.
“At the same time we’ve increased our staff levels by about double what we would normally put into income recovery.”
The other areas where the trials are taking place are: Edinburgh, Wakefield, Shropshire, Oxford and Southwark in London. In Wakefield the increase in rent arrears is 9%, and in Edinburgh, Oxford and Southwark the increase is around 30%.
Southwark Council is predicting that it will incur £14m in arrears if direct payment is introduced to all its tenants.
The Department for Work and Pensions said it will use the pilots to learn lessons and ensure the scheme is effectively implemented.
Minister Steve Webb said: "We currently pay housing benefit directly to one million people in the private sector and that works pretty well.
"We are trying to treat people in council houses the same way, but we want to get it right."
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Comments
I do not disagree at all that the money owed to landlords should be paid to the landlords in full and on time , I understand why some landlords do not accept HB or LHA Tenants however having gone into it an a bit more depth have an understanding of the tenants too.
As I said the "system" has to change as it is impossible to change the people. What I have worked out is how the system has to change.
The reason I am so optimistic is because I have also worked out what that change is worth to Landlords and Agents who are prepared to look at their business model and tweak it a bit. Reducing tenant arrears from 3.75% down to 1% for the private rented sector is worth £69 million for landlords and subsequently about £7million of extra fees for Agents. That £7,000,00 is an efficiency saving that requires no effort and by reducing administration is probably worth even more.
I don't know and why I would like to know the percentage arrears for the Social sector is that if as I suspect social arrears are far higher say 5% (that is optimistic ) there are huge social benefits if arrears can be controlled and rent money paid to tenants
Because Social provision is devolved widespread to local authorities, housing associations and a spattering with Residential Agencies prepared to take on HB/ LHA tenants the social arrears figure is unknown and it is no-one individual’s job to ask or collate.
In the immoratal words of Bart Simpson - d'oh!
Whilst I don't support Ordinary's sweeping statement that the sales of Fags and Alcohol would have soared, I think the point is this.
What has changed in between these tenants not receiving the payments and now receiving them?
Nothing!
All that has happened is that people now have an income (which is supposed to pay for their homes) that they can divert elsewhere and thus, not using it for what it was intented for?
People who are not on HB, do not have the same opportunity, so they cut back, do what they can and normally try and keep the most important things to them going, i.e. food and the roof over thier head.
Everyone is in the same boat with regards to the things you list Robert. Are you saying anyone not on HB is rolling in it and has a pot of money sitting in the garden shed?
Everyone is finding it tuff, but not everyone decides to steal money meant for another purpose.
Lets not get wrapped up in what it is being used for.
Gas, fags, electric, beer, it makes no difference, the money has been stolen!
Well Robert, I have to say that my comments are made from experience....there are some VERY good reasons why the majority of Letting Agents do not accept social housing tenants and that is simply because they do not pay their rent.
Those landlords who will accept them as tenants only do so when the rent is paid to the landlord directly otherwise it simply does not appear!!
I like your optimistic outlook when it comes to this story but the facts are that the tenants in this scheme have chosen to spend their money on other things rather than honour their duty to pay the rent to their landlord....to suggest they spend their money on wholesome food and heating bills is fantasy and that simply wont be the case.
if you cannot afford to run a car then dont own one, use a bus, bike or walk, like I had to when I was a child.
They had a duty to pay their rent and, quite simply they chose not to!
Well done Ordinary you just proved one of my points!
Do you have any figures on how many of the tenants of this scheme smoke and drink?
I would imagine that given the weather since October many will have turned up the heating and are paying 20p a gallon more for the fuel the put in their cars.
My opinion is that until one actually understands what it is like to have no disposable income, being at the mercy of Banks and Building societies who charge £50 for a failed transaction or being force to resorting to Payday loans charging 4000% interest rate before penalties are applied, it is easy, really easy to assume the money is spent of fags and booze but the reality is that, put in the same situation, most of would prioritise reduicing the "penalty debts" that are significantly worsening our finances.
The story does not give a percentage figure of arrears; £140,000 could be 1% of the rent role which would be good despite a 700% increase in 7 months or it could be XX% of a much smaller rent role and then, depending on the starting point, a 7 fold increase becomes a real worry.
Perhaps Ros could ask the source of the story for the %
From frustrating experience it is very difficult to get to speak to people like Mr Forbes to offer the help that they so obviously need.
Those who KNOW what I have done and achieved in the past will understand that my job required a very detailed understanding all aspects of "rent" for both private and social tenants, so it is with some confidence I would claim that without employing a single extra member of staff I am able to reduce tenant arrears (Private or Social) well below the accepted PRS average of 3.75%. My own personal target is sub 1%.The single thing preventing a solution is being able to sit down with Chief Executives Mr Forbes and explaining how simple, minor tweaks to their operation can make a world of difference.
Market analysis indicates that close to half of all the Agents who read Letting Agent today are using systems that I have directly influenced and far more if one includes my indirect influence on competition products. Those agents are benefiting day to day from having those minor tweaks applied to their own systems through a careful and subtle "whole system" approach that most are not aware of.
Up to now the Social Housing has not had to be as competitively commercial as the Private Rented sector but ever tightening Government budgets means there will be an increasing focus on areas like tenant arrears and there is no acceptable excuse for Social housing arrears to be any higher than those accepted by private landlords.
I have done a great deal of work looking at how to get a greater crossover between Private and Social rented provision and I am of the opinion that paying the rent to tenants is the right thing to do. I would be concerned that the tenants of this scheme will bear the blame for the soaring rent arrears under this scheme (reinforcing a stereotype is always easy) when it actually the process of rent collection which is at fault.
In my experience it would take a brave Chief Executive to listen and understand why their process has to change. It is far easier to change a system than it is to change society and human nature, the smartest thing to do is recognise that very simple fact and not cling on to old processes that do not work.
I would imagine sales of Fags and Alcohol have soared by seven fold within the same period!!