A property investment platform has taken the unusual approach of accusing the government of driving up homelessness through its policy of cutting Discretionary Housing Payments to tenants, primarily in the social sector.

The government has recently announced a cut of £40m in DHPs for tenants, taking the funding in England and Wales for rent shortfalls or deposits to below pre-pandemic levels.

DHPs provide financial support to tenants claiming housing benefit or Universal Credit, who face rent shortfalls or need assistance with payments such as rent deposits in order to move home.

The government is cutting the funding it gives to councils in England and Wales by more than a fifth, with Pick My Pad – an agency that operates social housing sharing services – warning the move will drive up homelessness following the recent end of the Covid evictions ban and the end of the furlough scheme in September 2021.

Pick My Pad chief executive Mish Liyanage says: “While the worst of the pandemic might be over, tenants are facing financial hardship with rising unemployment and the end of furlough in September, which may lead to further job losses, especially in the Midlands and North.

“Though the government boosted funding in 2020/21 during the pandemic, is now slashing it by 22 per cent to £140m in 2021/22. 

“The Local Housing Allowance (LHA) has also been frozen this year, leaving many tenants across the country facing higher rent shortfalls. In some parts of the country, tenants are set to lose more than £1,000. 

“From April 2021, tenants received the same amount of money as last year, even though rents have risen in many parts of the country. LHA is paid to tenants in privately rented homes, including those on universal credit.”

Liyanage says the cuts have created opportunities for private landlords as in some areas, the LHA cap is higher than open market rental rates. 

“Due to Covid the number of Universal Credit claimants has doubled meaning landlords do need to consider the social housing tenant type. 

“Also for landlords who may have difficulty renting a property due to location or configuration of a property, the LHA market is perfect, as these types of properties will let quickly to LHA tenants who will stay for longer thus reducing voids. Improvements in the Universal Credit process means arrears can be reclaimed – this was never available with Housing Benefit.”