One of the UK’s largest private landlords says the introduction of Universal Credit could put his business at risk.
Kevin Green, 50, fears that tenants will fall behind on their rent and that he may have to stop letting to people on welfare.
Most of the 762 properties owned by Green are in or near Llanelli. Around 60% of his tenants receive benefits.
The heavily-criticised roll-out of Universal Credit has just begun and is due to finish in October 2017.
Under the new system, six working-age State benefits, including Local Housing Allowance, will be merged into one monthly sum paid into the claimant’s bank account.
In a trial of the system, in Torfaen, among social housing tenants, rent arrears rose from around £20,000 to almost £140,000 in seven months.
Private sector tenants already have their LHA paid to them, rather than to the landlord, which has anecdotally resulted in landlords pulling out of the sector. Green says that once all the benefits are merged, tenants inexperienced at budgeting will struggle even harder to keep up with their rents.
Green told the BBC: “What we’re finding is if rent payment is put in the tenants’ hands they are not being taught in school or further education to run a home and they just can’t budget.
“And it’s going to lead to huge arrears. It could lead to us going bust at the end of the day and not providing homes for less fortunate people as well.”
http://www.bbc.co.uk/news/uk-wales-politics-24860574
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Comments
if erring on the side of theology is the same benchmarking several million existing tenancies then yes landlords can trust the tenants to pay the rent and on time.
I agree UC isn't going to be an overnight fix, the standard change management curve runs through denial, then anger before acceptance appears on the horizon for all parties. I would suggest that the responsibility of best part of £9000 is a real worry to some families almost as much as others can't wait to get their hands on wads of cash.
Thank you for your scepticism and your challenges if the only difficulty I face is reassuring Landlords and Agents then as soon as someone is brave enough to test me and my theories then report back that those involved in this project are well respected , long standing ,names in the industry I am happy that confidence will be established.
I think there some changeses whereby, if a tenant does not pay for the rent you are paid the rent directly snd the money to you that is now taken out their benefits, money taken out their benefits wasn't done before.
You make some valid observations however they err on the side of theology and may prove unworkable in the real world because whilst all the issues raised can be countered, it doesn’t address the glaring question posed by private landlords, can the tenant be trusted to pay the rent?
Your efforts are laudable but agency profiling is based on experience as well as probability and a re-direction of housing benefit doesn’t defeat that. I’m not convinced by the practicalities of your argument in that UC will instantly enhance the attraction of assisted tenants but I wish you the best of luck all the same.
Sorry if this sounds like a robust reply but my post was not intended a plug and the impression given was probably the result of a poorly chosen analogy on my behalf for which I apologise. There is no product (yet) and therefore nothing to sell other than a concept. The invitation for a conversation away from the public glare of LAT is not to trap anyone into buying anything but to provide a coal face, blunt opinion of what perhaps is wrong with the idea and process without making the thinking available to those who might not be capable of implementing all aspects of the idea that make it fair to all.
Although the solution would work in Torfaen and that alone would be proof of concept strong enough to satisfy any critic, those Torfaen tenants will represent the mean [average majority ] of social tenants (one of the factors in choosing a trial site). I am not advocating the private rented sector go after the sort of tenants you are describing to reinforce your point I am basing my projections on the top 1.4% of 'assisted tenants' those on the very right hand side of the distribution curve.
I have yet to see an Agent's advertisement that says 'no pensioners' but many adverts specify 'in work only' or often more bluntly 'No DSS' although thinking about it 'in work only' might well cover pensioners, so I personally find it strange that one group of tenants who receive cash from government are respected and acceptable yet another group of tenants in receipt of the similar, barely adequate, amounts of cash from the same source are ALL considered irresponsible chain smoking drunkards who can't budget and have no self discipline.
Please forgive me pointing out that 'budget and debt prioritisation' is not just an ailment of those in receipt of benefits, I can name people across the industry and entire spectrum of society who are share the problem. including accountant staff who have spiralling, uncontrollable, unsecured personal debt that has occurred after they have secured a tenancy.
With the increase of zero hours contracts there are working and reference-able tenants who will slip in and out of benefits; people with outwardly respectable careers but careers that do not pay consistent wages. Does that circumstance suggest that for the large part of their year these folk have normal budgeting skills but suddenly on say the 5th week in 13 they turn to booze, drink and fags because their employer has a quiet week?
Universal credit does not improve anyone’s budget and debt prioritisation but is does level the playing field so that recipient tenants should no longer be prejudiced by circumstance. I think if an applicant is willing to payout to be referenced they should be given fair opportunity to compete for a tenancy along with everyone else, it is then down to the credit scoring algorithms to assess each tenant on their individual budget and debt prioritisation history and provide recommendation for acceptance or rejection. With the accounting complications of the 4 weekly systems of benefits removed, Universal credit means that all proprietary systems can handle assisted tenancies in an identical way to every other AST.
I’ll forgive the plug as it seems you may well have a grasp of the intricacies of LHA and how to better implement its administration into an agency environment. Whilst I agree that changes in accounting can enable better management and reduced arrears, the whole principle is reliant on the tenant physically making payment.
Challenge accepted, half of all people living in social housing are low-income households compared to 1 in 7 of other tenures. The impact of low income and indeed poverty on families cannot be understated and will increase given that living standards are forecast to fall. The risk of UC being used to meet the costs of basic living needs is therefore heightened and the real world effects are on display in Torfaen [and that was only a trial]; we haven’t even mentioned those who may opt for deliberate abuse. I don't think this scenario can be so easily dismissed with good book keeping.
Lets be clear here, UC will place housing benefit in the hands of the tenant and the best operating procedures in the world will have zero influence on how they use it. This is a choice the tenant makes and there in lies the problem because as their level of income remains the same so will the budget restraints but given access to more funds, its inevitable that this could be used as a means to ease financial pressures as they see fit. Given that the private sector is founded on referenced, salaried tenants and affordability standards I don’t understand why you would believe that budget and debt prioritisation is tenant blind?
Call me a cynic but I think this story is simply a means of telling everyone how incredibly important and property rich Mr Green has become. Either that or a cheap bit of political lobbying on behalf of the Labour party in Wales.
Universal credit is a coalition idea and one that the labour party don't understand or condone because it upsets their core voters.
My conservative estimate of the opportunity Universal credit unlocks is worth just short of £1billion for landlords and therefore just short £100 million for Agents, so I am sure my 'how to guide' given away free of charge would be most welcome by an awful lot of people.
Don't get me wrong I am not being greedy but it would be unfair on those who have worked with me and challenged my ideas for the past 4 years if I handed over the Golden Goose just as she is getting broody. As I said I will discuss this, in detail with those who would like to find out details of how Universal Credit simplifies the assisted tenancies and moreover gives dignity to a spectrum of tenants that do not fit every unfair stereotype the are burdened with simply because the are receiving benefits.
First hand experience of 3 government departments HMRC, DWP and CLG leaves me at best disillusioned. Party influenced political ambition seems to be more important than finding a cohesive solution that will weather any change of government. But it is the lack of any detailed knowledge of the subject that is at the root of the problem along with a reliance on expert witness from those who are not truly subjective.
Having an understanding of the pressures on the budget of low income families I would challenge the notion that their [social tenants] budget and debt prioritisation skills are any worse than any other tenants. In under 5 minutes afforded me by one MP I tried to explain a simple HB/LHA tenancy based on 4 weekly payment plus tenancy top up paid 6 weeks in arrears. He became confused, flustered and angry because he simply could not follow the system he was advocating to be retained. Under the current system tenant arrears appear to increase month after month, the debt gets larger and larger suddenly a double payment comes through and the arrears temporarily reduce. Unfortunately the spiral begins again and the cycle appears to repeat itself. Very few client account keepers can follow the complexities or multiple entries of social tenancy and even fewer can explain the apparent problems to their confused tenants. Universal Credit enables the 76 entries of a Social tenancy in a 13 month period for a 12 month tenancy to be reduced to the standard 48 entries in 12 months for a 12 month tenancy.
(I am sure there will be those that can follow that last sentence but my guess is many won’t)
In respect of rent arrears, it is my estimate that overall tenant arrears across a mixed portfolio should be well below 1% down from an present average of 3.75%. There is of course a cost involved in the reduction but it is envisaged there will a real terms saving of about £273/annum/ tenancy. (another £0.98 billion saving to the industry)
Robert, its interesting you find Universal Credit (UC) may be the key to unlocking private accommodation to assisted tenants but you fail to explain why? Similarly your thoughts on why the arrears quoted should not have increased, UC is an opportunity, tenants aren’t to blame and the administration is at fault are welcomed here; free of charge.
UC would appear to be the maturation of the welfare state and the word responsibility is forefront but if empowering the tenant is paramount then why are the local authority’s enjoying rent rebate, an act that does not include benefit paid to the tenant? It’s clear that a duty of care is not afforded to the private landlord and so all aspects of responsibility apply to the tenant alone. To wit, If funds are made available to those of poor budgeting skills & debt prioritisation its reasonable to expect that temptation will be a factor in its expenditure as much as its reasonable to expect a rise in rent arrears. We can debate this but ultimately a tenant must take full ownership of any decision they make not to pay rent. To not do so is the application of selective responsibility…
It would seem that rather than respond to the varied aspects of conflict between private tenancy agreements and the rules of LHA with a compromise, the government has abandoned common sense. Proxy can’t regulate the private sector because it’s a business enterprise and not subject to means tested entitlement.
Social housing has reached critical mass and given its moribund state it would seem a direction has been taken simply to drive down the reliance on government help. With a lateral process implemented and hidden in plain sight with intentionally homeless stature it’s inevitable that many will simply disappear from the stats whilst private landlords suffer the bad press from evictions.
I do and reckon his worth is £15.24 million being 20% of your figure, the value of propertieson which he is probably maxed out on at 80% ltv
I think you may need to observe the industry a bit closer, 100K x 762 properties is £76,200,000, but then who worries about detail anymore
I understand your fears but understand why temptation is not necessarily the enemy everyone blames.
In over 4000 customers I can think of only a few who have actively gone after the HB/LHA market because of the inherent and perceived problems with social tenancies, most agents who have provided me with the insight have been accidental Social letting Agents where circumstances have changed and hard working families have had no other choice other than receive benefits.
Hopefully without embarrassing anyone many years ago an industry sector closed in one town and the majority of the 160 tenants of a single agency were suddenly 4 weekly in arrears plus top up HB tenants. That provided an instant baptism of fire undertanding why it is the current system that is at fault rather than the tenants. I fully accept the spectrum is a wide one and there are those who should not be catered for by private provision but I believe there is a significant financial opportunity for Landlords and Agency by adapting to Universal Credit.
Although it has yet to be tested in a widespread trial despite an offer to help with the problems at Torfaen I am fairly confident of being able to reduce tenant arrears for all tenancies significantly irrespective of the tenancy being private, social or assisted.
I am more than happy to discuss how I think Agents and Landlords can make minor changes to their operating procedures and have no more fear of assisted tenancy arrears than they do letting to any other tenancy.
Ros Renshaw has my contact details for those who want to find out if Universal credit is millionaire breaker or an opportunity that should not be ignored.
@ Robert May on 2013-11-12 09:50:26
I respect and agree with many of your posts but, I cannot agree with you on this issue. I too have had many years at the 'coal face' ( although not nationally ) In my opinion giving rent direct to the tenants - to be passed on as due - will result in a marked increase in arrears. Human nature will not be denied.
Those that will give me credit for achieving what I achieved will allow me to claim that 19 years experience of, amongst other things, the issues surrounding HB and LHA gives me an in depth understanding of how the whole process of collecting rent from social tenants the length and breadth of the country.
I feel that Universal Credit is the key to unlocking the issues that prevent many Agencies and Landlords providing accommodation to assisted tenants. In my (apolitical) opinion rather than arrears increasing in Torfaen they should have remained at the national average or possibly fallen and rather than Universal Credit being a problem it is an opportunity.
Naturally it is easy to blame the tenants but when one looks a bit closer, it is the administration of the process that is at fault rather than the tenants themselves.
In many cases, young people on LHA have never had a job and never learnt budgeting or consequences. Hence why there are on LHA. I own 3 properties that I bought to help young people specifically. I see how at the end of the benefit month, they are going without gas or electric to pay for cigarettes. I have a strong feeling that this is where the rent will go too...let's hope I'm wrong because at this rate, many current LHA landlords will stop being LHA because of this and it will leave us with a bigger housing shortage.
As Gary Silver has said, it costs the Government nothing extra to pay to LL direct, but guarantees the tenants a home as their rent is paid for them.
We done it once. The scumbag collected the rent, didn't forward it to the landlord. Spent it on late nights and slap up meals!
We've not gone down that road since
Its called the property market and influencing factors.
Pay the whole lot in vouchers not cash.
Never mind eh?!!
Poor old Kevin can gradually sell his 762 properties and can gradually amass, at an average price of say £100K, a fortune of £7.62M
Or he can gradually turn over the tenancies and not take LHA
Wish I had his problems
'.....In a trial of the system, in Torfaen, among social housing tenants, rent arrears rose from around £20,000 to almost £140,000 in seven months....'
If this is true.....'nuff said. Politicians - get real!
To allow the LHA element of Universal Credit to be paid directly to the tenant is abhorrent.
We have many LHA tenants who simply leave the property giving NO notice. There would be NO chance of recovery of rent if they were paid directly.
These tenants are vulnerable by definition and this is taxpayers money that is being wasted. It will cost the government NOTHING to pay this part to the landlord.
I don't think the senior ministers who want this rule, to allow the tenant to become 'responsible' realise that so many of these tenants are grossly irresponsible. LHA areas are awash with bookmakers and 'cheap booze' stores.
We do not live in an ideal world. This system of direct housing benefit payments has been tried before and failed miserably.
Let common sense prevail.......