Universal Credit / HB monies paid direct to tenants

by Readers Question

11:54 AM, 6th November 2014
About 4 years ago

Universal Credit / HB monies paid direct to tenants

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Universal Credit / HB monies paid direct to tenants

With an eye on the imminent introduction of Universal Credit, the recent a recent discussion – “Is your MP a Landlords champion” – kicked up some interesting points, one of which was the potential loss of tax revenues as a result of Tenants who, instead of passing the housing benefit payments on to their Landlord decide to keep it for their own personal usage. As with several of the respondents I had never considered this facet but was left wondering just how much could be involved. Universal Credit HB monies paid direct to tenants

If one puts any actual figures against such aspects as the number of claimants, the percentage likely to retain the HB money etc, Ministers – and/or their advisers – would undoubtedly dispute these, therefore in order to get a feel as to the possible effects consider the following.

If, for every 1 million claimants, 1% kept the HB money, for every £100-00 rental figure per calendar month the loss to Landlords will be £1 million with a corresponding potential loss in taxes – based on 20% of £200,000 per calendar month.

Assuming I have not made any fundamental error in the above, if one puts some multipliers on the above base figures then we may obtain some vision as to the potential total loss in tax.

Assume, 10 million claimants still allowing 1% who retain the HB monies and an average rent of £400-00 per calendar month – it may be low for some but I am assuming lesser advantaged areas, then the loss in taxation would equate to £8 million in one calendar month.

Given that such monies will be lost in to the black economy one has to question the rationale of paying HB monies direct to Tenants.

It is a fact that many tenants categorically state that they would rather the HB monies be paid direct to their Landlord, similarly many Landlords would prefer such monies to be paid direct to them. This not only has a financial benefit but also, should there be a “problem” with the claimants entitlement etc the Landlord is made aware of this direct from the Council and is able to contact the Tenant to ensure that he/she is providing the necessary information that is required to resolve the problem.

Who knows what the scenario will be when Universal Credit is rolled out to the whole country.

Regards

Don Higgs



Comments

Jonathan Clarke

13:05 PM, 6th November 2014
About 4 years ago

The rationale the government uses is not based on the tenants, the landlords or even the treasury`s needs or wishes . Its based on their political social agenda to empower its citizens to take control of their own finances in readiness for the workplace. It is a laudable aim in many respects because its what we encourage our children to do.

The flaw in their plan though is they will alienate LHA landlords because they are using us as a guinea pig and a scapegoat for that agenda. We provide that LHA housing but may withdraw from that market because of their mismanagement.

We provide support to our children when we give them pocket money and instill a sense of responsibility on how to manage their finances, But we are there to help and guide them through that process and pick them up if they stumble. The government will make a token effort to do that of course but the service they provide will be woefully inadequate. The stumbles will be big ones and they will lose their houses as a result and be put in B&B`s. We will then say we told you so and they will revisit it.

But we know it will fail because we have been here before with Blair. But Cameron did one good thing and amended the Housing Benefits Regs and in April 2011 it enabled us to be paid direct once more. So they know it will fail but true to form they pretend to listen and just nod in the right places of course but their agenda is the only one that matters at the end of the day. They dictate

The hypocrisy is palpable. On one had they want to give that money to the tenants to empower them but then resolutely refuse to listen to them and allow them to make their own choices in letting them make an informed decision to in fact pay it direct to us. That is more of a dictatorship and I`m sure breeches their human rights.

They are quite happily allowed to instruct a bank via direct debits to take money out of their accounts for utilities but for some bizarre reason they will not let them decide that the council should pay us at source via a bank transfer. That is not empowering that`s the opposite and giving out mixed messages

Its high time that decision should be challenged in the courts. What gives the right to a government not to allow a reasonable request for rent to be paid direct to their landlord. Its deemed to be their money so allow them to decide how the payment method should be.

If they insist on their plan then why do they hypocritically decide they can automatically deduct income tax and NI contributions from my wages. Give me the power to arrange payment of that myself to HMRC. They deduct it because they dont trust me to pay it off my own back and it would create a logistical nightmare trying to collect it from everyone who did not pay up. They patronise landlords and tenants alike with their half baked ideas about social responsibility

Why trust a tenant with £650 pcm who readily admits they dont want it and have not got the ability to manage their finances. Why set someone up to fail and give them no support. Its cruel and inhumane

Steve Gracey

14:01 PM, 6th November 2014
About 4 years ago

If the Government wants to empower and train these people to look after their own money why not take these people out of PAYE when they get back to work, so they pay their tax out of their gross income?

I'm guessing the Government prefers PAYE deductions at source for the very same reasons that Landlords prefer direct rent payments deducted at source.

Mick Roberts

14:56 PM, 6th November 2014
About 4 years ago

1% kept the money? I think for some, it’s much higher than that.
Even Govt own figures for the latest Councils who’d had to endure HB, are somewere around 12%. But the Govt always tally around with these figures.

And then you’ve got the loss of 40% per month if 40% Tax payer.
And then 45%.

Question paying to tenants? The likes of me & Jonathon Clarke & Rob Mellors & every normal human being on the planet questions this rationale.

I have loads & loads of other reasons & arguments. This Govt doesn’t understand Welfare at the bottom of the tree.

Ha ha & as I get back to finishing this text, Jonathon Clarke, has beat me to it.

Yes DWP has deal to payer water company direct because they recognise tenants don’t pay, yet all of a sudden, they think some/a lot of DWP tenants, are gonna be ok with receiving £500 every month.

I’m gonna’ copy some of my previous comments onto here, for those that missed it:

If the money is for rent, pay the rent. Why do you think DWP take money out income direct to pay the water bill?
Why do you think DWP pay the mortgage interest direct to the Building Society? ‘Cause DWP know from experience, that if they pay the claimant this portion of money, it won’t go on the mortgage-If they know from experience, it then baffles me how the puppets can then defend Universal Credit direct payment by the Puppet Masters.

Why do you think DWP pay the mortgage interest direct to the Building Society? ‘Cause DWP know from experience, that if they pay the claimant this portion of money, it won’t go on the mortgage-If they know from experience, it then baffles me how the puppets can then defend Universal Credit direct payment by the Puppet Masters.

Why do Elec & Gas companies have pay as you go meters? Der…Not rocket science is it! We are all different with money. Elec & Gas people know SOME people can’t budget & pay things every 3 months like other people, that’s why they give ‘em a provision to pay it as & when they have the money. THEY KNOW THIS FROM EXPERIENCE. And I know & HB staff know from experience, you CANNOT give a LOT of DWP claimants EVERYTHING IN ONE GO!
Now, when they run out of food or gas or elec, they may have their child tax credit in a few days to survive again.
They may get their child benefit tomorrow to put gas in before they freeze. To buy milk & bread for the kids.
If you give them £1500 in ONE MONTHLY PAYMENT, come on wake up-What do you expect to happen? Dream holiday to Spain? And they not gonna’ think about suffering the consequences later. They think of the GOOD time today-A lot of them don’t plan for the future. Unfortunately this is the real world at the bottom of the tree.

How much extra is it costing all these councils & Housing Associations with the extra costs in collecting money & rent arrears now some of them have had Universal Credit? This is either Tax payers money, or money that could have gone on more houses or better houses. Absolutely ridiculous. Maybe in 5-10 years, one will look back & say ‘remember when we paid tenants direct the money that should have been used for rent & they was blowing it on theirselves?-What a ridiculous policy that was.’
I can see it, tenants can see, HB staff couldn’t see it 6 years ago when LHA came in-They too CAN NOW SEE IT-Tell them bigwig plonkers in Parliament to wake up!

U should read ‘em Jonathon, I’d imagine everything u encounter too.

And you two have some great arguments with the PAYE at source-Let’s get that on News at Ten.

Landlord Geoff

16:25 PM, 6th November 2014
About 4 years ago

Johnathan
As usual you are 100% spot on.
Geoff
landlordgeoff.weebly.com

Jonathan Clarke

18:33 PM, 6th November 2014
About 4 years ago

A live example just now. I owed a tenant a £90 rebate. I saw them today with the cash. They said oh good that will give me some money to go partying Saturday. Fair enough its their money who am I too judge. I went to give it to them but they stopped me.

- Oh can you give me just 20 today for food and 70 on Saturday. I said why because it means two trips for me. They said - well if you give me it all today i will spend it and then I wont be able to go out Saturday!! -

What kind of lack of self control makes these people need to spend instantly and deny themselves a night out. And that`s just two days away. To them a 31 day month must seem like seem an eternity.

Whatever happened to the art of delaying gratification.

John MacAlevey

9:34 AM, 7th November 2014
About 4 years ago

Mick, completely with you with all you say. UC is a sop to the left of the Tory party..actually quite in line with what Blair might have done. Ian Duncan Smiths great plan is worthy but unworkable. The only way to get HB claimants out of bed is to make the differential twixt wages (increase) & benefits (decrease) to a point where it IS worth working. Compensate business who have greater wage bills by cutting business rates/tax. HMG`s money (our money) moves in a circular fashion, it just depends who gets it first & last.

Steve Gracey

10:34 AM, 7th November 2014
About 4 years ago

Reply to the comment left by "John MacAlevey" at "07/11/2014 - 09:34":

Couldn't agree more John ..... The only way to get HB claimants out of bed is to make the differential twixt wages (increase) & benefits (decrease) to a point where it IS worth working

I think this is the crux of nearly all this countries economic problems.

Housing shortage - due to 3 million immigrants coming to do the jobs that 3 million Brits choose not to do because they can get paid to stay in bed. These immigrants need to live somewhere.

House prices / rents too high - supply and demand caused by 3 million immigrants

Roads / congestion - extra 3 million immigrants travelling on them

schools / hospitals waiting lists - extra 3m on them

Energy capacity running out this winter - extra 3m using it

Food price inflation - supply and demand due to extra 3m eating food and farmers selling their fields to build more houses.

This isn't intended to be anti immigration - more like anti lazy freeloader.

Gary Silver

11:07 AM, 7th November 2014
About 4 years ago

Reply to the comment left by "Mick Roberts" at "06/11/2014 - 14:56":

Reasons why direct payment of housing costs are an extremely important option for both landlords and tenants :

Direct payments help reduce the personal debt of landlords and tenants.
Direct payments help to reduce the risk of a tenant losing their home.
Direct payments help to reduce the risk of landlords losing their investments.
More than 15% of local authority tenants and 13% of housing association tenants do not have a bank account; therefore would be unable to pay their rent by direct debit if this option was abolished.
The financial security that comes from direct payments has been critical for social landlords in securing private investment at highly competitive rates – which has maximised their capacity to deliver much needed affordable housing at good value to the taxpayer.
A research report by Policis in 2012 [ Optimising welfare reform outcomes for social tenants ] found that 86% of social tenants believe “strongly” that it is better for their Housing Benefit to be paid direct to the landlord so that they are secure in their home.
With 9 out of 10 tenants opting for rent to be paid direct to their landlord 92% stated that they would choose this option again, if given the choice.
After Fergus Wilson decided to evict all of his housing benefit tenants a few months ago, the government seem to be on the back foot defending yet another issue relating to their coveted Universal Credit flagship policy.

Although we won't be serving notice on our 'benefit' tenants just yet, as properties come free they will only be offered to students, working people or an LHA tenant with a guarantor for whom we can get some form of rent guarantee insurance.

The DWP have insisted all along (Ian Duncan Smith & Lord David Freud), that Universal Credit will be a bulk sum, comprising of many different benefits rolled into one. This in itself is actually a very good idea. Housing Benefit or LHA as its now known should be kept apart from this payment, or at least the landlord and tenant should be given the option of direct payments when the tenancy begins.

As landlords and agents we are NOT asking the government for more money but just asking for a split of payments between the claimant and the landlord. There WILL be a blatant misuse of tax payers money that will NOT get spent on what it was intended i.e. Housing Costs.

The vast majority of benefit tenants are vulnerable by definition and will not pass the money on as rent, but simply spend it on other purchases or luxuries. This has been proven to be the case when these often unfortunate people have so little to live on. You don't have to watch reality TV shows to understand the mentality of so many 'benefit st' tenants. Independent figures show that around 70% will fall into arrears and we fully agree with this.

It is not just landlords but also tenants, Citizens Advice Bureaus, Housing Associations, Landlord Associations and the man or woman in the street who knows this government idea is quite ludicrous and will not work.

The two politicians mentioned above argue that the recipients need to treat this benefit as a working wage and be responsible - Great, in an ideal world.

Many lenders will not lend to landlords who wish to expand their portfolios who rent to LHA or 'DSS' (historically named) tenants. Also NO rent guarantee insurance can be taken on these highest risk of tenants.

The PRS is being asked to handover an asset often worth in excess of £80,000 in return for the chance of getting their rent. No deposit is paid and quite often no rent in advance can be paid by the tenant.

Mass evictions and severe homelessness in NOT a threat but it will happen and cost the government in huge temporary accommodation costs, as well severe embarrassment.

You cannot create indepence from a state of dependence.

Don H

11:57 AM, 7th November 2014
About 4 years ago

As usual with many postings, some good additional experiences and information being provided. Ignoring other aspects touched on within such postings which are very valid, I have added a slightly updated and hopefully a more realistic figure of lost tax revenue based on inputs provided to date, which may still be "wide of the mark".
I believe that there are around 5 million claimants of housing benefit and it would seem that a minimum of 12% have failed to to pass HB monies on to Landlords in areas where trials have been undertaken. if one assumes an average rent throughout the whole of the UK of £400-00 per calendar month then the loss in taxation, just based on Landlords who are 20% tax payers would equate to £48 million in one calendar month, all lost to the "black economy". This is ignoring the "larger portfolio" Landlords who would be 40% tax payers.
Makes one question whether Ministers and their edvisers have even considered this potential loss of money to the public purse, or are they happy just to write it off as being "part of the learning process" - for them!!.

John MacAlevey

14:34 PM, 7th November 2014
About 4 years ago

...as a p.s. to my last post..how is it that non-payment of HB to the landlord by the receiving tenant is not seen as theft? It is a `pecuniary advantage` at the landlords expense. Time to call a spade a shovel.

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