Government to overhaul landlord benefit deduction scheme
1 year ago | 32 comments
Universal Credit overhaul will affect rent payments from April
9:37 AM, 11th March 2025, 1 year ago
23
Landlords are being warned that there are big alterations to Universal Credit coming which will transform how rent payments are managed across the UK.
Propertymark says that from April, the Fair Repayment Rate will drop from 25% to 15%.
That’s the amount of Universal Credit that can be deducted from a household’s standard allowance payment for debt repayments, such as rent arrears.
Also, the Department for Work and Pensions (DWP) plans to revamp the existing framework for automatically deducting of arrears and regular rent from tenants’ benefits following a court decision branding the practice illegal.
Alternative Payment Arrangement requests
Currently, the DWP’s system handles Alternative Payment Arrangement requests from landlords without manual oversight, siphoning off as much as a fifth of a claimant’s monthly entitlement.
This process, designed to avert evictions by securing funds for landlords, operates without the need to inform or seek approval from tenants.
The reduction to a 15% ceiling is expected to benefit 1.2 million households, boosting their yearly disposable income by approximately £420 on average.
However, this adjustment slows the pace at which tenants clear rent debts, potentially extending repayment timelines and placing additional pressure on landlords’ finances.
Ruled the automatic deductions unlawful
Propertymark said: “In January 2025, a legal case challenged this system when a tenant discovered that £500 had been deducted from his benefits without consultation, despite an ongoing dispute with his landlord over property repairs.
“The court ruled the automatic deductions unlawful, highlighting the lack of tenant consultation and potential for increased financial strain.”
Work and Pensions Secretary Liz Kendall responded by launching a review of the deduction mechanism, which also applies to recovering court penalties, council tax and utility debts.
She says that reform of the benefits structure to shield claimants from spiralling into unmanageable debt.
Ms Kendall added that the DWP will now investigate new ways to ensure landlords are paid rent while prioritising tenants’ economic stability.
Managing rent shortfalls
Propertymark says these changes signal a turning point for managing rent shortfalls among benefit recipients.
Without automatic deductions, landlords may face a rise in unpaid rent, requiring more direct communication with tenants to resolve payment challenges.
Letting agents are also being advised to adapt collection strategies and introduce support systems for renters grappling with budgeting difficulties.
UC rise
From April, working-age benefits, including Universal Credit, will rise by 1.7%, in line with the September 2024 Consumer Price Index.
This uplift will deliver an additional £150 annually to around 5.7 million families.
Propertymark says the rise will help those struggling with rising rents as data highlights that fewer than one in 10 PRS are affordable for claimants dependent on Local Housing Allowance (LHA) rates.
Tags:
benefits increase UK, DWP overhaul, landlord payment issues, Local Housing Allowance, rent arrears support, rent deduction rates, tenant income boost, UK benefits changes, UK housing costs, Universal Credit 2025
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Member Since May 2015 - Comments: 2208 - Articles: 2
5:55 AM, 15th March 2025, About 1 year ago
Reply to the comment left by Bill irvine at 14/03/2025 – 12:25
I have a mixture of working and benefit tenants, roughly half-and-half over 80 properties. All my legal cases, at a cost averaging three years rent per case, have involved benefit tenants. I will no longer take benefit tenants without a working, property owning, guarantor.
Member Since August 2013 - Comments: 148
3:35 PM, 15th March 2025, About 1 year ago
Hi Maluka
Your rental losses of circa 40 benefit-reliant tenants@ 3 years rent per tenant is quite staggering, suggesting you or your agents didn’t have much success mitigating your losses.
As I explained in my earlier post, you need to be willing to educate yourself on at least the basics of HB and/or UC “housing costs” and use that knowledge to pursue issues at an early stage rather than leaving things to the very slow and costly legal process.
Member Since June 2014 - Comments: 1565
4:09 PM, 15th March 2025, About 1 year ago
https://www.insidehousing.co.uk/news/nearly-two-thirds-of-prs-tenants-claiming-universal-credit-in-arrears-58623
“Nearly two-thirds of PRS tenants claiming Universal Credit in arrears”
Member Since May 2015 - Comments: 2208 - Articles: 2
4:12 PM, 15th March 2025, About 1 year ago
Reply to the comment left by Bill irvine at 15/03/2025 – 15:35
Sorry my post may have been misleading, the losses are three years rent per case not three years rent per tenant, I only have three active cases.
Member Since June 2013 - Comments: 3253 - Articles: 81
4:27 PM, 15th March 2025, About 1 year ago
Reply to the comment left by Bill irvine at 14/03/2025 – 11:44
That’s still shocking Bill
You might be surprised to hear Direct Payments only apply to between 5-7% of all private sector UC “housing cost” cases. Whereas in the social sector, the average figure is around 35%, again because of the “portal” facility.
When will this Govt wake up, this is costing em a fortune in homeless.
I’m gonna use your words there to my reply to my DWP Partnership manager who’s just replied again & purposely not cc’d u in.
Member Since June 2013 - Comments: 3253 - Articles: 81
4:36 PM, 15th March 2025, About 1 year ago
Reply to the comment left by Monty Bodkin at 15/03/2025 – 16:09
Thanks Monty. I use this info.
Member Since August 2013 - Comments: 148
4:36 PM, 15th March 2025, About 1 year ago
Reply to the comment left by Monty Bodkin at 15/03/2025 – 16:09
Hi Monty
The article you posted doesn’t state:
“Nearly two-thirds of PRS tenants claiming Universal Credit in arrears”. You missed out “at some point”.
As I’m sure you know, Universal Credit is paid monthly in arrears. So, most tenants will be technically in arrears by the end of the 1st month, as their AST expects payment in advance.
If I set up a tenancy from Monday 17th March and the claimant notifies DWP, payment of the “housing costs” will not be made until the end of the tenant’s BAP. Every month thereafter that tenant is likely to be in arrears by “1 month” if they don’t pay a bit extra every month to eradicate the negative balance.
Member Since June 2013 - Comments: 3253 - Articles: 81
4:38 PM, 15th March 2025, About 1 year ago
Reply to the comment left by Bill irvine at 15/03/2025 – 16:36
You correct Bill, but let’s use Monty’s evidence shall we ha ha.
It makes more of a mockery of the system.
Member Since August 2013 - Comments: 148
4:51 PM, 15th March 2025, About 1 year ago
Reply to the comment left by Mick Roberts at 15/03/2025 – 16:27
Hi Mick,
Just a few minutes ago, as I was typing my response to Monty, I received a call from an elderly landlord (member of the NRLA) who had called me a few weeks ago about a tenant in 7 months’ rent arrears.
I assisted her email her local Partnership Manager as both she and her female tenant had replied to several demands for validating information but had failed to secure a result. By emailing the PM, and setting out a timeline of events, she secured payment of the 7 months’ “housing costs” wiping out the tenant’s arrears..
Before her call, she had been phoning DWP and coming up against a brick wall. She knew nothing about the PM, or hierarchy of other DWP officials she could escalate problems to but will in future!
You know from your own experience, how doing so can secure you results, albeit not on all occasions.
Member Since June 2013 - Comments: 3253 - Articles: 81
5:07 PM, 15th March 2025, About 1 year ago
Reply to the comment left by Bill irvine at 15/03/2025 – 16:51
Fantastic Bill, they listen to u, but not us mere mortals.
Let’s hope u get somewhere with that one of mine soon once I get an hour to sort out the timeline for you.
If you can get somewhere with the Midlands Partnership managers, then you getting some kisses from me when I see u-What do u mean u never coming to Nottingham.
Yes I don’t get many results now, not got the energy, as soon as the first Brick wall appears, I han’t got the fight in me any more.
UC, Selective Licensing, the list goes on, they all wearing me out.