Universal Credit The Elephant in the Room

Looks like the county courts will be busy as LHA claimants willl not leave until evicted as the council will state they left voluntarily and will therefore NOT be obliged to be housed.
It could take up to a year to evict these LHA tenants; but hopefully they will continue to pay the rent or they will be deemed to have made themselves intentionally homeless and the council will not have to house them.
Start issuing those Section 21’s just incase! and don’t allow any new tenancies, go onto a SPT.

Not that simple from the homelessness point of view though. Decisions on intentionally can certainly put the kibosh on a tenant’s application but it isnt applied as a blanket rule, rent arrears = intentionality. Councils have to take into account the reason for the arraers being there.

In the defining case of Regina v Wandsworth ex parte Hawthorne she was deemed intentional because she was strapped for cash when her partner left and chose not to pay her rent but the court of appeal overturned the council’s decision saying the true test should have been what caused the considered decision not to pay, not the non payment itself.

The homelessness code of guidance also backs this decision, so it is likely that any LHA tenants being evicted for rent arrears caused by a cut in income may not automaticaly be deemed intentional, placing even more burden on case and resource strapped councils.

And also, when you think it through, it is highly likely that in order to protect themselves from the deluge, homelessness units are likely to be even harder on not picking up until warrant stage.

As a trainer I have the advantage of meeting people from a wide range of councils, both inner city ones and rural and in the past year I have had several coversations with senior managers who are murmuring that UC, HB cuts, payments direct to tenants, taking on the HRA debt, forced right to buy discount etc has the potential to bankrupt councils and housing assoications. I have never heard that kind of talk in my entire working life in the council.

The austerity measures being loaded by central government, aimed at cutting various budgets doesnt work, it just pushing other budgets up elsewhere to compensate. But if council’s go down or simply cant cope financially they will simply be blamed by government for being bureacratic, troublesome and inefficient.

I have had no internet all week so catching up……..

Like Ben I
have seen many changes in the lettings market and when one client group are
affected there is a knock on effect.

I remember
in the early part of this century the changes to student funding had a huge
impact on those who let in some universities and little or none on others. The
“red bricks” continued to take young people from all over the country
and abroad where those that had once been polytechnics tended to go back to educating
young people in the local community because they could no longer afford to pay
rent and bills in addition to university fees unless they studied from home.
Many properties that had been in student areas became available to those on low
incomes or benefits. This reduced the market for those who had previously
houses those people…………

In 2007 when
the payment of LHA defaulted to the tenant there was another major market
change when landlords lost their nerve because they did not trust tenants to
pass the benefits on to them – this in fact proved to be the case with some
claimants and rent arrears in the West Midlands alone amounted to £18m in the
first year of the changes.  Landlords
began to refuse to take those on benefits and the bed and breakfast providers
saw a massive increase in demand as local authorities used more temporary
accommodation of this kind to meet their statutory obligations to house the
homeless.

Local
authorities now have the ability to discharge their duties if they can place a
homeless person in the PRS for over a year and many authorities are being very
creative with their limited funds in order to encourage landlords to work with
them. Direct payment of LHA is becoming more prevalent and many landlords are
using this as a business model which is working very well, particularly in
areas where those on LHA outnumber students or working people. Many landlords
have accepted a reduction in rent as a result of the many changes to LHA including
the under 35’s and 30 percentile rate changes. 
Other landlords have left the market.

Universal
credit will change the landscape for landlords and for local authorities again
and solutions must be found. Unemployment will not go away and in some areas
landlords will have little option but to take those on benefits and even those
landlords who do not accept people on benefits at the start of the tenancy will
find that changes in circumstances will put many of their working tenants into
that category.

Whether we
take tenants on benefit or end up with tenants on benefits we all need to learn
how to deal with tenancies where tenant pay their rent through public funding. We
should all read John Paul articles on the “how to” so that we know the facts
and the systems and can make an informed decision should the occasion arise.  We should all have a clause in our AST’s that
ensures that if at the start of the tenancy or at any time during the tenancy
the tenant becomes reliant on benefit the tenancy is only granted on the basis
that these benefits are paid directly to the landlord.  A change in Government directives gave local
authorities the ability to make payments directly to the landlord if this is
the only basis upon which the tenant can find a home and most, not all,
authorities are paying landlords if this clause is used.  Some authorities are paying if the landlord
writes to them saying that the he will take legal action to terminate the
tenancy unless they pay him the rent directly. 
We all need to find out what the policy of our local authorities so that
we know where we stand if a tenants has to claim LHA.

There are
credit unions in most parts of the country but they have strict rules about the
area in which they are allowed to operate. 
These rules have been relaxed in some cases in lines with recent changes
to national policy and all landlords should find out which credit union covers
their area in preparation for Universal Credit. 
Many landlords have changes their business model and are already using
Credit Unions for all new LHA tenants and this will stand them in good stead
for UC, because regardless of where the payment comes from so long as funds are
paid into the account by the rent due date the landlord will receive the rent
by direct debit.

Government will continue on their chosen path regardless of the
fears of those of us who deal with the day to day consequences and solutions
must be found for those of us who choose to continue to be landlords. 

Professor Julie
Rugg, in what is known as The Rugg Review, published in 2008, gave this warning
to Government

“The report was critical of local authority attempts
to use the PRS to discharge their homelessness duties. “The belief that the PRS
will expand to meet this demand just because we want it to, indicates a poor
understanding of the sector. “Landlords are reluctant to move into this market
without some kind of incentive, so we have incentive inflation, ever more
expensive and ever more complicated initiatives to persuade landlords to take
benefit recipients.”

I don’t think
anyone is listening Professor Rugg.

All that being said and I agree with your contentions; this leaves as I suggested a massive risk to LHA LL if they decide to evict.
Tenants will not leave until evicted.
Rent won’t be paid and this leaves a LHA LL facing possible bankruptcy.
Unless LL can obtain RGI on these tenants  or their guarantors they will commence exiting this market as the risks toi their bottom line are too much.
It is not as though there is a shortgage of private tenants!
This means your workload will increase further.
Something to look forward to!!!!???

Mary I appreciate your  pressing the issue about direct payment of LHA.
That however is the bit that scares me the most.
Say you have a claimant for a year or so  and then a letter from the council informs you the LL that your tenant had made a false claim and therefore you were required to repay all the rent you paid.
This risk exists.
I could not take on such a risk  so as soon as a tenant failed to pass on LHA I would apply for direct payment and evict.
I would have NO alternative.
Is there any insurance out there that covers this risk.
Only that would persuade me to retain a LHA claimant who is now paying direct.

Also your internet.
Get yourself a One plan from 3 with new phone
Unlimited data usage plus all the other bits NOT SUBJECT TO FAIR USAGE
£25 pm
I am getting rid of my broadband as the phone works just aswell
Do it via topcashback and they pay you about £119.00

Paul perhaps I am not being clear.  I am not suggesting that landlords go for direct payment on the contrary.  If the payment goes into a Credit Union account that belongs to the tenant the payment is deemed to have been made to the tenant not the landlord.  If there is an overpayment the LA cannot reclaim from the landlord they must reclaim from the tenant. 

It is not clear yet how an overpay recovery would work but I assume that it would simply be deducted from the tenants “single purse of benefits” this would mean that the rent D/D would come from the remaining funds and the tenant would need to reduce his spending on something else to keep within his means – just like you and I would if we were hit with a big repair bill for our cars etc.

Paul it took 3 days for my internet provider to send me new kit before we realised that the fault was on the line.  I need my wi fi to run other applications.

Bearing im mind as you said that every tenant will be a P45 from UC when it comes in;  do you have any advices as to how we as LL should have knowledge about a CU which we could offer to our tenants in the event they end up as UC claimant
It would be useful to have this situation set up and information about such a credit union.at the time of the AST commencement.
This so we could advise a tenant as to what to do in the event they become a UC claimant.
When you think about it the perfect people to have a credit union for all claimants would be a POST OFFICE credit union
That is one big ‘common bond’.
It could help the PO out no end.
The big problem you have identified, or rather one of many ,is that clawback may occur to the extent there is not enough money in a credit union account to pay the rent.
What happens then?
How are these people going to manage a ‘single purse’ of benefit.
Unless all the important DD’s go out on the same day as the UC is received or maybe the day after the tenant will have spent the money.
That is unless the CU prevents money being taken out until all bills have been paid.
The more I think about it the more I feel it will fall at the first hurdle.
This coud be a seismic ‘poll tax’ event which the govt may not recover from.
Their heart is in the right place; they just have not considered the practicality of benefit claimants managing their own monies.
Most are dysfunctional and are not capable of managing these affairs.
I am at a loss as to how this govt seems to imagine these type of people are going to cope!?

I can offer you some advice on where to find the information you seek Paul. It’s rigt here, just keep reading Mary’s and Ben’s post and especially John Paul’s. He can’t offer advice on a yet unknown structure but he can and is offering advice on the current one. Instead of atacking his business model, why not ask him a few decent questions? If 50% of your private tenants were made redundent on Monday and could not find work would you know what to do? Would you serve notice on every single one of them?

As I have previously stated I have no issue with John-Paul’s business model; it just isn’t for me.
And yes as soon as the tenant doesn’t pay rent they will be evicted.
However this may not occur for some time as there is the present 13 week rule and if the tenant hasn’t been able to come up with the full rent then yes I would seek possession..
There is always the guarantor if the tenant failed the RGI check.
However 13 weeks should be enough time to sort themselves out.
I am not really that bothered as I have RGI to pay the full rent whilst I am obtaining possession.
I cannot have any form of payment plan that lasts more than 90 days as I would not be able to submit a RGI claim if I left it more than 90 days from when I didn’t receive full rent.
So RGI ties my hands somewhat.

Paul As Mark has said it is important for all landlords to understand the LHA system at the moment and to have the right information to hand to help a tenant who is suddenly unable to pay his rent.  Most local authorities have information leaflets which yoy can get from their offices, libraries, CAB etc. John Paul has good systems and solutions in place and all landlordsshould read his articles – just in case.  All landlords should keep themselves informed about the evolving benefit system including UC when we have more details.

You are so wrong about the profile of people on benefits it can be anyone. Business failure, relationship break downs, ill health, poor investment, exam failure, job loss……… Many people who have earned their living and paid their bills all their lives end up needing benefit support.  As Ben said he was once in that position himself and you can tell from the fact that he has a full time job, writes articles on line, keeps up with legisiation and regulation etc that he works very hard and does not fit the profile of a “benefit claimant”. I have dealt with tenants who are suddenly unemployed and it is very sad to see, they loose confidence and self esteem very quickly, if they also loose their homes what hope have they got to get back on their feet?  Like landlords their are good and bad tenants and it is quite wrong to judge which is which on the source of their income.

Do you realise how long it takes to repossess a property from a tenant?

You need to have some faith and to realise that those of  us who are working in the background to put things in place to make UC work know the business.  Each CU has its own way of working but all have a simple banking system where an account holder is unable to withdraw funds that are earmarked for a D/D.  The details will be worked out and systems will be put in place and the PRS will survive this as we have survived all the other changes because that is what we do well and because this country needs us to provide homes for those who need or choose to rent them.