Will landlords benefit from universal credit?Make Text Bigger
The new universal credit for housing costs may still leave private landlords out on a limb over rent payments.
The proposed new rules will replace local housing allowance with a housing cost element of the universal credit system.
But the outline proposals are not clear over who gets the payment – the landlord or the tenant.
Current rules let social housing landlords pick up the benefit direct, but private tenants are paid the cash rather than their landlords.
In many cases, this leads to rent arrears as the tenant does not pass the benefit on to the landlord.
Housing charities, like Shelter and Crisis, have added their voice to landlord protests about the current scheme and have called for the payment to be made direct to the landlord to avoid arrears building up.
How much housing credit landlords will receive is also a worry under the new proposals.
The indications are housing cost payments will be capped at 80% of the market rents for comparable properties in a council area. If the tenant wants to live in a house where the rent is more than the 80% threshold, they will have to make the money up from their own funds.
The intention seems to be to level the costs of social housing with those of private tenants on housing benefits.
However, whether this will push rents down by linking them with housing benefit for the area or not remains to be seen.
Many landlords will probably consider maintaining rents at the same level to replace tenants on benefits with professional tenants who are forced to rent rather than buy because of the lack of mortgages.
The fear is this will create a demand for social housing from tenants on benefits that housing associations will not be able to meet and that private landlords will not want to house because they cannot afford the rents.
Landlords with tenants paying rent from benefits need to look at how universal credit will affect their cash flow – and consider credit control and rent insurance options that prevent the build of arrears problems.
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