Universal Credit? Or Universal Nightmare?

Property expert Alasdair Melville

Property expert Alasdair Melville - Credit: Archant

The NLA Meeting at Three Rivers District Council in Rickmansworth was where we heard about the latest updates to the Deregulation Bill, the changes to Council stances on their ‘Easy Let’ program which operated as a council run Lettings Agent to house low income and vulnerable families and individuals, and an introduction to the Benefits system changeover from the current DWP cocktail to the all-encompassing Universal Credit.

The crowd is a good mix - even including NLA Chairman and experienced Landlord Carolyn Uphill who offered a brief but enlightening introduction to the waiting Landlords on how Landlords are vilified by society as money-grabbing heartless mercenaries, painted by the media to seem stingy, ungrateful and cruel. She goes on to say that the media reports of awful Landlords are a thin minority who give the bulk of those earning a crust in the Private Rented Sector a bad name - and judging by the clientele I’d say she was right. Most were over 40, well dressed and came forth with a good degree of technical knowledge and questions for the panel of speakers for the evening - in some cases serving them a positive roasting.

The first of the panel to offer their view was a gentleman named Alan who represented Three Rivers and informed Landlords of the Housing Services Departments ability to locate tenants and place them in properties at no cost to the Landlord (excepting the fact that the quality of tenant and the amount of guaranteed rent is potentially a third of that which could be achieved through a qualified and experienced Letting Agent, but this wasn’t mentioned) - it seems like a great deal on paper.

Backing this up however was the following dissemination of new practices as set out by the DWP when it comes to welfare reform. And this is where it all gets really interesting;

The new ‘Universal Credit’ is being rolled out piecemeal over several years and in specific distinct stages. The current phase of implementation is for single adults with no dependents. Once on Universal Credit, the individuals will receive ‘benefit’ by way of a monthly payment, and all of the former aspects of Housing Benefit, Income Based JSA, Income Support, Tax Credits and Child Benefit will all be rolled into one. The idea being that claimants will enjoy a ‘simulation’ of work until they can find sustainable employment - the support and methods sound almost utopian on paper, but there was one part which heavily rocked the boat with Landlords.

The matter of direct payment to a Landlord when a claimant encounters difficulty will be altered, and not in the Landlord’s favour. Currently Landlords and tenants can elect for payment to be made directly into the Landlord’s bank account, assuming the tenant has offered consent for the Landlord to be made aware, and therefore Landlords are notified immediately if there is a problem with payments.

Under the new Universal Credit, payments are automatically made to the individual claimant and the claimant must give express permission to send direct payment to the Landlord. Furthermore, the DWP will only pay arrears to a level of UP TO 20% of the outstanding monthly amount, each month, until the arrears are paid off.

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The deadly combination of these two could mean that Landlords who previously accepted Housing Benefit Tenants and built their businesses around the existing DWP rules could find themselves losing up to three month’s rent before they find that a tenant is experiencing difficulties. This hands a great deal of power to tenants who might be wise to the system.

The further problem here is that it introduces a higher barrier and more stringent checks for those in most desperate need of housing - tenants in arrears will be scrutinised more heavily, and if it weren’t bad enough already, more Letting Agents will dumb down the idea of even considering Universal Credit applicants, and Landlords may begin to reject applicants from Councils, leaving both the public sector and the populace they are seeking to help in a dire situation - facing homelessness.

The feedback from the event seemed to be coloured by the notion that many in the room felt that the reforms were poorly thought out and the impacts had not been fully addressed. I’m inclined to agree.

The final (and in my humble opinion most enlightening) element of the evening was Debenhams Ottway’s Howard Kent speaking on the finer points of the Deregulation Bill. I’ll be releasing a video on this soon which you can see in due course on my company YouTube channel.

Howard really dug down into the effects of incorrect service of paperwork, and how the HHSRS contained within the Housing Act 2004 really starts to bite when tenants make reports concerning health and safety issues in properties and improvement orders are served. The legislation, amongst a myriad other tweaks, now prevents a Landlord from serving a Section 21 where such a notice is in force, or even where such a complaint has been made.

Landlords will now need to be even more vigilant about record keeping and understand the nitty gritty details of the law if they are to protect their financial interests - it might be time to consider speaking to a highly experienced, qualified letting agent who’s already implemented this framework.