LHA & Universal Credit

Revised October 2013 with intended roll out 2015 - the benefits people receive in respect of Welfare, Employment, Housing (LHA) and childcare support will be harmonised and become a single payment known as a 'Universal Credit'. Vetting Tenants on Benefits and having a guarantor in place will become more critical to minimising a landlords exposure to losses
 
Any tenant who is currently in receipt of housing benefit is at risk of having the amount they receive reduced. As a landlord this may mean that you too could be at risk from tenants who fall short of paying their full rent.
 
Should the Tenant be in more than eight weeks rent arrears there will no longer be a mandatory right to request direct payment (as is the current case). see Tenant on benefits in rent arrears
 
Ministers imply that although some aspects of the Welfare Reform Bill are to yet to be finalised, the basic structure around direct payment to the claimant will go ahead regardless of the outcomes from the demonstration projects.
  • Grant Shapps, the Housing Minister, has said that the intention is to replicate vulnerability/safeguarding provisions under the present local housing allowance system but it is clear that a different approach will be taken to decide on those who are vulnerable.
  • In many respects the current safetynets within LHA Housing Allowances payments should prevail for some people are simply unable to manage their finances. With no recourse to direct payment Social & Private Housing Landlords will otherwise evict on mass and chaos prevails
  • Without an assured safetynet of Direct Payment private landlords may be inclined to take a more risk averse investment view and reposition their portfolios and be wiser to stay clear of areas with higher unemployment or socially deprived areas; this in turn may create social ghettos where only low income and benefits tenants reside.
Prior to the implementation demonstration projects will run from June 2012 until June 2013 the findings approx 10,000 Tenants will be reviewed January 2013. Areas for Demonstration Projects are detailed below

Summary

The Welfare Reform Act 2012 received Royal Assent on 8 March 2012, the Act sets out fundamental changes to the welfare system, aimed at improving the benefits system to reduce dependency on welfare through: improving incentives to work, making work pay and reducing overall spend.

It introduces:

  • A total household benefits cap will apply on the amount of benefits any individual or couple is entitled to (from April 2013)
  • A size criteria for those in social housing deemed to be under-occupying their home (from April 2013)
  • Universal credit - a single working age benefit called ‘universal credit’, which replaces current benefits for employment, housing and childcare support (from October 2013)
  • Direct payments will be introduced for those moved onto universal credit. This will be paid as a single payment direct to the claimant rather than the landlord (from October 2013)
  • Pension credit – help with rent will be incorporated into a new element of pension credit called housing credit (from October 2014)

Demonstration projects

These will run from June 2012 until June 2013 and will test how claimants can manage monthly housing benefit payments ahead of the introduction of Universal Credit from October 2013. Approx 2,000 Social Housing Tenants will be selected from the following
 
  • Southwark Council and Family Mosaic - London
  • Oxford City Council and Oxford Citizens, (part of the) Greensquare Group - Southern England
  • Shropshire Unitary County Council and Bromford Group, Sanctuary Housing and The Wrekin Housing Trust - West Midlands
  • Wakefield Metropolitan Borough Council and Wakefield and District Housing - Northern England and childcare support
  • Torfaen Borough County Council and Bron Afon Community Housing and Charter Housing – Wales.

Helpful links

NOTES
 
Universal credit will be paid calendar monthly in arrears.
 
A policy where rent monies for private, and social are paid direct to the Tenant irrespective of whether they pay their rent or not appears to present financial exposure to Private Landlords and Housing Associations, should their cash flow be impaired they will not beable to raise finance to build new Social Housing. If governments wish to inspire confidence in 'build to let' and attract pension fund investment there is an arguement the proposed legislation will be amended.