BRIEFING -
GIVE TENANTS
THE
RIGHT TO
CHOOSE
Tenants
Are Calling For Choice
q Currently private sector
tenants have no say over who receives their housing benefit; except in very
restricted circumstances, it has to be paid directly to them. This is despite the
fact that many tenants on benefits would prefer to have the option of knowing
their rent has been paid direct to their landlord. It allows them then to
budget for other expenditure knowing that their home is secure. In this way,
tenants retain full financial responsibility without the need for them
necessarily to have the money paid to them.
This is likely to continue once universal credit (UC) is introduced
starting in April 2013.
q Evidence shows that
particularly those tenants struggling to manage their finances would prefer to
have the right to choose to have their Local Housing Allowance (LHA) or their
housing costs under UC paid directly to their landlord. In October 2009, data
from a survey of LHA claimants by Shelter, one of the supporters of this
amendment, found that of the claimants who would choose payments to be made directly
to their landlord, 95% were struggling to manage their finances. Almost half of
the claimants who have had experience of both forms of payment believe that
landlord payment better helps them in managing their rent and household budget.
Likewise,in a recent survey carried out by the research consultancy,Policis,
93% of tenants in the social rented sector argued that it is better for housing
benefit to be paid direct to landlords.
q Crisis, Shelter,the Citizens Advice Bureauand the
tenants’ organisation, TAROE, all support giving tenants the right to choose as they see that the
removalof this right has led to more tenants falling into arrears and more
being under threat of eviction. Figures from the British Property Federation
indicate that since the removal of direct payments to landlords in 2008,
tenants have defaulted on millions of pounds worth of rent. For example, £287
million of all UK
rent went unpaid in October 2011 compared to £243 million the previous month.
Similarly, in its most recent figures, LSL Property Services has reported an
increase in rent arrears, increasing from 8.6% in September2011to 10.1% in
October.
q Support for tenant choice has also been given by The
Money Advice Trust who run the national debt line. Their Chief
Executive, Joanna Elson, has said of the amendment sought:“We feel that this would enable many tenants to avoid housing benefit
arrears and thus tackle their debts and manage their money wisely.”
q There has been a rise
in the number of tenants in the private rented sector who have been made
homeless, ‘Inside Housing’ has reported: “Homelessness
charities and landlords suggested the rise may be linked to a legal change
which saw local housing allowance paid directly to tenants from April 2008.”This
also leads to a cost implication resulting from paying LHA to tenants. When LHA
is not passed to the landlord as rent the consequence can be eviction for
non-payment of rent. Lack of social housing forces defaulting tenants into
expensive bed-and-breakfast accommodation, an additional cost to society and a
burden on public housing administration. Homeless Link isalso calling for
tenant choice.
Public Concern
q A recent survey by
DEMOS shows that 75% of respondents disagreed with the idea of paying money for
rent to tenants instead of landlords.
This indicates overwhelming public concern with the Government’s plans.
Supporting Housing Growth
q The Government has
claimed there is no evidence that landlords have suffered increased arrears as
a result of payment being made to tenants. On the contrary; a clear indicator
of increased arrears is the number of cases where payment has been transferred
to the landlord because a tenant is 8 weeks in arrears or more. For example, Hull City Council tell us that
following the introduction of direct payments to tenants in their area, the
number of cases where payment is
switched to the landlord for this reason jumped from under 4% of their case
load to approximately 12%, a threefold increase. Other local authorities have
had the same experience. Furthermore, David Newnes, director of LSL Property
Services has clearly concluded that “we
expect tenant arrears cases to climb over the next twelve months.”
q A further consequence
of the current arrangement is that many landlords are now reluctant to rent to
tenants on benefits for fear that they will not receive the rent. This makes
life more difficult for tenants seeking accommodation and may force them to accept
a lower standard of housing. In a recent survey of RLA members, of those who
would not rent to tenants receiving housing benefits, 45% reported that it was
due to a lack of guarantee of receiving the rent.
q In its submission to
the House of Commons Work and Pensions Select Committee inquiry into housing
benefits, Crisis said:“The reintroduction
of choice over who housing benefit is paid to would help to mitigate some of the
impacts of these cuts by, for example, incentivising landlords to continue to
rent to tenants in receipt of LHA.”
q At a time when the
demand for private rented properties is far outstripping supply, and given that
the Localism Actprovides a much greater role for this sector in housing those
who find themselves homeless, greater support is needed to access much needed
finance for new housing. Without tenant choice however, many lenders have
expressed concerns about the viability and security of providing finance for
new properties, as evidenced by the Council of Mortgage Lenders’(CML) support
for tenant choice.
Promoting Independence
and Financial Responsibility
q The Government isproposing
that the default position in both the private and social rented sectors should
be that payments should go to the tenant, arguing that this supports tenants by
encouraging them to manage their own finances. This position however denies
them the opportunity to make a rational decision about what is best for their
own circumstances.
q On behalf of the
Government Lord Freud’s principle argument has been the Government’s desire to
ensure that the payment of benefits mirrored as much as possible the payment of
a wage or salary to recipients for them to manage. His argument however failed
to note that unlike a
wage, Housing Benefits are tax payer funded. As such, the Government has both a
responsibility and a duty to ensure they are used for their intended purpose,
not least to address the increasing problem of housing benefit fraud.
q The Private Sector already
faces higher interest rates from lenders because benefits are currently paid to
tenants. Quite rightly, lenders are
concerned about a lack of security of income.
CML estimates that if the Government switches payments in the social
sector to tenants then housing association borrowing costs will increase by 1%,
which means that fewer new homes will be built and rents will be more
expensive.
q It is surely
completely alien to this Coalition’s philosophy to take the view that the
Government should decide for tenants what would be the most responsible way for
them to manage their own finances. Tenants themselves are in the best position
to make an informed choice about what provides them with greatest security
based on their own individual circumstances.
q Whilst the Government
has committed to a pilot scheme to test the payment of housing benefits
directly to tenants in the social sector, it has failed to test the principle
of tenant choice within the pilot schemes.
Nor has it considered the private rented sector in these tests.
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