Landlords across the UK are bracing for financial pressure as upcoming changes to benefit rules could make it harder to recover rent arrears from tenants receiving Universal Credit. Letting agents body Propertymark has warned that the changes, which take effect next month, will reduce the amount landlords can recover from benefit payments and could lead to increased rent arrears and longer repayment periods.
The Universal Credit Fair Repayment Rate is set to drop from 25% to 15% next month, reducing the amount available to cover monthly debts, including overdue rent. At the same time, the Department for Work and Pensions (DWP) will overhaul the system of automatic deductions from benefits following a recent court ruling that found the practice unlawful.
Court ruling forces change in repayment system
The shift stems from a legal case earlier this year that challenged the automatic deduction system. In January, a tenant discovered that £500 had been deducted from his benefits without consultation, despite being in dispute with his landlord over property repairs. The court ruled that these automatic deductions violated tenants’ rights because they were carried out without consent or prior notification.
Under the current system, landlords can submit an Alternative Payment Arrangement (APA) request to the DWP, allowing up to 25% of a tenant’s benefits to be diverted directly towards unpaid rent. This mechanism was introduced to help prevent evictions by ensuring landlords receive owed payments directly from benefits.
However, the reduction in the repayment rate to 15% means tenants with rent arrears will repay debts more slowly. Propertymark warned this could create “significant financial strain” for landlords, who will have to wait longer to recover unpaid rent — or risk seeing arrears grow further.
Propertymark’s head of policy and campaigns, Timothy Douglas, said: “Reducing the repayment rate may help tenants by increasing their disposable income, but it will have a direct financial impact on landlords. The delay in recovering unpaid rent could leave landlords out of pocket and increase the risk of evictions.”
Landlords face longer recovery periods and higher risk
The reduction in the repayment rate is expected to benefit around 1.2 million households, increasing their disposable income by an average of £420 per year. While this might ease financial pressure on tenants, it means landlords relying on benefit repayments to cover arrears will face longer recovery periods.
Douglas highlighted the broader implications for landlords: “This change will shift how arrears are managed, requiring more direct engagement between landlords and tenants. Without the backstop of automatic deductions, there’s a real risk that more tenants will fall into deeper arrears, making it harder for landlords to manage their finances.”
The loss of automatic deductions could also complicate the eviction process. In cases where tenants fail to keep up with repayment plans, landlords may have to rely on court action to recover unpaid rent — a costly and time-consuming process.
Letting agents advised to prepare for changes
Propertymark has advised letting agents and landlords to prepare for the impact of the changes. Agents are encouraged to reassess their rent collection processes and engage more proactively with tenants to resolve payment issues before they escalate.
“Landlords will need to be more hands-on in managing arrears,” Douglas said. “This could involve setting up structured repayment plans with tenants or providing financial guidance to prevent missed payments from spiralling out of control.”
The upcoming changes reflect a broader shift in government policy toward tenant protections, but they also leave landlords exposed to greater financial risk. For landlords, the key challenge will be balancing financial security with maintaining positive tenant relationships.
Douglas concluded: “It’s crucial that landlords and letting agents get ahead of this now. Waiting until tenants start missing payments will only make it harder to recover lost income.”
