Landlord Knowledge - The Home of Savvy Buy to Let Property Investors

Universal Credit – Alternative Payment Arrangements

As Universal Credit slowly starts to roll out over the country, many landlords are feeling threatened by the direct payment of the rental element of universal credit to the tenant.

This is understandable, particularly when social landlords (housing associations) are finding that their arrears levels have risen considerably since the benefit has gone to the tenants.

Universal Credit - Alternative Payment Arrangements Landlord KnowledgeHowever, Salford recently ran a Direct Payment Pilot, which though micro-managed and a very small sample, found that rent collection rate was 99.18% with 73% feeling they were coping. This corresponds almost exactly to the number of tenants that, after Local Housing Allowance was introduced in 2007, felt that they needed to have the rent paid direct to the landlord.

When Universal Credit was first discussed, there were indications that a level of direct payment to landlords of between 25 and 30% was unacceptable and would have to come down. In fact, recent signs seem to be that the DWP have accepted that whilst there was no wish it should remain this high, it may in the short-term be necessary, which should reassure landlords unsure about their tenants budgeting capabilities.

If landlords know that their new tenants have debt issues, have left rent arrears in previous accommodation, or have drink or drug issues and therefore have a real fear that the rent will not be paid to them, they can apply for an alternative payment arrangement, which means that the rent could go direct to the landlord, or be paid more frequently than monthly, or have the payment split between applicants (generally speaking there will only be one claim per family unit).

The bad news is that in most cases, payment to the landlord will be time limited, because it is expected that at some stage, with additional support put in, the tenant will be able to take charge of his own finances.

So, there is help available. To access this, you need to: do in-depth interviews, get the references, ask searching questions about arrears and debt. Alternative payment arrangements won’t last for ever, but may give your tenants time to learn how to manage for themselves.