The state of Universal Credit: Can landlords now trust it?
Jake McKey, Policy and Public Affairs Officer, has been working with the Government over the past year to highlight the challenges landlords face in managing Universal Credit and developing solutions to improve the system.
Since its inception, Universal Credit (UC) has come under fire from many fronts, notably the private rented sector. Over much of the last decade, the NLA has consistently criticised the poor administrative procedures, late payments and the five (previously six) week wait for the first month’s credit. As a result, confidence in the policy among private landlords dropped to an all-time low in late 2017, with NLA research finding that just two in ten landlords would be prepared to let to a tenant on Universal Credit.
However, we believe that with current and upcoming changes, the Department for Work and Pensions (DWP) has finally listened to the NLA on a range of key topics which will be explored in this article. Though there is still much to be done in making Universal Credit a successful policy, enough progress has been made that landlords should consider Universal Credit as a potentially viable option.
Universal Credit: what has changed and what needs to change?
While landlords remain wary, Universal Credit (UC) has come in for positive changes in 2019. These include a new online portal, better guidance and a funding boost to the system. At the moment, the overall direction of Universal Credit for landlords and tenants is beginning to look more positive.
The key changes to Universal Credit include:
Trial of new online payment system
Private landlords looking for direct payment now have access to a much more useful tool than its predecessor, the much maligned UC47 form. The new system has been simplified and is now easy and quick for the landlord, able to be completed in less than 10 minutes. While landlords put forward by the NLA have provided positive feedback, the results from an isolated DWP trial may be different when connected to their existing infrastructure, so landlords will have to wait and see when the system debuts at the end of this year.
The DWP has listened to feedback from the NLA and has simplified the available guidance. However, there are still issues for our members when navigating Universal Credit, as a result, we will shortly be releasing an all-encompassing guide on Universal Credit for landlords. This will act as an essential ‘how to’ for landlords looking to navigate the processes to setup and maintain a successful Universal Credit tenancy.
£4.5 billion boost to the system
This investment is showing dividends, with our members reporting the gradual slowing of waiting times, increased responsiveness from DWP staff and greater accessibility to the system for tenants and landlords looking to complete a claim. While issues such as lengthy waiting times and slow communication still remain for landlords, this is a step in the right direction.
The elephant in the room
However, despite the streamlining of the administrative processes, much more needs to be done in order to tackle the chief reason for the lack of uptake: rent arrears. Our most recent Q2 research survey has found that 76 per cent of landlords who let to tenants on Universal Credit have experienced rent arrears in the last year.
Separate NLA research has also found that of the 18 per cent of landlords who let to tenants on Universal Credit, almost half (46 per cent) had applied for an Alternative Payment Arrangement (APA), and three fifths (61 per cent) of those landlords had experienced delays in having it set up, once again highlighting that key problems still persist in UC tenancies.
In order to tackle the ever-increasing problem of arrears, the NLA believes that direct payment should be made to the landlord by default, with the option to opt out of this if agreed by both parties. This should be coupled with a re-examination of LHA rates, which have fallen well behind local rents in recent years, making landlords far more risk averse to tenants receiving benefits.
‘No DSS’ adverts
Photo credit: MHCLG
We have consistently argued that landlords should take a case-by-case approach to potential tenants, and that blanket bans on tenants in receipt of benefits are poor practice. Last year, the NLA’s approach was endorsed by Rightmove and Zoopla, who announced that they would be adhering to guidance issued by the NLA.
We recently attended a roundtable at No.10 to discuss the negative impacts of so-called ‘No DSS’ adverts. The good news is, recent figures released by the DWP found that 89% of lenders don’t have restrictions in new contracts for tenants receiving Universal Credit.
However, the NLA is pushing the Government to address the remaining challenges that have seen such a low take-up of Universal Credit in the private rented sector, and particularly highlighted to Ministers the impact of affordability issues caused by the current methods for calculating the Local Housing Allowance rate. Together with the tenant fees ban and security deposit cap which reduce the opportunity to mitigate risk, and the Government’s proposed abolition of Section 21, there’s the risk of a perfect storm for vulnerable tenants and undoing all the progress that has been made.
The repeal of Section 21
The repeal of Section 21 threatens to further compound the already fragile situation regarding rent arrears. The Government should take into consideration the need for the most vulnerable tenants to access housing owned by increasingly risk-averse landlords. This makes it clear that people on Universal Credit or legacy benefits would be the first and most prominent victims of the Government’s proposals – an issue we will continue to press over the coming months.
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