Benefit Changes Impact on Rent Arrears

One of the areas chosen as a test bed for the government’s planned benefits reform package is reporting a sevenfold increase in rent arrears for the period concerned, according to BBC News*.

The reforms generating the problems are part of the government’s move towards a universal credit benefits system.  Essentially, this comprises a desire to pay all associated social benefits as one lump sum directly into the eligible party’s bank account.

One of the major objectives is to try and reduce the amount of duplication that is involved in trying to assess eligibility for different types of social benefits and then paying them all in different ways and sometimes to different parties.

While few people have ever questioned the laudable objectives of the plan, significant numbers have been concerned that some of these changes may work out to the detriment of landlords and following on from that, their social benefit tenants.

The problem is that in the old system, rent was typically paid directly to the landlords concerned. This meant that the scope for rent arrears building up was significantly reduced and overall the scheme was popular with landlords and many tenants.

However, now that rental benefit money is being paid directly to the tenants and given their sometimes overall precarious financial position, the fear was always that it would lead to a corresponding increase in rent arrears.

The report and various spokespeople are offering a balanced view and are not claiming that this very significant increase in arrears is due entirely to changes in the way the housing benefit is paid and to whom. Some are pointing out that this is merely another issue to be taken into account, along with the overall on-going and increasing pressures on the finances of many people, including housing benefit recipients.

Yet it always seemed intuitively likely that adding benefits, which were being paid for the exclusive use of rent into an overall general private pot of money, might be likely to increase the probability that rent would simply become another of the many conflicting and unsupportable financial demands that people were trying to juggle.

Some landlords may feel that the plan is allowing the government to reduce its administrative overheads and cost of operation by simply transferring higher probabilities of debt management onto them.

The major risk here is, of course, that this may incline yet more landlords to simply turn away from social benefit recipients and to refuse to let to them.  That surely cannot be the government’s intention nor in anyone’s interests.

*Source:

http://www.bbc.co.uk/news/uk-wales-21738521