Private Landlords and Universal Credit

| posted in: Debt, FAQ, Housing, Universal Credit, Welfare Reform | 9 Comments

Private landlords will be one of the most significant groups affected by the switch to Universal Credit. This post is adapted from an email exchange I had with a private landlord about Universal Credit and summarises his main concerns and my reflections.

If you are a private landlord and have a view on Universal Credit, why not leave a comment in the box below?

I am not the first to write about this, and Universal Credit does not create the problem. There are several well-established problems for private landlords with the current LHA / Housing Benefit system. For example take a look at http://www.property118.com/index.php/dss-tenants-dhss-dwp-landlords/30386/ for an interesting discussion started by a columist and landlord Mark Trenfield and some fairly honest and revealing landlord replies.

The post shows that landlords don’t want to adopt a ‘no dss’ stance, and that the vast majority of benefit claimants make great tenants. However, the local housing allowance and the benefit system creates problems, and Universal Credit deliberately removes one of the ‘direct payment’ protection that landlords have enjoyed, in order to make benefit more like work and support tenants toward independence.

The most significant problems I have heard from discussion with private landlords, based on their experience, are:

1. When a new LHA claim is made there is a delay of several weeks before the money is actually paid to the tenant, and thus the landlord. 

Yes the landlord will eventually be paid, but cashflow is very critical to many landlords and the prospect of this administrative hiatus is quite offputting.

[DG] Universal Credit won’t change this, tenants will be paid directly in the vast majority of cases, the tenant will therefore be responsible for making that first payment. Though Universal Credit is paid monthly in arrear, tenants may be able to borrow a months worth of award interest free, the exact details of this are yet to be determined.

2. Housing Benefit is paid to the tenant not the landlord. This was supposed to increase choice and, to some extent, competition. However it does neither as fewer landlords by far are willing to enter the ‘dss’ system. Because landlords are reliant on the tenant passing on the rent they are never sure of payment. Obviously, the same is true for non-benefit tenants, but because benefit claimants have, in general, a much smaller proportion of disposable income, and usually little or no savings, there is no cushion in the system. Some financial challenge comes along and the HB tenant uses the money that ought to have been paid in rent to that end, and then the arrears cycle starts. This gripe is pretty much top of most private landlords’ set of complaints about the current system.

[DG] Landlords receive a protection that no other creditor gets, the same problems lead to arrears in utility and telephone bills. This will focus all stakeholders in getting to the root of the problem, whether it is a short term financial shock that a crisis loan can help with, or if it is simply not enough income, or if it is low levels of financial capability, or irresponsibility. There will be exceptions under Universal Credit.

There is an interesting article by the National Housing Federation making the case that UC rules should be drafted as broadly as possible when it comes to defining the class of vulnerable persons in respect of whom payments can be made directly to landlords. Interestingly in the same article research is quoted which indicates that most social tenants, who will have cash in hand once UC is introduced, would prefer that their rent was still paid direct to the landlord.

[DG] DWP have no objection to this – they just want the social tenant to make that choice themselves. A new financial product aimed at low income consumers (and part subsidised by DWP) could help to tackle this problem, by creating a direct debit that is safe for low income households.
see http://www.housing.org.uk/policy/welfare_reform/direct_payments_to_landlords.aspx

and http://www.housing.org.uk/publications/find_a_publication/general/social_tenants_finances.aspx

I am aware that, ironically, some private landlords actively seek out tenants who have a history of financial irresponsibility, as for these they will from the outset be able to establish direct payment from the local authority. I am not saying that landlords actively encourage such behaviour, or that tenants are aware that perversely this may place them in a better position to obtain a tenancy contract, but it does go to show how odd the current system is.

[DG] Interesting point that some landlords may seek out tenants with a history of financial irresponsibility. I don’t hold high hopes for the quality of this accommodation.

3. The risk of clawback from LHA for any false claim made by the tenant is always a worry.

[DG] E-claims and a digital by default claiming system, plus automatic notification of changes in earnings, should significantly reduce claimant errors that cause this problem. I doubt these systems will be perfect on day one, but they should be in place as the UC rollout progresses.


4. Many LHA tenants do not have the facility to pay a deposit or provide a guarantor
, both of which are pretty much essential for the private landlord these days. Indeed, again somewhat ironically, some private landlords will want a higher deposit from an LHA tenant than from a private tenant, as a hedge against the perception, rightly or wrongly, of higher financial risk.

On deposits, I have often wondered whether it might be possible for the state to take a role, by providing deposit loans, which could be paid directly into the state run Deposit Protection Scheme, and which would be paid back over the course of the tenancy by direct collection out of the benefits before they reach the tenant?

[DG] I agree with this solution, in my research with low income consumers the lack of any savings or up-front cash caused significant problems. The DWP could retain control over the DPS amount and if it were not returned in full then either take up the matter with the landlord or reclaim the sum from the tenant.
5. There is an ironic incentive for LHA tenant not to pay rent on time and to build up arrears. Some private sector tenants would like to move into social housing, and in these cases there is a perception that there is a requirement not to make oneself intentionally homeless. Thus some tenants take the view that the best route to getting a social sector home is to stop rent payments and get eventually evicted. Obviously this only applies in a minority of cases. I have personally experienced this situation.

[DG] Don’t get me started on social housing. Social housing tenants get an exceptionally generous settlement from the taxpayer and this leads to a race to the bottom to qualify for social housing. I would love to spend nine months or so focusing on housing policy if anyone out there wants to fund it.

6. There are concerns about the quality of the tenants themselves
 i.e. will they look after the property, will there be any anti-social or even criminal behaviour. For example, in my 25 years of property letting I have had not one but two cases in which a property that I had rented out ended up, without my knowledge, being used for drug dealing and prostitution. And that is from a small portfolio with most of my properties going to working tenants.

Of course this worry also applies to tenants who are not in receipt of benefits. Currently the law is too weak in this area. If a property is leasehold, thelandlord theoretically runs the risk of a forfeiture action i.e. losing the property, whilst the tenant in comparison is in a fairly unassailable position, as even serious anti-social behaviour is not a mandatory ground for the termination of the tenancy contact under the Landlord and Tenant Act 1985. Landlords know this and so, when faced with antisocial behaviour, are not willing to take the financial risk of applying to court for the tenancy to be ended. Another factor is that most private sector landlords do not own adjacent properties and therefore do not have as strong an incentive to deal with antisocial behaviour as some social housing providers may have.

[DG] Nothing to add here. Anti-social behaviour is a serious problem when it occurs, but it is not clear who has the responsibility to deal with it. I experienced a lot of this growing up, and neither the police nor the council could do anything about it.

I hope that this brief but frank outline of some of the difficulties faced by private landlords is of some use. I do not claim that it is comprehensive. The quote below I think sums it up nicely.

To be honest much of what is proposed in the UC system will not make much of a change to these private sector landlord worries. However, the general uncertainty that is bound to accompany such a major change to the benefit system will only exacerbate an already fairly poor situation. This is why I think that your UC calculator is genuinely useful. If private sector landlords are not going to run to the hills then they have got to be sure, prior to contract, that the applicant they are dealing with will be entitled to claim enough to cover the tenancy costs.

The premium version of the Universal Credit calculator can separate out the housing element even when a claimant moves into work. To make a licensing enquiry, please contact me.

9 Responses

  1. Our town switched to universal credit last year and it is causing me an absolute nightmare. Up until August 2017, I did not claim any benefits of any kind. Things changed when my daughter moved out of her Dad’s home and came to live with me. Because of this, I made a claim for working tax credits, but was informed that as our area was universal credit, it would be that which I received instead.

    I did not see a problem with this at the time, as I assumed it was essentially the same benefit with a different name – how wrong I was!

    In late October, our landlord, whom we had rented from for four years informed us that he was returning from abroad and would need us to leave our home so that he could move in himself. While we were upset by this, we didn’t see it as being a problem.

    We immediately started house hunting and found a number of interesting properties. Almost all of these said “no lha / housing benefit” but we paid no attention to this – after all, I was on what was essentially working tax credit, not housing benefit. I was fully self employed (and had been for 16 years) with a perfect landlord reference, affordability (even without the small amount of tax credits I was receiving) and had been renting without issue for 5 years, never once making a late payment.

    It was only after we applied for the first place we were interested in that we realised we may have a problem. We were instantly turned down – without the landlord even requesting any other info from us, as soon as I mentioned my uc payments. The letting agent stated that landlords were worried about not receiving money from uc recipients. Despite pointing out that I had only been claiming uc for 3 months since my daughter had moved in, and that prior to this I had been paying rent on time and in full (a full rent, which was actually higher than the place we were applying for) it made no difference. I was told that in landlords / letting agents eyes, universal credit was counted as lha / housing benefit.

    I was astounded by this and frankly, I still am. We are now nearly 2 months into our house search and we have one month before we need to leave our current property. We have still found nothing whatsoever to rent. Every single place we have expressed interest in has refused to take an application from us because of the small amount of uc I receive in place of working tax credits. What is even more maddening is that one letting agent who turned us down apologised and said that a year ago, before we moved to universal credit in this town, the working tax credits I received would actually have benefited my application as they would have raised my affordability level (not that this is actually required as I earn enough to cover the rent without any benefits – as I mentioned, my uc amount is minimal).

    We now seem to have 2 choices… rent a 2 bed place instead of the 3 bed place we need (there are a very small number of 2 beds that take uc) but this is not really an option as there are 3 of us moving together – myself, my daughter and my male friend (who house shares with us but is not a partner and so would require his own bedroom) and my son also comes to stay with me during school holidays and at weekends. If our only option is a 2 bed, the man I live with has said he may well leave. To many that may seem like the obvious answer, but we have lived together 5 years, he is my best friend, helps with the house and supports me. I am the first to admit that I crave adult company and I cannot stand living alone without other adults. I class him as family after all this time we have lived together and for him to leave over something like this breaks my heart – it is quite literally tearing my family apart.

    Or, we wait and hope that in the next 4 weeks something comes up. If it doesn’t we will all be homeless due to this.

    I have lost count of the nights I have spent laying awake crying over this now, it is one week before Christmas and the first one I will have spent with my Daughter living with me in 5 years – it should be a happy time but the stress and pain this is causing is almost unbearable.

    I never thought as a 35 year old Woman working full time, with perfect landlord references and earning enough to pay full rent on a property, that I would be facing homelessness this year, but this is what it has come to for us.

    Without any shadow of a doubt, I put this situation that we are in down to the switch to universal credit and I predict that in the very near future this will be a massive problem faced by thousands of other hard working families (and I specifically mention families, as people with children are the ones who can generally claim working tax credit / child tax credit, which will now count them out when it comes to renting most houses in the private sector).

    • Deven Ghelani

      Hi Anne, We are aware that this is a growing problem – landlords have had difficulties with arrears with Universal Credit due to the monthly rather than fortnightly payments. Many are reacting by not taking tenants in receipt of Universal Credit. Your best course of action would be to speak to your local council. They often work closely with larger private landlords. Given your tenancy record, they may be able to contact a landlord on your behalf or recommend a landlord for you to contact. As you are threatened with homelessness you need to contact the council as soon as possible. Good luck1

  2. Will private landlords be informed if tenants apply for UC? Or will we be left in the dark?

    I know Social landlords get notified but it doesn’t specify if private landlords will get this notification too??

    • Deven Ghelani

      Hi Jade, Private landlords are not informed if tenants apply for UC. In some instances (such as arrears or if the claimant requires support) rent can be paid directly to the landlord but this is not generally the case.

  3. We are private tenants, we are a single income working family, we are in reciept of tax credits, we are entitled to some housing benefit but we never claimed it because the vast majority of private landlords refuse to accept hb claimants and the one or two who did the properties were less than desirable and in areas not suited to young families. So we have a guarantor and just pay the full rent ourselves. My issue is we would not have this option on universal credit, everyone from non working families relying totally on benefits to those who are working families who have their wages topped up with the smallest amount of tax credits are going to be lumped into the same bracket, are private landlords then going to go down the route of no universal credits may apply as it is now with no HB/DSS? I find this really worrying.

    • Hi Emma,

      It is a shame that you feel unable to claim housing benefit.

      We are aware that some landlords discriminate against housing benefit recipients, and support efforts to tackle this. However, as a working household I would imagine they would feel more secure that you had additional income coming in with which to pay your rent. Given that your landlord accepted you as a tenant based on your income they should not mind if you go on to top it up with housing benefit after passing the initial screening.

      Under Universal Credit, I would imagine as above that landlords would take into account that fact that you were working, and that the Universal Credit was topping up your income. In many ways, this is no different to tax credits today, although the amounts and labels will change.

      I hope this helps – but if you have any further comments or queries, please follow up with an additional comment.

  4. I am on esa and my rent is paid directly to my landlordat the moment. My landlord has said I will have to leave if uc means that payments are no longer paid direct. I live in Leeds so when will the changes apply?

    • Hi Bobby,

      Thank you for your comment.

      Leeds is in Tranche 4, meaning Universal Credit will be rolled out between December 2015 and April 2016. It will initially only be available to single claimants, and then step by step include other cases. ESA claims will be amongst the last to be included, but we cannot give you a more accurate time frame.

      I am sorry to hear your landlord has said this, maybe you will be able to use this time to come to an agreement with him? If you have a bank account, you can setup a standing order for the rent to be paid regularly.

  5. Universal Credit and Landlords

    Universal Credit is the biggest change in the history of UK benefit system since 1945. The changes will be implemented fully in October 2013 but the process of change is started even now and from April 2013, some of the major changes effecting especially property market and landlords will be implemented. Universal Credit will affect anyone who claims or who will claim:

    • Child Tax Credit
    • Working Tax Credit
    • Housing Benefit
    • Income Support
    • Job Seekers Allowance
    • Employment and Support Allowance
    • Support for Mortgage Interest

    We will outline the changes effecting Housing Benefits as these changes will affect the landlords and the property market.
    Direct Payments
    1- Under the new system, the tenants will get the direct housing benefits payments instead of the landlords. There is no change as far this is concerned. But, the landlord’s right to get the direct payments in case the tenant refuses to pay him the rent is withdrawn. Currently, if the tenant does not pay the agreed rent to landlord, the affected landlord can request the direct payment provided the tenant is behind for eight weeks.
    2- In this case, the tenants will get the rent for indefinite period irrespective of the fact that they are paying to the landlords or not. Landlords will fall behind to their mortgage payments and the buy-to-let industry will be shaken. This is the biggest shock to the industry.
    3- It will affect the social tenants as well. The social tenants will find it very hard to rent a house and a huge deposit will be demanded from them.
    4- Eviction rate in industry will start climbing and many will be homeless.
    5- After eviction on court orders, they will have adverse reference and finding a new house will be almost impossible task unless they pay huge deposit.

    Benefit Cap
    6- From April 2013, the ‘benefits cap’ will come into place restricting a family’s level of benefits in payment which be capped to £500 per week for couples and families and £350 per week for single people.
    7- If a family is getting total payment in benefits more than £500 per week, it will be reduced to £500 and reduction will be made in housing benefits. It will impact to 4 bed or 3 bed houses. Rents of 4 bed houses are currently £700 to £800. After these changes, the rent will be reduced approximately by £200 to £300.

    We, at Care4Properties, are making processes and controls so that impact of these changes on our landlords is minimised and our tenants feel more secure. We are trying to guide our landlords (in case they have social tenants) what is the best possible way to deal with these changes. We are also education our tenants (who are claiming benefits) that how to protect their tenancies.

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