Direct payments to tenants

Welfare reforms will change the way tenants receive benefits.

Under Universal Credit, due to be phased in between October 2013 and October 2017, working-age tenants will receive a single monthly payment directly from the Department for Work and Pensions (DWP). This will include their support for housing costs.

This represents a significant departure from the current arrangements, under which many social tenants have their Housing Benefit paid directly to their landlord and receive other benefits weekly or fortnightly.

Who does this affect?

The Government has already announced that pensioners will be excluded from Universal Credit and residents of ‘exempt’ supported housing will have their help with housing costs provided outside of UC. This means that both groups of tenants will be able to continue to have their Housing Benefit paid direct to their landlord.

The DWP has also accepted that there are some working-age people who will not be capable of managing a monthly payment, and for whom direct payments to the landlord will remain appropriate. There will be a mechanism within UC to facilitate the payment of benefit direct to the landlord once someone is identified as vulnerable. However, ministers have not yet announced what types of tenants will fall into this ‘vulnerable’ category.

The National Housing Federation is calling on the Government to ensure that the category of ‘vulnerable’ claimants, to be awarded exceptions under Universal Credit, is drawn broadly, and includes residents with problematic credit and debt problems as well as those with health problems or a disability that make money management difficult.

Demonstration projects

The Government has launched six demonstration projects, running from June 2012 to December 2013, to prepare for these changes.

The projects are testing how about 12,000 claimants can manage monthly payments of Housing Benefit ahead of the introduction of Universal Credit. They are also looking at the appropriate level of safeguards needed to help secure landlord income streams if tenants fall behind on their rent.
The projects include:

  • Payments to tenants as the default
  • Monthly payment of Housing Benefit in arrears
  • Safeguards to pay the landlord directly where arrears mount up to a certain level.

The local authority and housing association partnerships involved in the projects are:

  • Southwark Council and Family Mosaic, London
  • Oxford City Council and Oxford Citizens, part of the Greensquare Group, Southern England
  • Shropshire Unitary County Council and Bromford Group, Sanctuary Housing and The Wrekin Housing Society, West Midlands
  • Wakefield Metropolitan Borough Council and Wakefield and District Housing, Northern England
  • Torfaen Borough County Council and Bron Afon Community Housing and Charter Housing, Wales
  • City of Edinburgh Council and Dunedin Canmore, Scotland

Early lessons from the first month of the project included:

  • Engaging with and assessing the needs of tenants has taken longer than anticipated
  • Landlords do not have immediate access to the information needed to assess tenants’ readiness for direct payment
  • The role of support partners in the project is crucial
  • There is a general lack of awareness among tenants of wider benefit reforms
  • Developing appropriate safeguards has helped to reassure landlords

The Government is encouraging local authorities and housing associations to join the Learning Network to find out more. Over 500 people have already signed up and are benefiting from being part of the network. To join emailDCLG.WelfareReform@communities.gsi.gov.uk.

Why is direct payment to landlords an important option?

  • Direct payments help reduce personal debt and the risk of people losing their homes.
  • More than 15% of local authority tenants and 13% of housing association tenants do not have a bank account, and so would be unable to pay their rent by direct debit if direct payment to landlords were brought to an end.
  • For social landlords, the financial security that comes from direct payments has been critical to their ability to secure private investment at highly competitive rates, maximising their capacity to deliver much needed affordable homes at good value to the taxpayer.

Risks of direct payment to tenants

Research by Policis, funded by the Federation, found the switch to Universal Credit could pose very real risks to the financial wellbeing of social tenants, with knock-on implications for housing associations and the implementation of welfare reform.

The report, Optimising welfare reform outcomes for social tenants, found 86% of social tenants believe “strongly” that it is better for Housing Benefit to be paid direct to the landlord so that they are secure in their home. At present, nine out of ten tenants opt for rent to be paid direct to their landlord, with 92% saying they would choose this option again, if given the choice.

Some 35% of social tenants on housing benefit, rising to 50% of those who have missed rental payments, are not confident that they can keep up rental payments if they receive their rent direct. This would seem borne out by the evidence on payment difficulties with rent currently. Affordability pressures on rent, missed rent payments and serious social arrears currently arise primarily among those making a contribution to rental payments or among those in work responsible for paying rent themselves.

Find out more

Read our briefings on the Welfare Reform Act.