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Changes to the benefits system and the options for landlords

By 2017 all of the UK will be operating under the system of Universal Credit. Any benefits will be paid to the recipient directly and in one monthly payment, giving them the responsibility for budgeting. Early indications suggest this has understandably worried many landlords but this need not be the case, and if you are able to market your property to good housing benefit tenants, so much the better. The Minister for Welfare Reform Lord Wolfe has laid out several reasons why the changes need not be seen in so negative a light. It’s certainly right that tenants with the desire and ability to manage their own affairs should be allowed to do so if their dependence on the State is to be reduced.

Firstly, benefits recipients will be assessed and if they are not able to manage the rent, then they will not be given that responsibility. And if one month’s arrears build up, there will be a reassessment as to the individual’s capabilities and they may be given extra support. If two months’ worth of arrears accumulates, managed payments will be switched to the landlord. There is flexibility in the system as long as you are aware of your rights and report the arrears to the council.

A further possibility for landlords and tenants is the use of a credit union. These financial institutions are community-based and not-for-profit, providing financial support to local residents. They should offer an account which receives the Universal Credit directly and keeps back the amount needed for rent; this money cannot be withdrawn by the tenant and goes to the landlord. There may be a small fee for this service but it’s a great way of eliminating any temptation to spend rent-money elsewhere, saving you both the hassle of arrears. Of course it relies on the tenant being willing to sign up. Just make sure they are aware of the option!

Finally, there is the benefits cap to consider. Lord Wolfe’s reassurances are less practical and reassuring here. It may take some time for the effects to be seen. Ultimately, if it encourages more people back into work, this can only be good for both tenants and landlords but patience will be the key. At this stage, Rentify simply recommend that both you and your tenant discuss how it may affect you and if there’s a way round it. Also, make sure you know the regulations so there are no nasty surprises. Note, for example, that the cap will not affect a household if a member is entitled to Working Tax Credit.