I believe many experienced landlords will just see Universal Credit as another hurdle to overcome like LHA. Inexperienced landlords will shy away from the risk. When LHA was introduced, private landlords have been focused on getting rent in advance and deposits off tenants.
LHA landlords know that the option is there to get housing benefit paid direct if a tenant defaults. However, no assurances have been made for Universal Credit as yet.
The only comforting factor with Universal Credit is the fact that Housing Associations and the public sector is to be included. This may be of some comfort to the private sector. If Universal Credit does not work as intended, there will be large amounts of arrears and evictions and if homelessness increases, the Government will likely take action a lot quicker, knowing that the housing they own is being affected directly.
Private landlords can minimise the risks involved in letting to LHA tenants by using payment institutions like local Credit Unions.
As a landlord, I have been using my local Credit Union since 2008 and they have provided a first class service to the landlords of Wolverhampton. They have also made it easier for us to accept tenants on benefits. This has had a knock-on effect for tenants who have found it easier to find private accommodation to rent.
I have currently 500 tenants on benefits and achieve a rent collection record of 100%. I would not be able to achieve this level of success without the use of Credit Unions. Using such organisations to collect housing benefit and pay this across to me as the landlord or managing agents is very convenient.
My experience over the years has shown me that tenants do not want the hassle of dealing with housing benefit. Although they understand that they need to apply for housing benefit, they prefer if the landlord or an agent, who can assist them with doing this on their behalf, as this has been the case for as long as l remember.
The temptation to spend housing benefit can be far too great for tenants and you often find tenants falling into a debt trap by using housing benefit payments for living costs on a short term basis – ‘robbing Peter to pay Paul’. So by landlords helping tenants to avoid this temptation and providing the rent is affordable, this is sound reason for a long and secure tenancy to be enjoyed by both parties.
In my personal opinion, as like any organisation, a Credit Union is only as good as the staff it employs or the volunteers who offer to help. And it is only as good as the experience it has gained through LHA. If you find the right one, or right credit union staff, then l think Credit Unions are great.
We’ve used five or six different Credit Unions, some better than others. Some pay landlords the same day housing benefit is received, some take five days and the worst l’ve experienced is 60 days. Some charge £1.50 per payment and the most expensive I’ve experienced is £10 per payment. So I think Credit Unions are great, providing they can pay landlords quickly and relatively cost effectively.
It is vital that landlords educate themselves with the housing benefit systems. i.e. for LHA do councils pay tenants 2 weekly, 4 weekly or calendar monthly? Once you know this information, you can structure tenancies, so payments go to Credit Unions correctly for your tenancy period.
If tenants are paid fortnightly, then it is best to start and end tenancies on this date, thus easily being able to ensure correct housing benefit payments go to the Credit Union. For example Wolverhampton Council pay tenants Monday fortnightly, so I only ever issue weekly tenancies and they procure/end on housing benefit payment dates. This way the Credit Union only receives housing benefit payments for your tenant for your tenancy.
Private landlords have spent four years working with Credit Unions and other rent collection organisations and have developed the foundations for what will be required from Universal Credit. With the increased risk of not automatically receiving housing benefit payments, landlords' referencing procedures and systems have been developing to protect them from bad tenants and debts from arrears. Private landlords have a great advantage over social landlords having had time to get used to the LHA and they should use this to advantage to expand their share of the LHA market.
