The problem social housing providers have is the amount of properties they manage. They provide housing to approximately two-thirds of all housing benefit claimants. Consider social housing providers like the one previously mentioned with 25,000 homes. Any changes they have to make will involve a lengthy and drawn-out process which could be costly if they get it wrong.
Aki Ellahi, Founder of Dssmove.co.uk comments:
“Over the last 18 months, I have been travelling the country and meeting with both large and small social and private landlords to see what preparations they are making for Universal Credit. Each day it is becoming more and more obvious that private landlords are better positioned and better prepared for the introduction of Universal Credit than social housing providers.
“From the many social housing providers I've spoken to, all are expecting increased costs associated with rent collection and an increase in rental arrears as a result of the introduction of Universal Credit. The highest estimate was an unsustainable 30% of rental income. What’s more, Councils who have recently pledged not to evict tenants who run up arrears as a result of the Government’s ‘bedroom tax’ could struggle to keep their promise once universal credit is introduced.
Many social housing providers are solely relying on credit unions for the answer. However, with the sheer volume of tenants these providers have lengthy and detailed feasibility studies must still be undertaken to justify whether credit unions and their additional costs are the right answer.
Private landlords with tenants on Local Housing Allowance have been familiar with this system over the last four years, following the Labour Government’s introduction of LHA in 2008. Many were furious they would not receive a tenant's housing benefit direct from their local authority. This change did not affect councils and housing associations, who still enjoy being paid housing benefit directly from local authorities, but the introduction of universal credit will level the playing field.
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 2013. 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 Local Housing Allowance and they should use this to advantage to expand their share of the LHA market.
Social housing can learn from the private rented sector to prepare for the Government's new welfare scheme.
Ellahi continues:
“As disappointed as private landlords were, in hindsight we have a lot to thank the previous government for. The LHA has given proactive private landlords over four year's valuable experience, developing systems and procedures for collecting rent payments direct from tenants in receipt of housing benefit. This experience has proved invaluable in preparing for universal credit and is something that social housing providers can only be envious of today.
“I'm a private landlord and letting agent, renting properties to approximately 500 local housing allowance tenants. Private landlords are traditionally a secretive bunch. However I'm a big advocate of sharing best practice and I'm particularly keen to see how universal credit will affect the sector as a whole.
“Private landlords are much smaller organisations - they think on their feet, can adapt to change and move quickly. The private landlord is like a speed boat – it's nifty and can manoeuvre easily and quickly. In comparison, the social landlord is an oil tanker which can take hours to turn. This ability to change at speed and the valuable experience gained from the past four years is why private landlords are ahead of the game – and social landlords need to catch up.”
