A benefits expert has warned that landlords could face increased rent arrears from next month due to a clash between welfare policies and Universal Credit payments.

Current DWP guidance states that if the overall Benefit Cap - the total amount a household can receive each year – applies, claimants could be left with little or no money for living costs, so it can decide to remove managed (direct) payments to landlords, says Bill Irvine (pictured below) at UC Advice & Advocacy.

For most households claiming Universal Credit, the reduction is usually taken from the housing costs element – even if tenants have a proven history of arrears and misuse of these funds. Sums could amount to more than £1,000 in some of the high rental areas.

Irvine explains that when the two-child limit is removed on 6th April, a family’s potential entitlement would be increased by about £3,500 per year for each additional child, but because the Benefit Cap is still at 2023 levels, many families, especially in high rental areas or those with three or more children, will hit the cap threshold almost immediately.

“As more families become capped, DWP’s default position will increasingly be to cancel managed payments to ensure the tenant has ‘cash in hand’ for living expenses and the cessation of direct payments to the landlord,” says Irvine.

Diverted

“Landlords will see housing costs elements diverted to tenants who are unlikely to use them to reduce or extinguish the rental liability, leading to a surge in rent arrears which will prove difficult to recover, even with a court order.”

However, the DWP insists it does not cancel managed payments to landlords simply because a household is subject to the benefit cap. It says a managed payment can only be removed where a claimant requests a review, and it is deemed to be in their best interests and that this is not an automatic or widespread process.

Spokesman

A DWP spokesman tells LandlordZONE: “Removing the two-child limit is a landmark policy and claims that it will lead to widespread cancellation of managed payments to landlords are simply incorrect. The default position remains that direct landlord payments are set up for benefit-capped households, and these can only be removed at a claimant’s request where it is in their best interests.

“The benefit cap remains in place to ensure fairness for taxpayers and to maintain incentives to work.”

Advice

Despite this, Irvine suggests that landlords could make a challenge on part-payment grounds and, when writing to the DWP, should explicitly cite Regulation 58(1) and request that it exercises its discretion to pay at least a portion of the housing element directly.

“Ensure all evidence of delinquency or misuse of funds is documented with DWP (at practice manger or service leader level) or via the Apply for Direct Payment service to keep a paper trail of DWP’s awareness of the risk to the tenancy,” advises Irvine.

“When pursuing legal action, it’s also important to draw the courts’ attention to this malpractice, which flies in the face of Regulation 58’s objectives and is likely to facilitate much greater incidence of public funds being misused.”

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