Lord David Freud has called for an “urgent” review of Universal Credit claimants – tenants who have fallen into rent arrears.
Lord Freud was appointed Minister of State for Welfare Reform at the Department for Work and Pensions in May 2015 and is a Conservative member of the House of Lords working towards implementing Universal Credit (UC).
Lord Freud now says the number of Universal Credit claimants in debt was higher than expected. According to Inside Housing, Freud describes the proportion of claimants already in arrears before they switched over to direct payment (direct to landlords) under Universal Credit as “frightening”.
Announcing in the House of Lords last week, Lord Freud said he had commissioned work from the department to help understand the true level and causes of these arrears.
“There is a lot of complexity here; it is not straightforward at all. I am looking at it with some urgency,” Freud said. “We need to understand what the existing arrears are. They are much higher than we expected – 50% – and that is a frightening fact.”
Lord Freud, who created controversy in 2014 over comments he made about the disabled when he suggested that disabled people should not be entitled to the minimum wage, was recently confirmed in his role and will continue as minister for welfare reform under Theresa May.
A recently published report by the National Federation of ALMOs* (NFA) and the Association of Retained Council Housing (ARCH) found that around 79% of 3,000 tenants claiming Universal Credit in England are in rent arrears, compared to 31% of other tenants.
The system of the authorities paying welfare payments direct to private tenants and expecting them to pass the money on to their landlords has been operation for some time with private landlords – in fact many in the private rented sector think that private landlords have been used as “Guinea pigs” in this regard for many years.
Up until the introduction of UC social housing providers, the local councils and housing associations, have been exempted from this system, so rent payments have still been paid direct to all social landlords. Some councils and housing associations, plus the housing charities, are now reflecting on and experiencing for themselves the many private landlords’ concerns over the years that people will default on their rent payments when they have to pay the rent one month in advance, under the new Universal Credit system.
NFA and ARCH research finds that tenants on Universal Credit owe on average £321.05, higher than the average for all tenants in arrears which is £294.57.
The government argues that payment of benefit to direct to tenants encourages people to take control of their own finances and reduces dependence. For exceptional cases the Department for Work and Pensions (DWP) has been working on a number of schemes with social landlords to stop vulnerable tenants them getting into arrears by allowing payments to direct landlords.
* Arm’s-length management organisations (ALMOs) have led a revolution in the management of council housing since they were first established in 2002. The NFA now represents 38 ALMOs, which manage 510,308 council homes across 41 local authorities.
Concerns about direct payments to tenants
Urgent Review into Universal Credit Rent Arrears https://t.co/O83C0ROFdO
— LandlordZONE (@LandlordZONE) September 29, 2016