Landlords are being warned to brace themselves for the rollout of flagship welfare reforms – with almost four in ten landlords suffering from unpaid rent following the introduction of Universal Credit.
Renting reform campaigner Ajay Jagota, of zero deposit renting solution Dlighted, is urging landlords to “consider how much protection traditional tenancy deposits are going to give them if soaring rent arrears come hand in hand with Universal Credit”.
Figures from the Residential Landlords Association suggest 38% of tenants already using Universal Credit are in arrears – 10% more than last year.
The RLA also claims that the average amount in arrears owed to private sector landlords by Universal Credit tenants is currently £1150.
A parliamentary enquiry into the programme has also been told that:
• Rent arrears among privately-renting tenants already receiving Universal Credit are up to five times higher than previous levels.
• Three local authority areas where Universal Credit has already been rolled out have seen tenants built up close to £8m in rent arrears, with 2500 tenants in Croydon, Hounslow and Southwark currently at risk of eviction.
Figures obtained by one newspaper following a Freedom of Information request also show half of council tenants receiving the housing element of Universal Credit are at least a month behind with their rent, with 30% at least two months behind.
Ajay Jagota, who campaigns for reform of Britain’s tenancy deposit system, is founder of Dlighted, the zero deposit alternative to a tenancy deposit scheme such as DPS, mydeposits and TDS.
The deposit replacement insurance system offers landlords a rent guarantee, as well as free legal assistance and asset protection of £600,000.
Ajay said: “Universal credit is the latest threat to landlords who are already losing out to tax changes and the coming ban on letting agents fees.
“Average deposits in my native North East are in the region of £550 but the average rent arrears owed by tenants already on Universal Credit is more than twice that, and figures suggest that close to half of landlords with tenants receiving Universal Credit will suffer from unpaid rent.
“These costs come before associated expenses of severe arrears like legal or bailiff fees, and don’t include cleaning costs or property damage. Landlords should consider how much protection traditional tenancy deposits are going to give them if soaring rent arrears come hand in hand with the rollout of Universal Credit
“Everyone agrees that the benefit system need to be simplified, but it doesn’t seem to be too controversial to suggest the wholesale introduction of Universal Credit be slowed down in light of results we’ve seen in the pilot programmes.
“Ironing out kinks now – such as cutting the seven-week waiting period before claimants can receive Universal Credit, or making it simpler for payments to be made straight to letting agents or landlords in the event of arrears could make a huge difference to the long term success and sustainability of Universal Credit”.
Universal Credit sees six existing benefits – Income Support, Income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance, Housing Benefit, Working Tax Credit and Child Tax Credit – rolled into a single monthly payment, paid directly to claimants.
It is being rolled out across the country from October 2017.