Welfare Reform and Work Bill

Debate between Earl Cathcart and Baroness Hollis of Heigham

Wednesday 27th January 2016 Lords Chamber

[Earl Cathcart (Con)]

My Lords, as the noble Baroness, Lady Meacher, has just said, under the old housing benefit scheme the tenant had the choice of the payment going to him or directly to the landlord. The Minister said that, under the new scheme, the,

“position is for universal credit to be paid as a single monthly sum direct to the claimant; that is designed to mirror what would happen if the claimant was in full-time employment, when they would be responsible for managing their own funds and paying their own rent”.—[Official Report, 21/12/15; col. 2438.]

In an ideal world that is an excellent idea, but in the real world it invariably does not happen. As a landlord, I can foresee that when the tenant receives the universal credit, the temptation will be to buy the weekly shopping, petrol, clothes and so on, and by the time the rent becomes due there will not be enough money left, so the spiral of debt takes hold. But the Government are adamant that paying universal credit only to the claimant not only will work but does work. Is this experiment working as the Government say it is?

According to a survey conducted by the Residential Landlords Association, it is not. It found that of those private sector landlords who had tenants on universal credit, some 63% had tenants in arrears on their rent—a point just made by the noble Baroness. Of that group of landlords, 85% had contacted the Department for Work and Pensions to have the housing element of the universal credit paid direct to them after eight weeks of arrears, as is their entitlement. More than 57% of that group said that it had taken the department more than five weeks to respond to the request, which means that the landlord is already more than three months out of pocket. I understand that the problem is even worse for social housing, with nearly 90% of tenants in arrears. It is heartening that the Minister said in Committee that,

“we are doing a lot of work now with social landlords to get the problem under control”.—[Official Report, 21/12/15; col. 2437.]

At least my noble friend admits that there is a problem and that the new system is not working quite as planned. Much of this could have been avoided if the rent had been paid direct to the landlord.

In October 2012, a survey of more than 1,000 landlords carried out by the Residential Landlords Association and the Scottish Association of Landlords found that more than 91% of landlords were less likely to rent to tenants on benefits as a direct result of the decision not to allow payment of the benefits direct to the landlord. Not making the payment direct to the landlord is not helping the landlords and it is certainly not helping the tenants. All the evidence, backed by Shelter, Crisis and the Money Advice Trust, has been that paying it direct to the landlord was popular with tenants, as they were assured that their rent was covered before they decided how else to spend their money.

If the Government really want to make tenants,

“responsible for managing their own funds and paying their own rent”.—[Official Report, 21/12/15; col. 2438.],

what better way than the tenant asking for the rent to be paid direct to the landlord? To my mind, that is the height of responsibility for the tenant: to ensure that the roof over their heads is paid for before deciding how to spend any remaining money.

[Baroness Hollis of Heigham]

My Lords, I strongly support the amendment moved so ably by the noble Baroness, Lady Meacher. This is a real problem. The previous proposals that we were given, and the previous explanations that we wanted to model on the world of work, frankly belonged to a different planet. Those tenants, particularly in social housing, who need housing benefit are not those, for the most part, who are paid monthly. They very often are on ZHCs, have insecure or short-time jobs, or have fluctuating incomes week by week. That is topped up by universal credit. They want and need the security of a home in order to continue often to be able to find the jobs that they want, which would give them greater security. If they seek direct payments to the landlord, why does the Minister think that the Government and the DWP can second-guess what is in their best interest? Why not treat them as moral adults who can make their own judgment? The result that we are already seeing and beginning to worry about is, given the refusal to give alternative payment methods until after six to eight weeks’ arrears, and the time of processing that, we can be talking about debts of more than £1,000, from which tenants never recover.

The alternative is to try to help tenants to find ways to bypass the rigidity of DWP. So we are busy setting up jam-jar accounts and other friends are busy trying to use credit unions in order to bypass the total universal credit going into the bank account where the bank then takes payments for any other outstanding debts or anything else. As a result, HB becomes the last thing to be paid to the landlord. Many are already experiencing those problems. Certainly, one local authority tenant said to me, “Well, I won’t worry about that because that will be the last thing that gets paid. The local authority won’t evict me. It costs them more to send me into temporary housing and, given that I’ve got kids, I can run that risk”. That is the mental framework. She said, “I would be perfectly willing if they took it at the beginning of the month. But if I put it in the bank, it will be gone by the end of the month before I pay the rent”.

I suggest that the Minister responds very positively to this amendment. Where the tenant seeks it, the department should agree that alternative payment arrangement and stop all the futile effort that so many of us are making trying to find ways to loop around the system, to overcome the rigidities of the department, to help tenants avoid what will probably be debts from which they will never recover. I hope that the Minister will take the words of the noble Baroness and the noble Earl very seriously. It is a real problem on the ground.

Welfare Reform and Work Bill

Debate between Earl Cathcart and Baroness Hollis of Heigham

Monday 21st December 2015 Lords Chamber

[Earl Cathcart (Con)]

My Lords, the three amendments in this group all relate to private landlords, who now account for 4.2 million properties for rent and more than half of all rented properties. However, as of August, less than a third of all housing benefit claimants lived in private rented accommodation. Why so few? Why is there this bottleneck deterring private landlords from taking on benefit claimants? As a landlord, I have claimants in my properties, but it is not made easy. Given the choice of a couple in work or a couple on benefits, for the landlord it is a no-brainer. Why take the risk, the hassle and the uncertainty of renting to the couple on benefits?

As the rental market tightens due to increased demand, it is important to encourage and support private landlords to house those in receipt of universal credit so that they can access accommodation, otherwise they will find themselves at the back of the queue. These amendments explore ways to do just that.

The first amendment is about giving the power to give the relevant universal credit information to the landlord. Landlords need assurances that tenants have the funds available to pay their rent. Without these, renting to them becomes a risky business. Currently, the private landlord can get no information about the amount of universal credit and when it will be paid. For those tenants in work, landlords will always ask for references from employers to establish their income to ensure that the funds are available to cover the rent. Surely it must be common sense for landlords to be able to do likewise for those in receipt of benefits. I understand that social landlords are able to gain such information, so why not private landlords? Surely what is good for the goose must be good for the gander. I acknowledge that it is quite difficult to find out how much benefit will be available before the tenant moves in, but it is not beyond the wit of man to publish a ready reckoner to help everyone see where they stand, according to each local housing area’s allowances.

Amendment 104B would insert a new clause to ensure that there is a legal power, where the tenant provides written consent, for the Department for Work and Pensions to disclose to all landlords information on the housing element of the tenant’s universal credit, including the amount, or approximate amount, and when it will get paid.

The second amendment relates to rent arrears. As benefit claimants may often move home, including to seek work, landlords need the security of knowing that tenants in receipt of benefit cannot simply stop paying their rent and leave their property. Currently, rent arrears can be recouped where a benefit claimant is still living in the house to which the arrears apply. There is, however, little or no opportunity for the landlord to recoup when such tenants move house, unless they are prepared to go through a lengthy and costly court process.

I cannot see the logic in allowing the landlord to recoup the arrears if a tenant is still in the landlord’s property, but not if the tenant has moved. I realise that there will probably be a hierarchy of deductions that can be made from future universal credit—no doubt future rents, council tax, utility bills, et cetera, would come first—but if even only a percentage of the arrears was paid each month, it would act as a disincentive to tenants to rack up the arrears in the first place and ensure that the landlord was not left high and dry once the tenant had jumped ship. Amendment 104BA would insert a new clause requiring the Secretary of State to make regulations to ensure that rent arrears follow a tenant in receipt of universal credit and that landlords affected have a clear route to reclaim lost rent in such circumstances.

The third amendment concerns making payment of the housing element of universal credit direct to the landlord, with the written consent of the tenant. It is vital that landlords have full confidence that they will be paid in full and on time if vulnerable tenants are to have access to the rented homes they need. This is especially important since the Government took away the option for tenants to ask that the housing element of universal credit be paid directly to the landlord, as was formerly allowed under housing benefit. At first, I thought that that omission was an oversight, but I now understand that the Secretary of State wants all the money to be paid to the tenants so that they learn to become responsible for managing their money—a great idea but, sadly, I do not think it is working.

A survey conducted this year by the Residential Landlords Association found that of those private sector landlords who had tenants on universal credit, 63% had tenants in arrears on their rent. Of this group of landlords, 85% had contacted the Department for Work and Pensions to have a tenants’ housing element of universal credit paid directly to them after eight weeks of arrears, as is their entitlement. More than 57% of this group said that it had taken the department more than five weeks to respond to the request, with all the consequent difficulties this caused the landlords in not getting paid.

I understand that the problem is even worse when one looks at social housing. A survey carried out by the National Federation of ALMOs and ARCH—the Association of Retained Council Housing—found that nearly 90% of council house tenants in receipt of universal credit are in arrears. I had to look that up again: I could not believe it, but apparently it is so.

[Baroness Hollis of Heigham]

I declare an interest as a former chair of both a local housing committee and a housing association. Given that universal credit is paid at the end of the month and this might not be coterminous with housing associations or social housing, what does the noble Lord regard as an arrears? Is he talking about more than eight weeks’ failure to pay the rent, because five to six weeks might simply be the failure to co-ordinate payments, given the move, unfortunately, to monthly payments?

[Earl Cathcart]

I think that I caught the noble Baroness’s question. I do not think it is after eight weeks: I think it is in arrears—that is, they have not paid the monthly rent on time and they have not paid the next month’s rent on time, et cetera. I hope that that answers the noble Baroness’s question.

[Baroness Hollis of Heigham]

I meant that the arrears might simply be a technical cash-flow issue, and not a legitimate arrear, because if, for example, the rent is due before the payment of universal credit, there will be a period when there will be arrears. The noble Earl will understand my point, but the arrears that matter are the arrears that become irrecoverable, which usually, in my experience, means eight weeks.