Universal Credit: Private Rented Sector

Caroline Dinenage Excerpts

Tuesday 9th January 2018 Westminster Hall

[The Minister of State, Department of Health and Social Care (Caroline Dinenage)]

It is a great pleasure to serve under your chairmanship, Mr Gray.

I congratulate the hon. Member for Eastbourne (Stephen Lloyd) on securing this important debate on the effect of universal credit on the private rented sector. He is a very committed campaigner and I thank him for his work to help us to improve the delivery of universal credit. Universal credit is an important reform and I am pleased to have this opportunity to talk about it, and hopefully to address the issues that have been raised by Members and some of the misconceptions.

As the hon. Gentleman knows, we have been using a test-and-learn approach to universal credit since the beginning. The roll-out of universal credit is a very long one, which is why we have taken that approach—we want to develop the universal credit system based on the evidence we gather as we go along. I thank Members from across the House for their contributions.

The Government are committed to making work pay and universal credit is transforming the welfare system to ensure that it does so. With universal credit, work always pays and, compared with the old system, people spend more time looking for work and find work faster. Universal credit supports people who can work and cares for those who cannot. For the first time, universal credit supports people who are in work, and encourages and incentivises them to progress and earn more.

Members have raised a number of concerns about the impact of universal credit on private rental sector landlords, which I will seek to address. However, we must remember that universal credit is the largest and most significant welfare reform since the second world war. The Government are listening to stakeholders both in Parliament and externally, and we are well aware of the concerns that have been raised. I will try to address some of those concerns today, and to put Members’ minds at rest where I can do so.

First, I will clarify for the House some of the things that universal credit has not changed, in particular for landlords in the private rental sector. Since 2008, housing benefit has been paid directly to claimants by default, and not directly to landlords. That remains the case with universal credit. In fact, currently only 25% to 30% of housing benefit payments are made directly to landlords in the private rented sector. If private landlords want housing benefit to be paid directly to them, they need to ensure that the relevant criteria are met, which are broadly the same as those for a request for direct payment under universal credit.

What has changed is that universal credit is assessed and paid monthly, to replicate the world of work, as we have already heard. Our ambition is to create a welfare system that encourages people to take greater responsibility for their finances, so that they are ready and prepared to move into the world of work. It means that, where possible, we want to encourage and support people to take responsibility themselves for paying their landlord, but of course we want to ensure that the necessary protections and support are in place to allow them to do that.

We know that the majority of people are comfortable managing their own money. However, for claimants for whom that is not the case, we have put in place support to help them. That is why we have the facility, as I have mentioned, for universal credit to be paid directly to the landlord where appropriate.

The hon. Member for Eastbourne asked for changes further to support private sector landlords and tenants—for example to make it easier for private landlords to have rent paid directly to them by the Department for Work and Pensions. We have always been clear that we will roll out universal credit in a way that allows us to continue to make improvements, as Members will have seen in the Budget before Christmas. We have already made a number of changes to universal credit as part of our engagement with the sector, and we will continue to develop our approach based on the feedback and evidence we collect as we go along. It is important to remember that, by Christmas, only 8% of universal credit had been rolled out, and by the end of January it will still be only 10%.

We have made practical improvements. For example, we have simplified and sped up the process for private rented sector managed payment requests, which can now be done by email and on a single form, with no additional information required, and work is under way further to improve that process in the universal credit full service.

We have also improved and updated the landlord information and have made it easier to find on gov.uk. We have another meeting this month with private rented sector representatives—such meetings happen regularly—and we will check whether they can access the information they need. Members have raised that matter today.

[Drew Hendry]

On making it easier for people to get information, there is a long-standing call to reintroduce implicit consent, to allow agencies to assist people with their claims. Will the Minister consider such a reintroduction for universal credit?

[Caroline Dinenage]

We have removed the need for explicit consent. A universal credit claim is the responsibility of the claimant, and implicit consent puts the development of the system at risk. However, it is something that we keep under review.

Some Members may not be aware that we issue a bi-monthly landlord newsletter. Such regular communications and incremental process changes are necessary if we are successfully to introduce this radical and innovative reform, and we will continue to build on them.

We have also made more fundamental changes to make a difference for private sector tenants and landlords. We have recognised that managed payments to landlords in the private rented sector are running at a lower level than expected. We understand that landlords are often small businesses with one or two properties, and that they cannot afford to have rent arrears. That is why we have made three important policy changes for this sector in recent months.

First, in December, as part of the Budget measures, we announced changes to universal credit guidance to ensure that when private sector housing benefit claimants come on to universal credit, we know whether and why they had their rent paid directly to their landlord previously. That will allow our work coaches to determine whether a managed payment to the landlord for universal credit may need to be applied, and will prompt a conversation with the claimant. That change will provide an important safeguard and help to ensure that those who need the support get it from the outset. It will also help to ensure that claimants receive appropriate budgeting support, by providing a further prompt for the work coach to have a discussion with them.

Secondly, we have changed our policy to ensure that when a private rented sector landlord asks for a managed payment to be set up and supplies evidence of two months’ rent arrears, we will implement the managed payment without requiring the claimant’s consent, just as in the old system. That change has already been welcomed by the Residential Landlords Association and shows our commitment to working with landlords to keep improving the system.

Both those changes are designed to ensure that vulnerable claimants who cannot manage a monthly universal credit payment are fully supported, and that landlords receive the rent they are owed.

Thirdly, as set out in the Budget, we will tackle rent arrears by providing claimants with an extra benefit payment equivalent to two weeks’ housing benefit while they transition on to universal credit. We have abolished the seven-day waiting period in universal credit and we have increased the maximum advance payment to up to 100% of a claimant’s indicative award.

A number of Members across the House have spoken about the universal credit monthly payment structure affecting rent being paid to landlords and, therefore, landlords’ willingness to rent to claimants. However, as I have explained, we have systems in place for those who cannot pay the rent directly. It is important that we are fully able to empower those who can be trusted with their own financial affairs. In fact, it would be wrong and insulting to assume that universal credit claimants cannot be trusted to manage their finances.

Members have mentioned reports that some landlords claim they would be unwilling to rent to universal credit claimants, including a recent one from the Residential Landlords Association. Such claims have been made by landlord groups since 2008, when we first started paying housing benefit directly to claimants, but it never seems to have materialised. The evidence shows that the proportion of tenants who are on housing benefit or universal credit has remained broadly consistent for the past 10 years—about 30% of the private rented sector and about 65% of the social rented sector. It would not make financial sense for a business to give up such a large proportion of the market. The way in which universal credit is designed means that landlords would not normally know that a prospective tenant was receiving universal credit. We know that there is anxiety about arrears, which I have addressed, but the fact remains that universal credit is a stable, secure, reliable form of income for claimants and their landlords.

The Department for Work and Pensions regularly engages with private landlords and their representatives. The universal credit team holds quarterly strategic engagement meetings with sector stakeholders, in which it shares the latest updates on universal credit, responds to questions and listens to concerns. Insight from that engagement has already helped us to make numerous process changes to improve interactions with stakeholders. Two examples are the recent changes made to the process for ensuring that managed payments to landlords are put in place where appropriate: treatment under housing benefit and the removal of the need for explicit consent from the claimant.

Department for Work and Pensions staff will continue to work with claimants who have managed payments in place to ensure that they have appropriate budgeting support, and they will remove the arrangements when a claimant is ready. To those private sector landlords who have expressed concerns about renting to universal credit claimants, I say that with the safeguards we have in place, the improved work outcomes that universal credit brings and the personal budgeting support available, such concerns should be groundless.

More attention should be paid to the evidence of universal credit outcomes than to the unhelpful scaremongering of Opposition Members. I can only give in evidence the fact that, in Prime Minister’s questions, the Leader of the Opposition claimed that Gloucester City Homes evicted one in eight tenants—12% of tenants—due to universal credit. That would have been 650 tenants. In fact, it was eight tenants, all of whom had arrears before universal credit was introduced. None of the evictions was as a result of universal credit, and one was because a gentleman had been living in Australia for 18 months.

Universal credit represents a generation-changing culture shift in how welfare is delivered and how people are helped, creating a system that allows people to break free from dependency, take control of their lives, and work. Universal credit picks up from a deeply flawed system and strives to solve problems that were previously thought intractable. In that old system, complexity and bureaucracy so often served to stifle claimants’ independence, limit their choices and constrain their outlook. We have shown with our actions, and have demonstrated here today, that we are listening and learning and are making the changes necessary to implement this historic reform safely, securely and with careful regard to our stakeholders.