Universal Credit: Private Rented Sector

Melanie Onn Excerpts

Tuesday 9th January 2018 Westminster Hall

[Stephen Lloyd]

My hon. Friend makes an important point. I think that is something that needs to be considered, particularly as regards the further caps that have come in over the past couple of years. I think those are unsustainable.

[Melanie Onn (Great Grimsby) (Lab)]

Has the hon. Gentleman given any consideration to the issue of 18 to 21-year-olds who are on universal credit and have no recourse to any funding for the housing element? Very often they will be on a lower wage, as obviously the minimum wage for younger people is lower than that for people over 25. There are big issues for the sector and I think it will ultimately end in a rise in homelessness among that group. Does he agree?

[Stephen Lloyd]

I agree. As regards that particular age group—unless they have some sort of bank of mum and dad—in our surgeries we are already seeing that young people are tremendously adversely affected, both by the lack of housing benefit at that age, and, frankly, some of the issues around universal credit.

Another issue that has not been properly addressed, and I would welcome hearing about this from the Minister, is that there is a portal for public sector housing and councils and housing associations to access as regards people in their area, or their tenants, going on to universal credit, but there is not one for the private sector. I urge the Minister not to tell me that there is, if she has been told that by her civil servants, because I have been told by all the residential trade associations that there is not, or it is not working.

At the risk of misquoting Tony Blair, who kept saying, “Education, education, education,” I want to talk about evidence, evidence, evidence. All those years ago, when I and others first challenged the then Secretary of State, the right hon. Member for Chingford and Woodford Green, in the Work and Pensions Committee, saying, “You must understand, if you retain the original plan, which is that all the money goes to the tenant and the tenant pays the landlord, it will be an absolute disaster,” I did not have evidence. I just had a hunch, based on years of experience dealing with thousands of people. I just knew that, as did many others. Where are we now? We are five or six years down the line, and I want to provide some evidence.

In the past 12 months, the RLA reports, one in three landlords has attempted to evict a tenant; 60% were due to rent arrears, and the majority of those were on universal credit. This means not only unnecessary suffering for tens of thousands of housing benefit recipients, but it poses a threat to the future of benefits claimants ever succeeding to rent in the private sector, because once a tenant has a bad record, it is extremely difficult to unwind.

Secondly, a recent study carried out by the RLA shows that almost 87% of landlords would not be willing to let their properties to claimants of universal credit, while 38% have already experienced universal credit tenants going into arrears. Where are we going with this madness? I remind everyone of the percentage of rent arrears among those on universal credit in Northern Ireland. A recent study commissioned by Crisis—a homelessness charity—and the Joseph Rowntree Foundation found that 90% of local authorities were concerned that universal credit would increase homelessness, which it has, because of section 21s. The list of evidence goes on and on.

The RLA has found that 73%—Minister, these are the facts, the stats and the evidence—of its thousands of members,

“lack confidence in renting to tenants on the Credit due to uncertainty that they will be able to recover rent arrears.”

Another major landlords’ trade association, the National Landlords Association, found that only one in five of its members would let their properties to tenants on universal credit. I have already talked about Crisis. The trade association for letting agencies, the Association of Residential Letting Agents, which many hon. Members deal with, found that

“34% of ARLA Propertymark letting agents who we surveyed told us that they had seen a reduction in landlords renting to Universal Credit claimants.”

The list goes on and on, so it is time to fix it.

This is what I propose to the Government. I am delighted that the Chancellor of the Exchequer listened to me, the MP for Eastbourne, and made those amends in the Budget. I suspect that a few others probably had a little more influence than me; but, heck, like all politicians, I have been banging on about it for years so I will take the credit. So there have been some adjustments, but where do we go next? I ask the Minister to report back to the new Secretary of State, with whom I worked in coalition and whom I congratulate on her position, and persuade her to go to the Chancellor and do what it takes to make defaults to landlords, by mutual tenant-landlord agreement, automatic; and to go over to Northern Ireland, see their minority Government colleagues in the DUP, find out exactly what their computer programme does that allows colleagues in Northern Ireland to do automatic default payments, follow their two-week advice—I would do the same on that—and implement it across the country.

I believe that what would happen is that the housing stock capacity in the private sector would go up exponentially—even potentially double—because of what I mentioned earlier. Despite the challenges with tenants sometimes being on benefit, the prejudices that landlords sometimes have against them are often founded on the reality that landlords do not feel secure that they will receive the money. I am absolutely certain that if landlords know that they will get a default payment, over a couple of years there will be a substantial increase in the amount of private rented stock available to people on universal credit, and that could make a significant difference in reducing homelessness.

There is an opportunity for the Government. Despite the ideological and fundamental errors that underpin some elements of universal credit, finally, after years and years of banging on the door, they are beginning to change. Thank heaven! Now that door is open, the Minister and her Government have an opportunity to be game changers and to convert universal credit into what I believe it always should have been: a decent benefit. One of the key things they need to do is around the default payment, which I have debated this morning. Along with that—this is my other favourite—I would go to the current Secretary of the State at the DWP and ask her to have a word with the previous MP for her constituency, the former Chancellor George Osborne, and ask for the £3 billion back. He took that out after 2015, when the Liberals were defenestrated at the election; he slashed £3 billion a year out of universal credit, which was supposed to be about the work allowance.

If we get that money back and properly convert what should be a default payment to landlords, we can produce what universal credit should have been, and was originally designed to be: a progressive, positive benefit that gives people transformative opportunities. After five years of it being a complete car crash in so many ways, I believe that the Government finally understand that. I urge the Government to make my day and, possibly, that of the former Secretary of State, the right hon. Member for Chingford and Woodford Green, and to make automatic payments as a default to landlords. I ask that they to do it instantly, they do it in both the private and public sectors and they do it now.

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[Peter Aldous]

The hon. Lady highlights an example of the problems with implementing universal credit that many of us have experience of from our constituency casework.

[Melanie Onn]

In October, the housing association Shoreline in my constituency had 182 residents who were already on universal credit, and 80% of them were in rent arrears. Such examples create a stigma against people who are on universal credit, because of those issues. Fundamentally, we have to iron out some of those problems to prevent people from getting into arrears and to give private landlords confidence that those people will not be defaulters or bad debtors when paying their rent.

[Peter Aldous]

Yes. It is quite clear that private sector landlords’ confidence in the system has been very severely dented. I sense, from my own perspective, that the situation has improved, but I acknowledge that there is still a great more work to be done. Local letting agents advise me that the majority of their landlord clients are still reluctant to let to universal credit claimants. It is also necessary to bear in mind that many landlords own only one or two properties and the rents that they receive are a very important part of their annual income.

The Eastern Landlords Association, which has 1,400 members, highlights the lack of a level playing field, with council and housing association landlords able to secure direct payments after eight weeks’ arrears, while private landlords need specific tenants’ approval to do so. This is still proving a disincentive to private landlords to let to universal credit claimants; as we have seen, many of them have lost confidence in the system. It highlights the need for better communication with the DWP and describes the system of claiming alternative payment arrangements online as “hit and miss”. It advises that while some claims do get processed, in its experience at least 50% do not get looked at.

The roll-out of universal credit is a mammoth task. There is a lot of heavy lifting to be done, which the DWP cannot do on its own. There is a need for a partnership approach, which should involve private landlords as well as councils, the 1ocal voluntary sector, such as citizens advice bureaux, and housing associations. To give credit to the DWP, under the guidance of my hon. Friend the Member for East Hampshire (Damian Hinds)—perhaps I should say my right hon. Friend; I wish him all the best in his new role—it has begun to adopt such an approach in recent months, and I anticipate that the Minister will continue in the same way. It is important that full consideration is given to the Residential Landlords Association’s recommendations and to the innovative proposals from Crisis to adapt the Newcastle trailblazer for reducing homelessness to ensure that those in receipt of universal credit do not fall into rent arrears.

In Lowestoft, three suggestions have been made. First, in each DWP office, the Government should have a landlord liaison officer for landlords to contact to discuss issues with their tenants’ housing claims, when the landlord has applied for an alternative payment arrangement. Secondly, housing moneys should not be released to a tenant when they are being sanctioned, as they often choose to use the money to support the sanction shortfall. In effect, that means the landlord is penalised. Finally, when a sanction does happen, the housing money should automatically be paid through an alternative payment arrangement to the landlord.

A lot of people wish to speak in this debate, so I will conclude by saying that if universal credit is to be a success and to do what it says on the tin, it is important that the DWP listens to the proposals that I have outlined, as colleagues will too, so that we fully regain the confidence of private landlords, because they have a very important role to play.

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[Tracy Brabin]

Gingerbread is a fantastic charity. In my constituency, a young woman came to me who was being bullied by her landlord in all sorts of ways because of her inability to pay her rent. Single women living with children are incredibly vulnerable to that.

The ending of an assured shorthold tenancy agreement with a private landlord is now the primary reason for families presenting themselves as homeless to the local authority. The pressures on local authority housing could not be more severe. In Kirklees, for example, there are currently 9,700 applications for only 171 properties. It is a priority for all of us to support the private rental sector as universal credit is rolled out, if we want to lessen the burden on local councils. But this problem will not go away any time soon. The number of working households claiming housing benefit in the private sector has more than doubled since 2009, whereas the wages of some of the lowest paid in our society have stagnated. DWP figures confirm that only 7% of private renters are actually unemployed and seeking work. Sadly, although the Joseph Rowntree Foundation found that the private rental sector has grown by a third over the past 12 months, the number of those being evicted has also grown, with 7,200 more private tenants losing their homes in 2015 than in 2003.

[Melanie Onn]

My hon. Friend’s point is incredibly important. The Joseph Rowntree Foundation has been working with the Cambridge Centre for Housing and Planning Research, and they showed that in 2015, 80% of private sector evictions were no fault evictions. That resulted in individuals going to local authorities, but perhaps being considered as people who had made themselves intentionally homeless. Does she agree that that creates a huge difficulty in the system?

[Tracy Brabin]

The idea of people making themselves intentionally homeless is a huge problem for a number of my constituents. It affects their credit rating and rolls on into the rest of their lives in a really unacceptable manner.

The greatest concern for landlords is the move away from direct payments. Many worry that tenants will not have the capability to budget effectively and will end up spending the housing element of universal credit on other essentials. In the debate last year on UC, the Government argued that delaying payment for rent was the same as those in work being paid at the end of the month, so the delay was a good lesson in budgeting and responsibility. Well, maybe for middle-class families with savings or relatives with cash to see them through a tricky financial patch, but when—as the English housing survey discovered—66% of private renters have no savings, the ability to budget is not so straightforward.

After the Budget, the Residential Landlords Association did a snap survey, which found that 36% of landlords would have more confidence in letting to tenants on universal credit. Sadly, 64% said they would not. I suppose their caution is not surprising, given that the RLA reported a high rise in rent arrears where universal credit has been introduced. The National Landlords Association chair agreed, saying that they expected to see

“a steady decline in landlords being willing to rent to benefit claimants in the next 18 months to two years.”

Only 18% to 20% of private landlords accept tenants who pay their rent with local housing allowance. That is down from 46% in 2010-11. Why? Because universal credit encourages tenants to fall into arrears, and 38% of landlords have seen tenants in receipt of UC entering rent arrears. In Kirklees Council—my constituency council—437 claimants are on universal credit, with further roll-outs scheduled for later in the year. Some 82% of those are in arrears, to the tune of seven weeks’ rent on average, whereas before going onto UC, the figure was 5.1 weeks in arrears.

Landlords do not want to evict tenants, because it costs £1,800 to end one tenancy and start another. They want the security of knowing that they will have their rent paid regularly, in a timely fashion. Although bad and greedy landlords have given the sector a bad press, a substantial number of landlords in the private sector are hard-working and understanding. They often have only one property to let out as a contribution to their pension, or as a way of saving for the future. In fact, two thirds of landlords are basic rate taxpayers and are not on high incomes. However, although they are sympathetic to tenants, they know that they too would fall into debt if the rent was not paid.

In conclusion, it is vital that we pause and fix universal credit, ensuring that families are not made homeless due to delays in the system. More widely, we must also increase the number of affordable homes that are available. Only by increasing the numbers of affordable homes being built will we reduce waiting lists, keep rents low and keep families in private rental housing to ease the burden on councils, supporting them to provide excellent social housing for the most vulnerable in our communities.