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Massive extra costs to social housing providers identified by Southwark’s direct payment benefits test

Southwark CathedralPrivate landlords have for some time had to put up with the rules which provide for payment to go direct to the tenants. Only in two circumstances –

  • where the tenant is deemed ‘vulnerable’ (which has to be specially applied for) or
  • if the tenant is over 8 weeks in arrears of rent

will payment be made to the landlord direct.

Social housing providers have, until now, still had payment made direct to them in the majority of cases. However with the benefit changes planned by the government, this is set to change.

The reasoning behind this is to ‘empower’ tenants by getting them to take responsibility for their lives and financial affairs.

However, as a benefit manager I was listening to at a talk last night rightly pointed out, for persons with chaotic lifestyles, there are better ways of training them to manage their finances than giving them a large sum of money once a month.

Southwark’s project has been focusing on what actually happens in this situation. Here are their findings:

  • Only 60 per cent of the tenants identified for the pilot were successfully moved onto the scheme
  • There is a lack of understanding about personal finance among some tenants and some were unable to obtain a bank account
  • 11 per cent of those originally identified for the pilot refused or were unable to engage with the council, and 14 per cent were later deemed too vulnerable to take part

Following on from this, Southwark estimate that when direct payment is borough wide, their rent arrears could increase by 14 million, with extra administration costs of £400,000.

Cllr Richard Livingstone said

What has been exposed by our pilot is that social landlords are likely to face such high levels of debt that direct payments could bring social housing as we know it to an end

A worrying prospect.

Private landlords are unlikely to want to take up the slack. Already they are fleeing from benefit tenants like the wind, and even those prepared to consider the idea may well find their their mortgage lender prohibits it.

Worrying times indeed. You can read more about the project here.

Southwark Cathedral picture from flickr

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2 Responses to Massive extra costs to social housing providers identified by Southwark’s direct payment benefits test

  1. Welcome to the real world social landlords! Now you’ll appreciate what private landlords who accept social tenants have had to put up with.

  2. This should be no surprise to anyone Tessa. Nobody with any common sense needed the 5 pilots to tell us this.

    How does simply dumping several pounds a week into someone’s bank account suddenly make them good with money? Of course the argument is that they will need to learn, but what happens while they are learning and making mistakes? (which is part of the learning process)

    At a time when we need more housing than ever the housing association that my sister works for in Hampshire has cancelled its entire new build programme in anticipation of the chaos being caused by spiralling rent arrears.

    When this was first mooted by government I was training some experienced council housing officers in Wales and explained it to them. One officer looked stunned and said simply “We’re finished if they do that”. Indeed sir.

    Whereas PRS landlords solved the problem by walking away from tenants on benefits social landlords have no so such luxury.

    The thing is, will repossessions rise or will county courts, as many do now, merely refuse to grant warrants and tell the social landlord they will have to find an alternative.



About the post author:

Tessa Shepperson

Tessa is a lawyer and specialises in creating products and services which help landlords and letting agents learn and understand landlord & tenant law. For example, she runs the Landlord Law website (now in its 14th year) and is a director of Easy Law Training Ltd and Your Law Store. Tessa also sits on the Property Redress Scheme Council. When not working she enjoys reading, cooking and messing around on the computer. You can also find her on Google

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Tessa is an English lawyer specialising in residential landlord and tenant law.

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