Universal Credit

Local Housing Allowance is due to change dramatically in the next few years and it is important that landlords understand what this will mean for them and their tenants.

If you use an Agent to manage your property you will probably be wise to close your eyes to the changes and make it your Agent’s concern (after all that’s what you pay them for), however if you manage your property yourself or you like to keep up to date with changes then take note.

The change is to the Welfare Reform Act and all benefit recipients will soon be in receipt of Universal Credit instead of their current benefits package.  This Universal Credit will include local housing allowance (LHA) payments which is what Landlords are concerned with.

Universal Credit is due to be introduced in October 2013 for new claimants and from April 2014 for existing claimants.  It will combine all benefit entitlement into one, wage-like payment. This new system will cap the benefit amount paid to each household at £26,000 per year.

At present, LHA varies according to the area and the subsequent rental costs. Under Universal Credit, capping the amount per household per year to £26,000 could mean that many Tenants receive substantially less in benefits per month and may no longer be able to afford their current rental arrangements.

The changes to LHA are likely to have the most impact on Tenants living in high rent areas, particularly on families.  In addition, Landlords are likely to see more instances of rental arrears.

The Letting Company’s advice to Landlords is that they take time to talk through the changes with tenants and discuss how they plan to manage their finances.

Tenants may find credit unions helpful when setting up bank accounts and arranging for standing orders and direct debits. These outgoings can be deducted from the bank account as soon as the benefit payment is received, helping the Tenant to manage their funds when Universal Credit is introduced.

It is essential that Landlords are aware of the pending changes and understand that their Tenants may be receiving significantly less money as a result of Universal Credit. Ahead of its introduction, Landlords should work with their Local Council to plan how they can work together during the changeover.

And if, when Universal Credit is introduced, tenants do begin to struggle with their rent, Landlords should work with them, perhaps arranging a short-term reduced rent where possible or a sensible repayment plan.

And for those Landlords who currently don’t have LHA tenants, you will be wise to keep informed of the changes because in this economic environment potentially any Tenants could find themselves needing to turn to Universal Credit for support.

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