Welfare Reform Bill

I suspect that this is the last amendment we are going to have time for, so we are on the home stretch. The good news for the Minister is that this amendment does not cost any money; in fact, it is going to save a great deal. It is about the direct payment of housing costs support to the tenant instead of, as is the current case, payment of these benefits to the landlord. The Government are keen for tenants who receive housing benefit, local housing allowance in the private rented sector or, in future, the housing costs element in universal credit to be given the rent money directly and then to take responsibility for passing it on to their landlord. This would increase tenants’ understanding of the need for budgeting and financial discipline in the home and help them cope with rent payments if and when they get a job. However, it seems that those affected by this proposition—tenants, landlords, and, indeed, those who advise and support tenants and landlords—are united in opposing the concept. A recent survey by the research consultancy Policis found that 93 per cent of tenants in the social rented sector wanted housing benefit to be paid direct to their landlord. It seems that those on benefit prefer the option of knowing that their rent has been paid, allowing them to budget for other expenditure in the knowledge that their home is secure. Citizens Advice, the Money Advice Trust, Shelter, Crisis and Homeless Link all oppose the idea of tenants being denied the right to choose for their rent to be paid directly to their landlord. These organisations are concerned to ensure that tenants do not fall into arrears and face the threat of eviction. The Tenants and Residents Organisations of England—TAROE—strongly support giving tenants the right to chose. Organisations representing landlords—the Residential Landlords Association, the National Housing Federation, the housing federations in Scotland and Wales, the British Property Federation, the National Federation of ALMOs and others—are worried that rent arrears will escalate as tenants prioritise other debts, often to less tolerant creditors, including obnoxious loan sharks, who are likely to be major beneficiaries if benefits for rent are paid direct to tenants. If rents are paid monthly, the cash in hand for tenants can easily exceed £500, a huge sum for those struggling to make ends meet on a day-to-day basis. Recent figures from LSL Property Services show that rent arrears in the private rented sector are already on the increase. Following a pilot scheme by the London and Quadrant Housing Trust, which saw arrears rise markedly when housing benefit was paid direct to the tenant, the National Housing Federation has calculated that on a national basis arrears of £320 million would be likely to accumulate as a consequence of this change. The federation also calculates that the extra admin costs of individualising the payment of rent to tenants would add a further £100 million per annum to the costs. Collecting rent from each tenant to whom the benefits had been paid is clearly a more laborious process than receiving it from the local authority. There is an even more serious consequence of a system that fails to pay benefits direct to landlords, which is that many landlords in the private rented sector are becoming increasingly reluctant to let to any tenant on benefits for fear that they will not receive the rent. Like it or not, we now depend on the private rented sector to accommodate many low-income households, and the refusal to pay the local housing allowance directly to the private landlord is a huge discouragement to the sector. I know that the Minister has been looking at the level of arrears that must accumulate before the rent money can be paid direct to landlords in the hope of being able to reassure landlords that if arrears are mounting up rent direct to the landlord will be possible, but even a few weeks of arrears, which will be very hard to recover subsequently, can be a serious deterrent to landlords who are already reluctant to let to people on benefit. The Council of Mortgage Lenders is a significant body that supports my amendment. It says: "““For social landlords the certainty of benefit payments that reflect actual rents has been important to their ability to secure private investment at highly competitive rates and ensure that they can maximise their capacity to build much needed social housing. This principle should be carried over into the new Universal Credit””." It goes on to say: "““Institutional investors place great importance on cash flow underpinned by direct payments and the view of rating agencies is key to the continued success of this type of investment … It will not be sufficient to maintain the confidence and commitment of lenders and investors to leave the important elements around housing credit to secondary legislation. There are potential implications for existing loan agreements … The existing levels of rent direct payment have been a major factor for funders in offering the social housing sector preferential loan rates. It is estimated that these benefit the sector by some £500m pa””." Losing those preferential rates at £500 million per annum, added to the direct costs of arrears and extra administration of £420 million per annum, gets us to nearly £1 billion a year for this policy. Amendment 49 would simply enable tenants to opt for or consent to the housing cost element of their universal credit payment going straight to the landlord. We know that the technical, mechanical process of separating out the housing element from the rest is not a problem, since the Minister has already made it clear that payment for rent will indeed go straight to the landlord when the tenant has gone into arrears, as it will for tenants over pension age who wish this. Clearly, there is no logistical reason for not giving tenants the opportunity to choose this option. Surely, it is right and proper to allow tenants to manage their finances and protect themselves against arrears and the potential horrors of eviction though the rent being taken care of directly by the state paying their rent money to the landlord. Some will confidently choose to handle the rent themselves, and those who opt not to at the outset would be able to change their minds at a later date, but the great majority would, it seems, wish their rent to be paid direct to the landlord. The Scottish Federation of Housing Associations tells me that 96 per cent of housing association tenants in London currently choose that method of payment, and they will all be adversely affected by the change. Last month, the Minister announced a set of demonstration projects to look at financial support and budgeting advice for tenants, including mechanisms for repaying arrears and instigating payments to landlords when arrears build up. This is a very helpful initiative from the Minister. I know that it will look at how tenants with bank accounts could use direct debits to pay out what is paid in for rent. The Scottish Federation makes the good point that the direct debit system cannot guarantee that a landlord will receive payment. In fact, there is a risk that households on constrained incomes who have bank accounts and set up a direct debit for rent payments could find themselves with insufficient funds to meet the payment on the due date. If this happens, in addition to the rent arrears that they will accrue, they will also face significant bank charges for the missed direct debit, especially if the landlord tries to get the payment more than once. There is a significant risk that both rent arrears and general indebtedness will increase among tenants of social housing. On the question of whether we could get round the problem by giving good advice, the Money Advice Trust’s chief executive Joanna Elson has said of the proposal in my amendment: "““We feel that this would enable many tenants to avoid housing benefit arrears and thus tackle their debts and manage their money wisely””." The helpful initiative that the Minister has started will produce important information and possibly help us come to different conclusions about whether rent should be paid direct to landlords before universal credit is introduced in October 2013. The hazard with carrying on in the mean time on the course currently set is that it creates anxiety and uncertainty for housing association and their lenders, which inevitably impact on the terms on which housing associations are able to operate. It will cause distress and concern among the tenants themselves. I hope that the Minister can provide a level of reassurance at this stage in the legislation’s development that we will be able to restore confidence to tenants and landlords. I look forward to his comments and beg to move.