In October 2013 Universal Credit will replace the current benefit system resulting in the claimant receiving a single payment which will include a housing benefit element.
But mechanisms in place to protect landlords in the event of non-payment and the facility to receive direct payments in exchange for lower rent for the tenant are currently absent from latest draft regulations.
Chris Norris, head of policy at the National Landlords Association, said paying housing benefit direct to tenants is nothing new in the private rented sector, which saw the changes in payments arrive in 2008, but the omission of the protection against non-payment is alarming.
He said: “Currently there is a trigger in place which, if the tenant reaches eight weeks of arrears, allows the landlord to apply for housing benefit to be paid to him directly but this procedure has not been included in the regulations so far and without this a landlord’s only recourse is repossession through the courts.”
Norris said that landlords are more willing to negotiate on rent knowing that there is no way that tenants can get into serious arrears.
And he added: “But without this backstop we are concerned that landlords will consider the risk of non-payment too great and decide it is not worthwhile to tenants in receipt of local authority allowance.”
LettingFocus blogger and property expert David Lawrenson said: “If the government is going to make it harder for landlords to rent to LHA tenants then they will just walk away, particularly where there is an abundance of working tenants in an area. And where there is no other option but to rent to LHA tenants landlords may decide to get out of the market completely.”
The DWP, who have been working closely with the NLA, said it is still considering what protections need to be in place for the private rented sector.
The NLA is also concerned that guidance for local authorities, which advises them to pay landlords directly if the landlord has reduced rent for the tenant in the event of difficulties, is to be scrapped completely.
The DWP spokesman said this guidance was always a temporary measure to ease the transition from housing benefit to LHA in 2008 when the benefit was first paid direct to tenants.
He said: “When Universal Credit is fully introduced there will no longer be a singular housing benefit payment to be administered by the local authority therefore this guidance will cease to exist.”
In response to landlords concerns, the DWP spokesman said: “Universal Credit will help millions of people by making them better off in work than on benefits. We are currently ensuring the necessary safeguards are in place.”
It is expected that the final rules for Universal Credit will be set in December in time for a pilot to begin in April 2013.