Universal Credit the Private Rented Sector and a Sense of Groundhog Day
Summary: The government’s plan to normally pay the Local Housing Allowance part of the planned Universal Credit to tenants (not to landlords) reminds us of the film “Groundhog Day”. Haven’t we been here before and did we not learn from what happened last time?
The Universal Credit was first announced at the Conservative Party Conference in 2010, though the idea has been floating around for while – and variants of it are highly popular on both left and right.
Indeed, I recall studying a version of this, as proposed by liberal economist, JE Meade, whilst at university, many aeons ago.
The thinking is that a Universal Credit would replace a number of other benefits, including Local Housing Allowance (LHA).
Good in Theory
It sounds good.
By implementing a single, universal credit, welfare administration costs could be cut and it would ensure that people who work would always have more money than those who do not work.
Unlike some existing benefits that have a 100% withdrawal rate, the universal credit would be gradually tapered away so that people will be unafraid to take on a job, even if it is only part time, because they will still keep most of the additional money they earn.
But within the proposals that are on the table at the moment, is the idea that the Housing Benefit (Local Housing Allowance) element, which tenants can currently elect to have paid direct to landlords will normally only be paid direct to tenants (who it is hoped won’t spend the cash on something else).
Been There, Done That
The plan to normally have the LHA paid direct to the tenant (as the main default option) has been tried before under the previous Labour administration.
Labour’s idea was that by paying the tenants direct, the recipients would become better at budgeting and somehow more responsible.
Of course, these were very laudable aims and are all well and good.
But back then, landlord and tenant groups as well as housing charities like Shelter and Crisis all found that these potential benefits, whilst laudable enough, were more than outweighed by the fact that, by paying tenants’ LHA direct to the tenant, even more private landlords would become unwilling to let to tenants who were dependent on LHA.
The landlords’ fear – which was shared by many of their tenants too – was that the money would be spent on things other than the rent, which would lead to arrears and eventual eviction.
Ways and Means
And so, under Labour ways and means were again found to pay the LHA direct to private landlords. For example, one work around was that LHA could be paid to a landlord if, by doing so, a tenancy could be sustained that would otherwise be cancelled.
As we have already been here before and learnt the consequences of what happens when tenants are unable to have their LHA paid direct to the landlord, it seems odd that the Government could be thinking of making the same mistake again.
It all reminds me of the film, “Groundhog Day” where a bored American Weatherman, played by Bill Murray was trapped and forced to relive the same day again and again.
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