Universal Credit

Wednesday 13 March 2013, 12:00pm

Motion detail

This Assembly recognises that, by making rent payments to recipients rather than direct to landlords as is currently the case, Universal Credit is likely to result in increased rent arrears. This Assembly further notes that, as a result of these increased levels of arrears, evictions may well grow and fewer homes will be built in London as housing associations suffer consequential increases in borrowing costs.

This Assembly recognises that 90% of social tenants believe that it would be better for Housing Benefit to be paid direct to the landlord” , rather than direct to the tenant as intended under the government’s Universal Credit proposals. This desire is driven by the fact many Universal Credit recipients fear they would be unable to manage their finances effectively and would overspend under the new model, leading to rental arrears and possible eviction .

The Assembly acknowledges that these fears appear to be borne out by London & Quadrant research showing that arrears amongst Local Housing Allowance recipients (those social tenants renting in the private-sector) increased from 3% to 7% when they moved over to direct payment , resulting in increased evictions. Furthermore, under LHA, the National Landlords Association found that more than half of private landlords said they would not rent out their properties to benefit tenants due to fears of rent arrears .

This Assembly notes that an additional consequence of direct payment of rent to Universal Credit recipients may be increased borrowing costs for social house-builders and, therefore, in fewer housing units being built in London. The credit ratings agency Moody’s has, for example, noted that direct payment to the landlord is a ‘credit strength’, whereas direct payment of rent to recipients (who then pay their rent themselves) is a ‘credit negative’. The result would be that housing associations would have to pay more to borrow money, with knock-on implications for the building of affordable housing and new dwellings . 

This Assembly therefore recognises that Universal Credit presents three potential problems in respect of housing the capital: 

1. The single-payment system may result in fewer private rented homes being available to those in receipt of Universal Credit; 

2. The single payment system may result in elevated levels of arrears and, therefore evictions; and 

3. By increasing the borrowing costs of housing associations, the number of new social rented and affordable homes being built may be significantly reduced, which would exacerbate London’s housing crisis by accelerating private sector rent increases – up 12% in the last year  – and place even greater pressure on London’s social housing waiting lists, which already contain almost 370,000 households .

This Assembly calls on the Mayor to conduct an urgent review in to the potential impact of Universal Credit on housing in the capital, particularly the problem of arrears and elevated borrowing costs, which may prevent thousands of desperately-needed new homes from being built in capital.  Further, this Assembly urges the Mayor to seek urgent reassurances from the Government that Universal Credit will not exacerbate London’s housing crisis.