It has now launched a search for up to half-a-dozen partners in the social housing sector to take part in a series of "demonstration projects" next summer to test key elements of its proposals.
The government believes that encouraging benefit recipients to take greater responsibility for managing their own financial affairs is a crucial part of its welfare reform initiative.
Lenders, tenants, consumer groups, landlords and social housing providers all remain concerned about the potential impact of the proposals, yet the government remains emphatic that the question is not if, but how, direct payments of benefit to tenants will be implemented.
The Department for Work and Pensions said last week that its demonstration projects would help gather useful information for introducing "safeguards" to ensure that proposed reforms do not create unintended problems for those affected by the proposals.
The DWP said the demonstration projects were an important element in the government’s plans to roll out universal credit, and re-affirmed that it wanted to work closely with local authorities and the housing, lending and voluntary sectors on its plans for implementing the proposals.
Lenders' concerns
Lenders continue to fund housing in all tenures, and have so far provided more than £60 billion of finance to social landlords.
Crucially, this funding is underpinned by the certainty of guaranteed payments of housing benefit to landlords, which has reinforced lender confidence in the reliability of income for the sector. This, in turn, has enabled lenders to provide funding at lower rates, which is attractive to social housing providers.
But paying housing benefit directly to tenants will introduce greater uncertainty about the flow of income to social landlords.
And, in what is already a risk-averse lending environment, this is likely to diminish the confidence of lenders in funding the sector.
Housing associations – and politicians
Some of the potential implications of this were outlined during the second reading of the bill by the Liberal Democrat Baroness Falkner of Margravine, who is also a non-executive director of Hyde Housing Association.
Baroness Falkner said that, against a challenging backdrop of a shortage of supply of homes, with diminishing investment in housing by taxpayers, reduced government grants and a general tightening of credit, "associations are being asked to provide more affordable housing."
She argued that "arrears are bound to increase with direct payments to residents and the level of risk that housing associations will incur will rise."
She forecast that credit rating agencies would downgrade the status of housing associations and that "borrowing for building in certain parts of the country might rise by as much as 100 basis points."
She continued: "The government’s stated desire to increase the supply of housing, in particular, social housing will not therefore be met (and) several questions also arise from the proposals concerning choice, efficiency and value for money."
Tenants' concerns
Research shows that many social housing tenants are also concerned about the added responsibility of managing all their outgoings, including the payment of rent to their landlord, from the single monthly benefit payment the government is proposing to make in future.
The evidence suggests that many would prefer payments made directly to their landlords, as this would provide them with greater financial security, certainty and peace of mind.
A recent survey of 1,000 tenants carried out by the research consultancy Policis, working with the National Housing Federation, found that 93% were in favour of the government paying rent directly to their landlord.
Meanwhile, in 2009, Shelter said that, among those claimants who would choose payments to be made directly to their landlords, 95% were struggling to manage their finances.
Bill amendment
Organisations representing tenants, landlords and housing managers in both the social and private rented sectors, as well as lenders, have now joined together to support an amendment to the bill that would enable benefit recipients to choose whether to receive their housing payment themselves or have it paid directly to their landlord.
The amendment has widespread support from a large number of bodies representing tenants, landlords and those in the social housing sector. Both the NHF and the CML are backing the amendment, alongside the:
- Money Advice Trust;
- Tenants Information Services;
- National Landlords Association;
- British Property Federation;
- Residential Landlords Association;
- National Association of Arm’s Length Management Organisations;
- Tenants and Residents Organisation of England;
- Tenant Participation and Advisory Service, Scotland;
- Scottish Federation of Housing Associations;
- Community Housing Cymru; and
- Northern Ireland Federation of Housing Associations.
The government's response
The government appears firmly committed to the principle of paying housing benefit to claimants as part of a more fundamental commitment to welfare reform.
In a speech to the NHF the day after the House of Lords debate, Lord Freud said:
"Universal credit payments must include payments for housing costs…this means benefit claimants have to manage their own finances – their full finances – so when they do find work it’s easier to leave the safety of the welfare system.
"I am absolutely committed to making a single universal credit payment, wherever possible."
But t
