From 2008 Housing Benefit will be paid direct to claimants in private rented accommodation unless they are vulnerable or in rent arrears. Known as Local Housing Allowance, the new scheme has been tested in 18 ‘pathfinder’ local authority areas, prior to national rollout. The final report from the pilot is due in the summer of 2007. The Government is also aiming for Housing Benefit payments to be made to social housing claimants rather than their landlords.

Some reports claim, rather patronisingly, that tenants in receipt of benefit are not able to manage their money and so will not pay their rent.

One group, the Residential Landlords Association, is advising landlords to simply say ‘NO’ to Housing Benefit tenancies.

“The trouble is … the money is often spent on other priorities instead of paying the rent. And there are no winners from a situation that just encourages more rent arrears,” says RLA chairman Lee Dribben.

“Landlords can’t afford to take that sort of financial loss on a routine basis while they chase defaulting tenants who have already spent their rent allowance on other things.Vulnerable low-income tenants, who already have difficulty managing their money, are being driven further into debt.”

On the other hand, a new report from the Chartered Institute of Housing (CIH) for the Joseph Rowntree Foundation (JRF) shows that most tenants make rent payments the first priority, and that any rent arrears are often linked to administrative problems rather than wilful nonpayment.

The new research entitled Direct Payment of Housing Benefit - what do claimants think? Reports that there was a mixed response to the Government plans to pay Housing Benefit direct to claimants. It identifies that tenants with an organised approach to money management should adjust well to direct payment of Housing Benefit, but others will need support and money management advice in order to make the transition.

The research is based on in-depth interviews with tenants of private and social housing and reveals that many people, regardless of tenure, age and family circumstances, are content with payment of Housing Benefit to the landlord as it avoids ‘hassle’, provides peace of mind and avoids the need for them to become involved in case of errors or non payment. Their attitude to moving to direct payment depends on their overall approach to managing their finances.

Claimants who tended to have a more organised approach to money management thought the transition to receiving Housing Benefit and paying full rent themselves would be straightforward. Individuals with a more chaotic approach expressed anxiety about the ‘hassle’ involved and, in a minority of cases, about spending the Housing Benefit consciously or inadvertently on other things.

The report said that this highlights the need for support to make the transition to claimant payment in terms of adequate money management and budgeting advice and regular and clear statements of Housing Benefit received and rent payments made.

The report also shows that using bank accounts and automated methods of payment could reduce the ‘hassle’ factor and help make the transition to direct payment smoother.

Claimants who already receive direct payment appreciate the control they have over the Housing Benefit and the rent payment process and the fact that they can conceal their benefit status from their private landlord, so have greater housing choice.

“Most people will be able to adjust to having Housing Benefit paid to them instead of their landlord, but safeguards need to be in place for the minority of claimants that do have problems.” said Oxford University Professor Peter Kemp, who led the study.

ARLA’s Chief Executive Adrian Turner responded to the debate by saying that tenants should be encouraged to take responsibility for themselves.

“No one in the industry believes that the historic housing benefit system worked to the benefit of landlords, tenants or agents. ARLA was involved in some of the early discussions with the Department for Work and Pensions over the introduction of the Housing Allowance system and encouraged the Department in their efforts to improve the system. We see nothing wrong in encouraging tenants in receipt of the Housing Allowance to take personal responsibility for planning their finances and budgeting their income against expenditure just as anyone else has to.”

The new Housing Allowance system has safeguards in to allow the payment to be made directly to agents or landlords in certain circumstances, such as arrears build up. So the argument that the system is inflexible is weak.

Adrian concluded: “ARLA wants to see a robust private rented sector, with all parties taking their responsibilities seriously. We do not believe it benefits the market for landlords to create outcasts of a whole section of their potential tenant base.“

One ARLA member that we spoke to said:

“We don’t have a problem with Housing Benefit tenants. You cannot exclude people because they are getting help. We minimise potential problems by taking a guarantor even if only part of the rent is being paid by benefit, but actually, they are no more or less likely to get into arrears than any other tenant.”