Brokers will need to be up to speed with the new benefit payment method, as many of their buy-to-let landlord clients will have to deal with tenants unable to pay their rent promptly and may fall into arrears. A recent analysis of official statistics for Labour MP Karen Buck found that between 2011-12 and 2014-15, £35bn of housing benefit will be received by private landlords, £13bn more than the previous three years.
Landlords will no longer receive rent directly from the State. Instead their tenants will receive the housing benefit, and they will be responsible for making sure their landlord gets the rent paid safely, and on time.
This will throw up all sorts of financial management issues and, according to a recent report by the National Housing Federation*, only 4% of tenants say they would prefer to receive their housing benefit directly; 92% said they would prefer it be paid directly to their landlord.
Landlords are expecting to have to spend more (increased legal costs, rent collection costs, spend on financial inclusion) and collect less rent, and brokers can help clients by familiarising themselves with the issues the clients might face, so that they can have a proper, fully informed conversation.
But, a clear, honest channel of communication between landlord and tenant will also be needed. Using new and different methods of managing rent collection and arrears management will have a significant impact on this, and landlords need to be aware of certain issues. For example, reminding tenants prior to the UC payment, prompting ahead of payment, and follow-up prompting.
Landlords will need a simple and reliable method for collecting payments, one that enables monies to be transferred safely and securely. In addition, having an electronic reminder process, for example, by text or email, could benefit both landlord and tenant.
Brokers can help by keeping clients up to date with all new legislation changes and knock-on effects.
*Welfare reform impact assessment, final report – Jan 2015
Derek Steele is CEO, Mobysoft