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Lenders back landlords in bid to get housing benefit payments changed

The Council of Mortgage Lenders is backing attempts by landlords to get the Government to change its mind over how housing benefit is paid.

In last week’s second reading of the Welfare Reform Bill in the House of Lords, the Government re-stated its commitment to proposals to pay housing benefit directly to tenants as part of wider plans for welfare reform.

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.

Landlords have repeatedly called for tenants to be given the right to choose whether to receive their housing benefit, or to have it paid direct to landlords.

Currently, Local Housing Allowance is paid directly to housing benefit tenants in private rental accommodation. The Government plans to do the same with the housing benefit element of the new Universal Credit, but this time social housing landlords will also lose out on not having rent paid direct.

Landlords have repeatedly complained that LHA tenants often fail to pass on their rent, choosing to spend it on other things. Landlord bodies say that as a result, landlords are leaving the social housing sector.

The CML said this week that lenders need to have their own mortgages repaid by social housing landlords, and this was underpinned by the certainty of them getting rent payments.

A recent survey of 1,000 tenants carried out by the research consultancy Policis, working with the National Housing Federation (NHF), 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.

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 CML said: “Making tenants responsible for their finances against their wishes imposes additional worries and concerns, and problems that may unnecessarily arise from an inability to cope. The Government needs to acknowledge this as it develops its proposals further.”

It added: “Lenders support tenants, consumer groups, landlords and managers in the social and private rented sectors in urging the government to let benefit recipients make rational decisions about what is in their own interests.”