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Arrears are becoming a serious problem for buy to let investors who rent to tenants receiving Universal Credit.
New research has found that two-thirds of private landlords who let to people on Universal Credit have suffered from their tenants going into rental arrears.
The Residential Landlords Association (RLA)’s research exchange PEARL has compiled a survey of 2,200 landlords which discovered that 61 per cent of those with tenants on Universal Credit have experienced rent arrears. This is a vast increase in comparison to the 27 per cent recorded in 2016.
It was found that on average, tenants on Universal Credit who were in rent arrears owed almost £2,400. This is a 49 per cent increase year on year.
Over half, or 53 per cent, of landlords with tenants on Universal Credit have applied for an Alternative Payment Arrangement (APA), where rent is paid directly to them rather than to the tenant. When applications were successful, it took an average of two months for this to be organised.
RLA Policy Director, David Smith, stated that the research suggested an ‘urgent need’ for further changes to Universal Credit.
He said: ‘We welcome the constructive engagement we have had with the Government over these issues but more work is needed to give landlords the confidence they need to rent to those on UC. The impact of the announcements from the Autumn budget last year remain to be seen. However, we feel a major start would be to give tenants the right to choose to have payments paid directly to their landlord – this would empower tenants to decide what is best for them rather than being told by the Government.’
The RLA is calling for the APA process to be urgently improved, namely before managed migration begins next year. This will mean that more families and increasingly complex cases will be moved on to Universal Credit. The RLA is also calling for tenants to be able to choose, to have the housing element of Universal Credit paid directly to the landlord if it suits them.