Financial Responsibilty For Tenants?

Now, anyone who has read my previous posts (and there are not too many of you!) will know I like to bang on about this universal Credit system that the government is bringing in. In a nutshell (and this whole idea is nuts) the government want to pay all housing benefit payments direct to our tenants who then, beacons of financial shrewdness as they all are, will then pass this rent onto the landlord/agent.

Well here’s a curious thing…..we had a visit from our local credit union recently. They are encouraging our tenants who are in receipt of housing benefit (and will, therefore, endure the transfer to the Universal Credit system) to set up accounts with them, have their benefits paid into the account and then the credit union will pay the rent to the landlord. Seems a good idea?

To act as this middleman, the credit union will extract a fee from the landlord of up to 6%. There is nothing to pay up front – they will deduct it from the rent! Genius.

It also transpires that the government are directly financing the credit unions to set up such accounts (up to £1.85 million is available to each credit union*) and here the madness arises…

It is the Government’s express aim to have the tenant receive all their benefits into their own account, giving them the financial responsibility to deal with their own affairs in an attempt to prepare them for life in the workplace. Meanwhile, and at further cost to the tax payer, they are setting up these accounts so the tenant won’t get their hands on the benefits and someone will pay the rent on their behalf!

Universal Credit is going to cost the taxpayer £12.8 billion pounds to implement** and if landlords come on board with the credit unions – as they surely will to protect their income streams – then this terribly misguided scheme will merely bring us back to the status quo (Except for one thing of course – tenants will see an effective rise of 6% on their rents as landlords pass on the costs charged by the credit unions).

It’s not just me is it – this whole thing just sounds nuts?!

* Figures from http://www.abcul.org/media-and-research/news/view/348

** Figures from http://www.computerweekly.com/news/2240185166/Universal-Credit-will-cost-taxpayers-128bn

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Taxation of Finances and Mind

We do a bit of sales in our office, not too many but enough to give ourselves extra headaches. We had a sale going through nicely last week and on the day of completion we had a call from the purchaser’s solicitors stating their client was concerned that on their last visit to the property the back door handle was a bit dodgy. Therefore a condition of completion would be that this is fixed. “No problem!” I said confidently, dialling up the vendor to have this piece of maintenance waived through.

Of course he said, “No”, and was willing for the entire deal to fall through on the back of this job which I had priced up at less than fifty quid. Guess who footed the bill?

We had to take a tenant to court because he had omitted to pay rent for two months. Turns out the tenants wife’s penchant for a new Brighthouse sofa every year finally caught up on him and the cupboard was finally bare. All our efforts to contact the tenant prior to the case went un-answered and he did not attend the courts. I did, however, receive a nice phone call from him shortly after, enquiring as to how he had got on. “Poorly” was the only answer I could muster.

Moving to maintenance issues…..

Call from tenant with an ant infestation requesting I send one of our maintenance men to manufacture a wooden structure to cover the holes where the ants were finding their way in.

“Have you tried ant powder?” I asked hopefully. They hadn’t. “Try ant powder”.

Also visited a property at the request of a neighbour to investigate a garage under construction in one of our rentals. Good heavens it was big – two stories, timber framed and only slightly encroaching onto the neighbouring properties. the tenants advised that, while they didn’t have the paperwork, they had obtained full planning permission from the council. I advised that planning permission could only be granted to the property owner. Oh dear. Structure dismantled.

“To live without hope is to cease to live.” Fyodor Dostoevsky

Universal Chaos

So, the government’s lumbering juggernaut of an idea, Universal Credit, is taking up a great deal of our thoughts. While not being a terrible idea – everyone agrees that the benefits bill should be reduced – the method has huge repercussions for our industry.

To make benefit claimants financially more responsible and to ease their transition into the world of work (providing that there are jobs about for them to go in to), they will now be paid all their benefits monthly, in a lump sum, directly into their bank accounts.

Compare this to the current arrangement where housing benefit payments are paid direct to the landlord and the tenant has to pay the small amount of top-up rent (the difference between the rent charged and the huousing benefit award).

Now, as agents, we have trouble enough in ensuring the tenants pay the small amount of shortfall. Christmas is a particularly tricky period as the shortfall invariably gets spent on little Johnny’s Xbox / iPod / 50 inch plasma TV (or whatever that year’s popular “keeping up with the Jones’s” gadget is).

So, the idea of tenants receiving all the housing benefit directly into their bank account and relying on them to resist the temptation of using a little bit to pay off a mobile phone bill, a gas bill or a pack of 20 Lambert & Butlers leaves me in a cold sweat.

Of course this has all been tried before. In 2008, the government brought out Local Housing Allowance, a scheme where, once again, some bright spark thought that, by paying tenants their housing benefit direct, it would make everyone more financially capable and the world a whole better place. It didn’t work. Tenants spent their benefits on everything except that which it was paid for, arrears spiralled, evictions increased and housing benefit departments creaked under the strain of dealing with increased queries and requests from desperate landlords pleading for the payments to be re-directed.

The system got into such a state that I was summoned to a meeting with the head of the local authority’s housing benefit department. During this meeting I was advised how, on all future tenancies, the actions I needed to take to get the benefits paid direct to the landlord – I was being briefed by the government on how to circumvent a policy brought in by themselves! Bonkers.

Anyway, they are trying again. Arrears will rise and Housing Associations will be put under financial pressure and won’t be able to reinvest in the housing stock. Evictions will increase and councils won’t be in a position to offer a safety net because they have sold all their houses. Landlords will opt either to jack it in altogether or only offer houses to workers putting further pressure back onto social housing.

For me, it will no doubt mean more hours door knocking and arrears chasing, some of our landlords will probably call time on their investments and sell up and life will become slightly less pretty.

But I suppose that all this is worthwhile as long as benefit claimants become more financially independent – hell, they could even go for the 60 inch plasma this year.

Welcome!

Hello and welcome to my blog. I’ve always been interested in doing a spot of writing and my job as a letting agent provides a rich seam of material to share. I deal with the whole spectrum of humanity, ranging from the DSS tenant to the multi-millionaire landlord – both of whom can be hilarious and completely irrational alike – and it is my encounters with good people that I would like to share.

I won’t name names, I won’t give accurate place names, dates or any of the important details but everything will be true and I hope that by sharing some of this Stuff it’ll do everyone the world of good.

All comments greatly appreciated (except anything nasty).

Brigglet