MPs have backed lenders concerns that the current government plans to pay housing benefits directly to the tenants could very well damage the ability of lenders to fund the social housing sector.

The government’s wish to pay tenants directly instead of the landlord could increase the risk of rent arrears which devastating consequences for social housing landlords. Effects of this change could be to discourage landlords from providing for the social sector and/or encourage them to charge higher rents in order to offset the risk involved.

This month DWP (the Department of Work and Pensions) are due to launch localised projects with councils in certain areas as part of the plan to launch universal credit nationwide -“ including direct payments in tenants. There is a large opposition to such plans, which are to be fully completed by 2017, by numerous bodies including local authorities, landlord groups and housing associations.

The House of Commons public accounts committee announced in there report (Managing the impact of housing benefit reform) that direct payments to tenants could lead to a severe increase in evictions due to rent arrears. The report also notes that homelessness could increase given the bad debt provision increase on the part of housing associations.

The committee criticises the DWP for effectively taking a “wait and see” stance on the impact of these reforms. This is because the DWP has actually states that it cannot anticipate the effects reforms will have as it cannot predict how tenants who claim housing benefits will react to them. The committee argue that changes must be monitored at a local level in order for them to react rapidly when dealing with rent arrears.

DWP have also been criticised for its low level of knowledge and awareness amongst its staff “ who cannot readily explain to those who claim how the reforms will affect their personal case. There is also a lack of understanding of: the impact of reforms on the income from lodgers, how additional funding to local authorities will be used to help claimants, how the administrative costs of implementing these changes will weigh up and any potential policy conflicts.