Ministers are to press ahead with their plans to pay benefit tenants their rent money and trust them to hand it over to their landlords.
This is despite the fact that a social landlord taking part in a pilot has said that, three months into the test, it is already losing money as tenants fail to pass the money on.
The pilot is running six projects to test the direct payment of Universal Credit – due to kick in next year – to tenants in social housing.
Private landlords have been calling for some time for tenants to be given the choice as to whether they receive the rental element or whether it should be paid to their landlords. Housing charities have also made the same call, saying that tenants themselves would prefer it if their landlords received the money.
In the private rented sector, landlords have had to become used to Local Housing Allowance being paid direct to their tenants. Bodies such as the Residential Landlords Association and National Landlords Association have protested that the upshot is that tenants do not pay their landlords, preferring to spend the money on something else rather than pass it on as rent.
Both the RLA and NLA claim that a number of private landlords have given up accepting benefit tenants as a direct result, or plan to do so.
Ministers have so far dug their heels in, saying that tenants must learn to handle their own finances.
Social landlords still receive rent money direct, but this is due to change next year with the Universal Credit.
Now Wakefield District Housing, which is running one of the six pilots, has said that the policy will cost it £8m a year in bad debts, and that it would have to spend £3.5m a year just on rent collection.
Kevin Dodd, chief executive of WDH, warned the reforms would mean social landlords would struggle to continue to deliver services of social benefit, such as helping people into work.
He calculated WDH’s total social benefit to the community since 2005 to be worth £1.4bn.
Dodd said: “We are into the third month of our pilot and people are now stopping to pay [their rent] at all. They’re spending the money on something else.”
But Brendan Sarsfield, chief executive of Family Mosaic, which is running the London pilot, said rent arrears stood at 5%, lower than he had expected at this stage of the pilot.
He said: “It is too early to say whether direct payments will be a success or not a success.”