Tenancy agreements harder to enter into due to Universal Credit

An increasing number of private landlords across the UK are making it for difficult for tenants to rent a new home or flat. Councils from Liverpool to Dover and Manchester as well as many other districts are reporting on this trend and the cause of it is due to the Universal Credit. The reason this is occurring is that landlords are concerned that claimants to this government benefit will not be able to pay their rent on time, and they have good reasons to believe this.

Rent arrears are soaring for those areas that have implemented the Universal Credit, and as just one example the West Lancashire Borough Council is projecting the amount will hit £4 million just in their borough. So landlords have a reason to be fear this new change, and they are scared that more families and individuals will not be able to make their housing payments on time so less homes are being let.

Landlords are fearful of the Universal Credit

Studies show that it is harder to let a new home or flat as the credit is being rolled out. Landlords and also letting agencies are making the application process more extensive and are slowing down the assessment process for prospective tenants. More proof of income and other information is being asked.

The amount of money needed to let a private accommodation has also increased. Some reports show landlords are asking for three to as many as six months of rent in advance from a tenant to minimize their risk. Others are requiring some type of property-owning guarantor from the tenant or maybe an additional bond from the local council.

This is becoming a major problem. Obviously there are challenges in someone on a low income or government benefits to come up with several months of cash for rent payments up front, and this could lead to more homelessness or shared housing across the UK.

The reason this is occurring is the Universal Credit. With the number of people on this benefit scheduled to greatly increase in 2015, landlords are preparing for it now. What this new benefit will do is it means the government would no longer pay the property owner directly, but the council will instead issue money in one lump sum to the tenant, and that individual then needs to pay all their bills and rent with it. So they are responsible for budgeting and ensuring all expenses are paid on time. So while it may make the claimant more responsible over time and less dependent, property owners are still unsure of the impact.

The way the system works now is that private landlords can decide who to let to and the terms of the tenancy agreement too. So there is nothing a council can do about this new housing problem, other than prepare people for the upcoming changes and share information on it. Anyone seeking a new home in the private sector should start to plan now.