In Focus (2022, Qtr 1): Universal Credit, Local Housing Allowance & Welfare

Introduction

The NRLA In Focus series informs and develops NRLA policy on key issues affecting landlords in the private rented sector. This Quarter 1 survey gathered responses from 1,060 landlords. This survey focuses on issues around Universal Credit, Local Housing Allowance and Making Tax Digital. 

In addition, landlords were asked questions to understand their motivations and perspectives which allows the NRLA to track landlord confidence and build a picture of the present supply side of the private rented sector. 
 

Landlord Confidence

We found that Landlord Confidence dipped in Quarter 1 and still remains negative. However it is still at high levels compared to those experienced since the LCI began. 

•   The proportion of landlords planning to sell and proportion of landlords planning to increase rents have both risen. 
•   Increasing costs is a key motivator for landlords reducing portfolio and plays a vital role underpinning planned rent increases
•   Confidence in Wales remains particularly low
  • This may be due to the future introduction of the Renting Homes Wales legislation. 
     

Universal Credit

Over one third of landlords let a property to a household with at least one member claiming Universal Credit (UC). This is a trend which is steadily rising. 

Of those landlords who let to UC-claimants , 40% had experienced arrears.

• This has fallen considerably over the last three surveys but remains high.

Following the trend of previous years, the largest group of landlords experiencing rent arrears with UC-claimants reported the arrears started after making a claim on Universal Credit. 

Despite the staged roll-out process, landlords and tenants are still experiencing problems with Universal Credit. The result is that many tenants who have recently made an application find themselves falling into unnecessary arrears. 

That said, landlords are being more positive about the Alternative Payment Arrangement (APA) element of the system (see below).
 

Local Housing Allowance

Tenants who are claiming Universal Credit and are struggling to manage their monthly payments can apply for an Alternative Payment Arrangement (APA). Landlords can also make this application if their tenant is in more than 2 months arrears.

Only 22% of landlords with UC claiming tenants requested an APA within the last twelve months. This follows what is now a downward trend from previous years - 23% in 2021 and 36% in 2020. 

Of those landlords that do rent to tenants on UC, two-thirds do not link rent levels at Local Housing Allowance rates. Those landlords that intentionally link rent to LHA rates for tenants on UC, many view this as much a philanthropic decision as a commercial one. 

Mirroring the findings of previous years, this study showed that there are supply issues of properties in the PRS which are affordable to low-income tenants who claim UC.  The freeze to LHA rates until 2025 will only compound issues for this group of tenants further widening the gap between the benefits and the rent tenants are able to pay. There may be future strains on the availability of property at LHA rates if these rates do not rise.

Making Tax Digital

The NRLA was approached by HMRC to help them gauge the level of awareness and preparedness of landlords in the PRS for the Making Tax Digital (MTD) reforms to the tax system.

The findings show that awareness, confidence, and preparedness for MTD amongst landlords is low:

•   Over 80% of landlords were not confident in understanding the expectations that MTD initiative would place on them.
•   More landlords stated they had “no awareness” of MTD.
  • Among landlords with just one property this rises to almost 40%.
•   Over 30% said they were yet to think about planning for MTD.
  • Only 11% felt confident enough to declare they were up to speed with the demands of MTD. 

When landlords were asked where they would be likely to seek information from, almost three-quarters stated they would look to the NRLA for advice and guidance on MTD.