But a new study done for the National Housing Federation said direct benefit payments could lead to increased arrears and therefore banks would not lend to the sector at the current low rates.
The report, The Impact of Housing Benefit Reform on Housing Associations, was written by consultant Sue Harvey. She said: "If you talk to funders, there are two things they are keen on: one is regulation; the other is housing benefit. The willingness of banks and building societies to lend to the sector at the current very low margin is largely based on the fact that income is underpinned by housing benefit."
Andrew Heywood, senior policy adviser at the Council of Mortgage Lenders, said it seemed reasonable that moving to direct payment could lead to increased arrears, particularly for those on very low incomes, but only a social sector pilot could show how much of a problem it really was.
He added that lenders would take "a cautious line" on lending if the proposals affected cash flows.
If you talk to funders, they are keen on two things: one is regulation; the other is housing benefit
Sue Harvey, report’s author
John Bruton, finance director of Raglan Housing Association, said the impact of direct payment was difficult to predict but increased arrears could be expected.
He said: "It remains to be seen whether the position stabilises or results in higher evictions for non-payment and it is difficult to predict how residents will respond to the change. For associations in a marginal position, this could impact on the attitude of lenders. At the least, it would create an additional difficulty."
London & Quadrant Housing Trust has piloted paying housing benefit direct to tenants on two of its estates. In one area, the change did not have a significant effect on arrears but, in the other, arrears increased. Revenue manager Jeremy Hutchings said: "Those who have a one-to-one interview clearly understand their responsibilities."
Source
Housing Today
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