Direct action

There's no question that the housing benefit system needs an overhaul. Most tenants will tell you that making a claim can be one of the most difficult and frustrating things they do and last year, Shelter helped about 8000 people who had problems with housing benefit. The system is unwieldy, hugely bureaucratic and, with more than a third of tenants receiving their benefit late, clearly failing.

The pathfinder being tested now for claimants in the private rented sector is designed to improve this situation. And over the course of the pathfinder, Shelter is conducting extensive research to assess the full impact on poorer tenants.

Preliminary investigations in four areas that are due to become pathfinders showed us just how urgent the need is for improvement.

We analysed more than 1600 local newspaper adverts and visited numerous properties in these areas, so we saw just how tough it can be for people on housing benefit in the private rented sector. There is often little or no choice for the poorer tenants; the number of homes that they can afford on housing benefit is very limited and often the ones they can afford are of a very poor standard.

Barely one in 10 properties advertised were affordable to people on housing benefit (see table below). A quarter of these directly barred housing benefit claimants by stating "no DSS". Further "mystery shopper" research found that other landlords were hostile to housing benefit claimants – about three-quarters of them refused point blank or asked for an extra deposit or guarantor.

The situation got significantly worse when our researchers visited some of the properties available to people on benefits. At least one serious fault was observed and more than half suffered from damp. Some of the defects were potentially life-threatening – just under a third of all properties lacked a clear route of escape from a fire in the kitchen and not a single bedsit contained the legally required smoke alarm.

The pathfinder is designed to empower tenants and make the system more straightforward to negotiate. By publishing a flat rate local housing allowance and phasing out the direct landlord payment, ministers argue, they are putting tenants in charge of their own finances.

These are laudable aims, but evidence from tenants, landlords and housing groups suggests that this could have damaging side effects. Most tenants who are currently paid directly have to carry large amounts of cash to their landlords every week. One in six of the poorest households do not have access to a bank account and will now struggle to manage their finances.

Ministers argue that vulnerable tenants will retain direct payments, but we already know that some pathfinder authorities have rejected more than 80% of claimants who opted for their rent to be paid straight to their landlord.

At the same time, tenants in the pilot areas already report that landlords have begun to stop renting to people on benefits as they fear the end to direct payment will make their rent less secure. One woman recently approached Shelter after her landlord gave her notice to quit solely because he assumed the end of direct payments would threaten his income. She told us: "I have been really upset and stressed out by the whole situation. He is threatening to sell his flat and I really don't know where I'll be living in six months' time."

Although the government's attempt to tackle the complex and unfair system of housing benefit should be applauded, reforms must be firmly rooted in the reality of the housing market and ministers must address the full implications of the pathfinder.

There must be safeguards in place to help poorer households with these changes.

We are keen to get the broadest range of views in our report, so all relevant stakeholders in the pathfinder areas – housing organisations, tenants groups and landlords – are invited to contact us through hbpathfinder@shelter.org.uk to share their view and experiences.