L&Q switches direct-benefit tenants back to old system to tackle arrears

London & Quadrant Housing Association cut arrears in areas where it was running the direct payment pilot from 7% – roughly £6m – of its annual rental income to about 6.5% since last October.

But the association attributed the drop to the fact that 100 tenants, out of a total of 600 involved in the pilot, were no longer receiving direct payments.

L&Q said it has also, in the past 10 months, increasingly resorted to threatening eviction for tenants who continually refuse to pay rent.

The drop in arrears is the first seen in the two pilot areas of Croydon and L&Q’s south-west Thames area since the system was introduced in October 2002.

Before the pilot, arrears in the Croydon area were just 3%. This has since more than doubled.

Mike Donaldson, director of corporate strategy at L&Q, said the association intends to move more tenants back to the old system, under which housing benefit goes directly to the RSL.

He said: “There are still 500 tenants receiving direct payments – that’s why the arrears are still relatively high.

“Those tenants who can’t cope will be moved back to the other system, some at their own request, others at ours.

“No new tenants will be able to receive housing benefit themselves and I expect to see the number of tenants who do gradually dwindle over time.”

The findings, which will be officially released in October, may undermine the Department for Work and Pensions’ enthusiasm for direct housing benefit payments.

Nine local authorities are running two-year “pathfinder” schemes for private tenants.

Apart from L&Q, other social landlords that have tried the idea include Circle 33 and Five Piers Housing Association, part of Manchester Methodist Housing Association.

Direct payments have come in for strong criticism from the Council of Mortgage Lenders, which believes the system would lead to rocketing rent arrears, thereby undermining RSLs’ ability to borrow money.