Presently, Alternative Payment Arrangement requests from landlords are processed automatically by DWP's computer system, potentially diverting up to a fifth of a claimant's monthly benefits without a requirement to notify them or gain their consent. This mechanism aims to prevent evictions by ensuring that landlords receive owed payments.
Reducing the maximum deduction to 15% will see 1.2 million households benefit, increasing their disposable income by an average of £420 per year.
However, the lower cap means that tenants repaying rent arrears through deductions will do so at a slower rate, potentially leading to longer recovery periods and financial strain for landlords.
Legal challenge sparked more action
In January 2025, a legal case challenged this system when a tenant discovered that £500 had been deducted from his benefits without consultation, despite an ongoing dispute with his landlord over property repairs. The court ruled the automatic deductions unlawful, highlighting the lack of tenant consultation and potential for increased financial strain.
Government response
In response to the ruling, Work and Pensions Secretary Liz Kendall, MP, announced a review of the automatic deduction process, which is also used to collect court fines, Council Tax and energy bill arrears. She emphasised the need to reform the benefits system to protect claimants from falling into debt that confirming the DWP will explore alternative methods to ensure landlords receive due payments while safeguarding tenants' financial well-being.
Implications for property professionals
This development signifies a shift in the management of rent arrears for tenants receiving benefits. The loss of automatic deductions may lead to increased rent arrears, necessitating more proactive engagement with tenants to address payment issues. Agents should prepare for potential changes in rent collection processes and consider implementing supportive measures to assist tenants facing financial difficulties.
Universal Credit rate set to increase
Working age benefits will be uprated by the September 2024 Consumer Price Index of 1.7% from April 2025, which should see around 5.7 million families receive an extra £150 a year.
This is a step in the right direction for those struggling to meet increasing rental costs. Recent estimates suggest that fewer than 10% of private rented homes in the UK are affordable for people on Universal Credit, specifically those relying on Local Housing Allowance (LHA) rates.
What to do if your tenant has not paid the rent
A tenant who has fallen into rent arrears can be a distressing time for both the landlord and tenant. Follow our steps to help you resolve the situation smoothly.
