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Universal Credit sends rent arrears soaring

The number of people seeking advice over rent arrears has increased by 47% over the past five years due primarily to the roll-out of Universal Credit, according to a new report.

Citizens Advice Scotland (CAS) published a paper yesterday in which it blamed changes to the social security system for the hike in the number of people facing problems paying their rent.

The report found that the most common reasons for rent arrears were a benefits issue, loss of income or unexpected costs, with incidence of rent arrears significantly higher among tenants receiving Universal Credit.

The CAS report - Our Rent Arrears - Causes and Consequences - found:

+ The growth in rent arrears advice coincided closely with changes to the social security system;

+ Almost a quarter of those living in rented accommodation have experienced rent arrears in last five years;

+ CAB clients with rent arrears are more likely to be in part-time employment or unemployed;

+ They are more likely to be single person or a lone parent, to be aged between 25 and 44, and to live in the 20% most deprived areas.

CAS spokesman Rob Gowans said: “The rise in rent arrears is one of the most worrying trends we see across the Citizens Advice Bureau network at the moment.

“While there are a number of factors driving this, we have no doubt that the flaws in Universal Credit are one of the main ones.

“For the past 18 months we have been calling for a halt and fix to Universal Credit.

“We have set out again today the key flaws that need to be addressed, including reducing the waiting period before payment, cutting out processing delays and reducing deductions.

“These are relatively simple changes that could make a huge difference to millions of people.”

Separate analysis of the impact of Universal Credit, compiled by the Policy in Practice consultancy, has revealed that almost two in five households in receipt of benefits would lose an average of £52 a week, and this has led to a sharp rise in the number of private landlords with tenants receiving Universal Credit going into rent arrears.

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Buy-to-let shifting towards an era of professionalism

Two years on from sweeping tax reforms to the buy-to-let sector, the industry is rapidly shifting towards professional landlords, according to senior mortgage experts.

Mortgage advisors came together this week at the Mortgage Strategy Leaders Forum in London where they discussed the changing tax landscape and the impact that it has had on buy-to-let property owners, and were unanimous in their opinion that the government’s plan to professionalise the industry appears to be working.

With some accidental and part-time landlords exiting the market as a result of tax legislative changes, the profile of the typical buy-to-let landlord appears to be evolving, shifting towards professional landlords focused on growing their portfolios, according to Rob Jupp, CEO at Brightstar Financial.

He commented: “There’s no truth to press reports that landlords are leaving in droves. But the tax changes have been the death knell for dinner party landlords.”

David Whittaker, CEO at Keystone Property Finance shared similar sentiments, pointing out that the bulk of properties sold by landlords had been acquired by other investors, most notably professional landlords, rather than first-time buyers.

He said: “Increased yields in some areas have mitigated the tax changes. As a long-term business plan with yields of 4.5% or 5% and mortgage rates about 3%, buy-to-let is still a good investment.”

Many experts have long argued that first-time buyers are unlikely to benefit from the government’s cut to tax relief for buy-to-let landlords, and this was a view shared by the panel, despite figures this week showing that the number of first-time buyers in the UK has reached its highest level since June 2017.

There were 35,500 new first time buyer mortgages completed in August, up 2% compared to the same month last year and lending to this group increased by 5.2% to £6.1bn, according to the data from UK Finance.

But according to Mortgage Strategy, the panel suggested that the jump in lending to first-time buyers had more to do with Help To Buy rather than the squeeze on landlords.

Adrian Moloney of One Savings Bank commented: “Help to Buy has been the stimulus for an improved first-time buyer market, not landlords selling up.”

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Government releases £400m for cladding upgrades

The government has released the first tranche of an estimated £400m to fund the removal and replacement of unsafe cladding on social sector high rise housing in the aftermath of the Grenfell Tower tragedy.

The money will be used to remove and replace unsafe aluminium composite material (ACM) cladding systems on social sector high-rise housing in England owned by social landlords.

In total, 12 local authorities and 31 housing associations have been allocated the money they need to cover the cost of removing and replacing unsafe ACM cladding from social, residential buildings they own which are 18 metres or higher.

This funding will enable local authorities and housing associations to get on with the job of making their buildings safe.

Many ex-council homes sold under the Right to Buy scheme, which was introduced in 1979, are now part of the private rented sector – owned by a range of former council tenants, buy-to-let investors and letting firms.

Housing secretary James Brokenshire said: “There is nothing more important than ensuring people are safe in their homes and that is why I am pleased the £400m funding has started to be released.

“We are doing the right thing by residents and fully funding the replacement of unsafe ACM cladding in social housing buildings 18 metres or above.

“In the private sector, I want to see landlords protect leaseholders from these costs. I am pleased that a number have stepped forward to do so, including Barratt Developments, Legal & General, Taylor Wimpey, Mace and Peabody. However, there are some who are not engaging in this process. If they don’t, I have ruled nothing out.”

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