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Council tenants currently receive their Housing Benefit as a rent rebate and their rent accounts are adjusted accordingly. Housing associations, the other main providers of social housing, cannot require the direct payment of tenants’ Housing Benefit entitlement but the vast majority of their tenants opt for this method of payment.

When Universal Credit is rolled out nationally (expected to be complete by 2017) the Government intends that the housing component will be paid direct to tenants; although it is envisaged that certain vulnerable tenants and pensioners will continue to have their housing costs paid direct to the landlord. This will bring the social housing sector in line with the private rented sector where tenants, except in certain limited circumstances, have received their Local Housing Allowance direct since April 2008 (see Library note SN/SP/3211, Paying Local Housing Allowance direct to tenants in private rented housing).

Direct payment of the housing element of Universal Credit to social housing tenants is controversial. Social landlords are concerned that it will result in increased rent arrears and impact on their revenue streams.

This note explains the Government’s approach to the introduction of direct payments and social landlords’ responses. Information published by the Direct Payment Demonstration Projects in December 2013 indicates an average rent collection rate of 94% across the areas piloting direct payment of Housing Benefit to social housing tenants.

Detailed provisions setting out how housing costs will be calculated under Universal Credit are contained in the Universal Credit Regulations 2013 – for more information see Library note: The housing element of Universal Credit (SN/SP/6547).

The DWP has published a guide for landlords: Universal Credit and rented housing – frequently asked questions.

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