07/12/2012 | By Carl Brown, Stuart Macdonald, Inside Housing

Wakefield District Housing would have to borrow extra £20m if plan proceeds

The Department for Work and Pensions has insisted its plans for direct payment of benefit will proceed despite a landlord on a pilot project claiming the policy will cost it £8 million a year.

Wakefield District Housing is running one of six projects to test the direct payment of universal credit to tenants. The policy aims to encourage people to take responsibility for their finances.

WDH has calculated the reforms will lead it to lose £8 million annually in bad debts. It will have to borrow an extra £20 million to shore up its business plan.

Speaking at the Northern Housing Consortium’s northern summit last week, Kevin Dodd, chief executive of WDH, warned the reforms would mean it and other landlords would struggle to continue to deliver community services, such as helping people into work. He calculated WDH’s total social benefit to the community since 2005 to be worth £1.4 billion.

Mr Dodd said: ‘We are into the third month of our pilot and people are now stopping to pay [their rent] at all. They’re spending the money on something else and I’ve got to find £5 million each year to plug a hole my budget due to rising bad debts.’

He added that WDH would also have to spend a further £3.5 million each year on collecting rent.

Direct payment pilots are also taking place in London, the west midlands, the south of England, Scotland and Wales. Brendan Sarsfield, chief executive of Family Mosaic, which is running the London pilot, said rent arrears stood at 5 per cent, which is lower than he expected at this stage of the pilot. ‘It is too early to say whether direct payments will be a success or not a success,’ he added.

It is understood the DWP will publish details of rent arrears from the pilots before the end of the year. The department was criticised for holding back findings last month.

A DWP spokesperson said the findings from one area do not represent the likely success of direct payments and that the policy will proceed. He said: ‘We have always been clear there are some people direct payment would not be for.’