Officials warn of ‘moral hazard’ in covering rent arrears

Fears tenants would stop paying rent if department covered arrears, minutes show

Sinn Féin spokesman John Brady said the belief tenants would stop paying their rent thinking the department would cover the arrears ‘shows a worrying attitude within the department’. Photograph: iStock

Sinn Féin spokesman John Brady said the belief tenants would stop paying their rent thinking the department would cover the arrears ‘shows a worrying attitude within the department’. Photograph: iStock

 

Senior civil servants warned there was a “very real moral hazard” of tenants not paying their rent if emergency social welfare payments were provided to cover rent arrears, documents show.

The Department of Social Protection provides a supplementary welfare allowance to social welfare recipients to cover emergency once-off expenditure above ordinary welfare payments.

Last year the department spent €1.6 million on 1,900 emergency payments to cover tenants’ rent arrears. In 2017 the department approved 2,300 payments covering arrears at a cost of €1.9 million.

The department management board, made up of senior officials, warned of the “moral hazard” of this situation during a meeting with Minister for Social Protection Regina Doherty. Minutes of the February 9th meeting were released to The Irish Times following a Freedom of Information Act request.

“Any development of policy in this area will have to have regard to the very real moral hazard issues that would arise, and changes in landlord behaviour in the knowledge that the State would support tenants,” the minutes stated.

In a statement, a department spokeswoman said the “moral hazard” referred to was potentially incentivising the “non-payment of rent or HAP contribution by a tenant, in the belief that [the department] would discharge arrears in all circumstances”. The Housing Assistance Payment is a welfare payment tenants in the private market receive to cover part of their rent.

‘Worrying attitude’

Payments under the emergency welfare scheme were made on a case-by-case basis by department officers and “there is no automatic entitlement to a payment under this scheme”, the spokeswoman said.

The scheme “was not appropriate as a broad approach” for tenants who fall into arrears on their rent, she said.

“The department can assist a tenant to discharge rent arrears on a once-off basis, and in so doing will encourage the tenant to avail of the household budgeting facility, through which the rent or HAP contribution can be deducted at source from their income support payment,” she said.

Sinn Féin social protection spokesman John Brady said the belief tenants would stop paying their rent thinking the department would cover the arrears “shows a worrying attitude at play within the department”.

The Wicklow TD said “nobody wants to be in a position where they cannot afford to pay their rent”.

The supplementary welfare allowance “is there as a safety net for people when and if they need it in emergency situations and it should remain as is, especially if it means the difference between keeping a person in their home or homelessness,” Mr Brady said.

Latest Department of Housing figures showed 10,338 people were homeless in August, including over 3,800 children.

The figures have consistently increased in recent years, as the number of tenants falling into homelessness after being evicted from the private rental market has outstripped Government efforts to deliver additional housing.