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FEARS have been raised that Colchester's rental market could be facing a new crisis.

Hundreds of flats lay empty cross the town as the market has become saturated.

Now concerns have been raised a new method of paying housing benefit could hit the market again.

Under the new Local Housing Allowance scheme, new tenants claiming housing benefit will get the money directly. Previously, the sum was sent directly to the landlord.

The new system has been been introduced as part of a Government initiative aimed at increasing choice and personal responsibility.

But concerns have been raised some tenants will not use the money to pay the rent.

John Frey-Kelsey, chairman of the Colchester Landlords Association, said his members felt the new policy was a backward step.

Mr Frey-Kelsey said: "As far back as 1984 to 1990, Colchester landlords lobbied the Government to get the already direct payment to tenants paid to the landlord, the reason being the tenants used the their rent money for personnel use rather than paying for their home.

"Many of us suffered bad debts and with a mortgage to pay, were going to have to sell up.

"The Government changed the method of payment in about 1990 to go direct to the landlord, their actions saving the day for the landlord and, of course, the homeless."

Now Mr Frey-Kelsey said landlords might be reluctant to let houses to people receiving Local Housing Allowance as they will not get the rent directly..

The situation could also make it hard for people eligible for the allowance who are looking for homes.

John Fisher, finance manager (benefits and strategy) for Colchester Council, said safeguards had been put in place to help vulnerable people - and landlords.

The new housing allowance system will not affect tenants of council houses, housing association properties or hostels.

And in cases when rent is eight weeks overdue, the system can also be changed so the allowance is paid straight to the landlord.

Mr Fisher said the new system had been trialled by 18 councils over a four year period and had the experiment had found rent arrears had been reduced.

Colchester Council, which is acting as the agent for the Government, has held a series of meetings with landlords to discuss the changes and has sent out a newsletter.

But Mr Frey-Kelsey said after eight weeks, a landlord may already have lost about £500.

***please keep in if poss - this is where story came from** Richard Jones, manager of Letting Solutions in Colchester, said: "Landlords may not want to take the risk of losing money and they may decide it is easier to withdraw from letting to new Local Housing Allowance tenants and move over to private sector tenants."

Lettings Solutions is now planning to work exclusively with a major housing association - which is exempt from these new arrangements.

Mr Jones said: "Our aim is to remove the risks of non-payment which Colchester landlords fear may be a result of these changes."

9:12am Friday 2nd May 2008

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