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Warning of 'unsustainable' strain due to universal credit rent debt

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The government is being urged to slow down the rollout of universal credit as more evidence emerges that an increased number of claimants are putting even more strain on local authority housing revenue accounts.

There has been a 12% increase in rent arrears, up to a combined total of £43.6m, for tenants living in the homes of 28 councils with their own housing stock, or those with arms-length management organisations (almos) surveyed in 2017 and again this year. A quarter (25%) of this debt was attributable to households on universal credit, even though they only make up 4% of all households.

The findings form part of research, shared exclusively with LGC, by the National Federation of Almos and the Association of Retained Council Housing and published in their joint report ‘Carrying the debt, measuring the impact of universal credit on tenants and landlords’.

The report said: “It is not surprising that as the number of claimants on UC (universal credit) increases, so the debt rises too and it is actually not as high as it could have been if it were not for the 1% reduction in rent and some improvement in the UC process. But it is concerning in that as the roll out continues and the total arrears figure grows, so too does the negative impact upon landlords’ finances for basic services to tenants.

“It is clear that this level of strain on local authority HRAs (housing revenue accounts) will become increasingly unsustainable as more households transition to UC over the coming years.”

There were 28 organisations, with a total of 344,163 households, which provided data in 2017 and 2018. The latest survey results showed the number of households on universal credit had nearly tripled to 20,811. Despite this, the overall percentages of households in arrears had remained broadly similar to 2017 and when looking at households which had more than a month or four weeks’ worth of rent arrears, this was 54% in 2018 compared to 51% in 2017.

“This strongly suggests that there has been no real change in the reasons that households are falling into arrears over the two-year period, just increasing numbers of households on UC,” the report said.

The wider research, which included responses from another 10 organisations, showed the average rent arrears for households on universal credit was £520 compared to debts worth £328 for households not receiving universal credit.

ARCH and the NFA said in the report they were “very concerned about the legacy of debt being left behind by the transition to UC”, with one almo, Your Homes Newcastle, providing data which showed it can take between 18 and 24 months to repay rent arrears following the switch to the new benefits system.

While ARCH and the NFA, which together represent organisations with more than a million council homes, support the principles of universal credit they said they had “deep concerns” about the intensive support their members need to offer tenants when they switch on to universal credit.

Among their calls, the bodies have urged the government to move to monthly payments in advance rather than arrears to recognise the fact that claimants often do not have a safety net to get them through the first month.

John Bibby, ARCH chief executive, said: “Our members are heavily investing in supporting tenants to successfully transition to UC, however the level of arrears debt being accrued is having a huge impact on council HRAs, which are already under pressure.

“It will also not be possible to sustain the levels of intensive support to tenants as the roll-out continues and resources become increasingly stretched. For this reason, we are calling on the government to provide sufficient transitional funding for landlords to enable them to effectively manage the roll-out and adequately support vulnerable tenants.”

Eamon McGoldrick, NFA managing director, said: “We are pleased that the government has listened to us and other partners and implemented changes to the UC system which should see improvements for tenants and landlords as the roll out progresses.

“We will continue to work with DWP to ensure our members’ experience and concerns shape the system. However, we still have deep concerns about the ongoing impact of UC on tenants, many of whom are already deeply vulnerable, and we are calling on the government to fix the biggest flaw in the UC system, which is payment in arrears.”

Last year LGC reported the first three councils with housing stock to complete a full roll out of universal credit - Croydon, Hounslow and Southwark LBCs - had amassed almost £8m in rent arrears.

A DWP spokeswoman said: “Rent arrears are complicated and they cannot be attributed to a single cause. Our research shows that many people join UC with pre-existing arrears, but the proportion of people with arrears falls by a third after four months in UC.

“This report recognises that we have made significant improvements to help claimants get support sooner and the impact of these changes is still to be felt. This includes removing the seven waiting days, making 100% advance payments available from day one and providing two weeks’ extra housing support for people joining UC from housing benefit, that doesn’t have to be repaid.

“We are also rolling out the UC landlord portal to social landlords, which is helping us target support for vulnerable people.”

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