The government must ditch the “dogma” and adopt a more “pragmatic” approach to the rollout of universal credit or face rising homelessness, Southwark LBC’s cabinet member for finance has warned.
LGC reported last week that more than 2,500 tenants across Southwark, Croydon and Hounslow LBCs were so far in arrears since switching to UC that they were at risk of eviction. In Southwark the 4,000 council tenants on UC together owe more than £5m. This is equivalent to 38% of the borough’s arrears, despite only accounting for 11% of tenants.
Research by the Association of Retained Council Housing and National Federation of Almos earlier this year painted a similar picture of rising arrears and found the mandatory six-week wait between claim and payout was a major driver.
Fiona Colley (Lab), whose Southwark portfolio covers finance, modernisation and performance, told LGC it typically took 12 weeks for UC claimants to “stabilise” and start paying their rent regularly.
“I’m not entirely convinced [Jobcentre Plus] are processing that many [claims] within six weeks,” she added.
Cllr Colley said another factor driving rent arrears was that people’s benefits stopped completely when they made a UC claim, meaning if they had been in work but receiving help with housing costs this stopped until the UC payment was made.
New claimants in all parts of the country will be put on universal credit by September 2018 with the transfer of existing benefits claimants due to begin the following year.
Cllr Colley warned even councils without housing stock would face additional costs as a result of the UC rollout because of the difficulty of recovering costs of emergency temporary accommodation and evictions of tenants who get into arrears with private sector landlords.
“We have heard from private sector landlords a growing reluctance to take people on benefits; other authorities will see more in the way of homelessness and evictions and difficulty discharging people into the private sector.”
She suggested payout delays and the hardship faced by tenants could be reduced if the Department for Work & Pensions took a “more pragmatic” approach and worked more co-operatively with landlords.
“There are some things that could smooth out the system, but it would mean moving away from some of the dogma around personal responsibility,” she said.
For example, Southwark finds many delays are caused by discrepancies in rent levels supplied by tenants and the rents charged by landlords when a council or housing association could provide that information directly.
“They want the claimant to be taking the lead on everything and be the only conduit for all information,” she said.
“They’re trying to make the cultural change, which may be desirable in the long term, but isn’t very practical when they’re trying to roll out a big new system.”
Other practical changes suggested by Southwark include getting rid of the seven-day period following a claim during which claimants are not entitled to any support and ending the one-month limit on backdated rent payments.
The DWP response
DWP says around 77% of claims are processed within six weeks with two thirds of delays due to verification issues and a third down to individuals not signing their ‘claimant commitment’ agreeing they will look for work. The department has set up a landlord portal to improve information sharing with landlords and will be contacting the largest registered social landlords later this year.
However, there is unlikely to be any shift on the seven-day wait which is designed to ensure the state does not pay for very short periods of sickness or unemployment. Advances of up to 50% of the value of the payments are available and can be paid back over six months.
A spokesperson said: “The vast majority of claimants are comfortable managing their money, and for anyone who needs extra help, we have budgeting advice and benefit advances.
“We are rolling out universal credit in a gradual, safe and secure way and in the rare cases where issues arise, we work closely with local authorities to support people when they need it.”
In response to concerns about the impact on rent arrears the DWP has previously pointed to evidence that many UC claimants were already in arrears before making the switch.
Duncan Whitfield, Southwark’s strategic director of finance and governance, said even if you excluded previous debt, tenants had amassed £1.3m in arrears since switching on to UC. This is equivalent to a 10% increase in arrears, a figure Southwark fears could quadruple when the 12,000 tenants still in receipt of housing benefit make the switch to UC.
The pressure on the council’s finances could also have an impact on its housing investment plans.
Cllr Colley said the 1% annual rent cut between 2016 and 2020 ordered by the government would cost Southwark £62m and had already meant the council had had to reprofile planned kitchen and bathroom work.
Meanwhile, potential safety improvements in the wake of the Grenfell Tower fire and the cap on borrowing through the housing revenue account was also putting pressure on the housing budget.
“If on top of that you start to reduce our assumptions on what proportion of our rent we are going to collect it’s going to hit our investment programmes,” she said.