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First three universal credit boroughs amass £8m in arrears

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The first three councils with housing stock to complete a full roll out of universal credit have amassed almost £8m in rent arrears, LGC has learned.

More than 2,500 tenants claiming universal credit (UC) across Croydon, Hounslow and Southwark LBCs are so far behind with their rent they are at risk of eviction, a paper submitted to the Commons work and pensions committee reveals.

However, LGC understands councils are unlikely to take such drastic action in the circumstances. In the paper the three councils, along with Tower Hamlets LBC, call for government to rethink how universal credit is administered to remove the six-week wait for a pay-out ahead of the planned extended roll out due later this autumn. They blame this wait for much of the rise in arrears seen amongst UC claimants.

The paper, signed by the senior politicians responsible for housing at the four Labour-run boroughs, warns that moving from “the highly paternalistic approach that was a feature of the [housing benefit] scheme” to UC where tenants are required to pay their own rent “too quickly, is simply too radical a rupture to be delivered swiftly and safely”.

The committee is due to hear evidence on the roll-out of universal credit this morning in its first meeting since the general election.

Full roll-out means all new benefits claimants and claimants whose circumstances change are set up on universal credit. This is due to be complete nationally by September 2018 with a further 50 areas due to ‘go live’ before Christmas. In 2019 existing benefits claimants will begin to be transferred onto universal credit.

In Southwark, where full roll-out took place in March 2016, just over 4,000 council tenants are on UC which is equivalent to about 11% of the borough’s tenants. In that time these tenants have built up £5m in rent arrears, equivalent to 38% of total arrears.

Croydon and Hounslow, where full roll-out took place in June 2015 and January 2016 respectively, each have more than £1.3m in arrears. This accounts for just under half of total arrears, despite only 20% and 15% of tenants claiming universal credit.

In Tower Hamlets, where fewer than 2% of tenants in properties managed by arms-length management organisations are claiming universal credit, 83% are in arrears. The equivalent figures are 77% in Southwark, 73% in Hounslow and 64% in Croydon.

The government has previously dismissed concerns about the link between UC and rent arrears by pointing out many tenants were already in arrears.

In their evidence to the committee the councils acknowledge this is the case but say their concern “centres on the very sharp increase in those rent arrears that we continue to see during the twelve week period immediately following the UC claim”. At Croydon, Hounslow and Southwark the average rent account balance for UC claimants ranges from -£567 to -£1,224 while housing benefit claimants are on average in credit by between £2.50 and £8.00.

The paper continues: “We see this as a particularly regrettable feature of the UC transition for social housing tenants as we have experienced it to date - but we also see it as one that is remediable.”

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