William Eichler 24 October 2017

London borough warns Universal Credit pushing tenants into rent arrears

London borough warns Universal Credit pushing tenants into rent arrears image

Rent arrears for those claiming Universal Credit (UC) are worse than under the previous housing benefit system, new report reveals.

Southwark Council, one of the first boroughs nationally to see the full roll out of UC, has today launched an in-depth report by the Smith Institute into the impact on tenants of the controversial benefit reforms.

The report, published in conjunction with Croydon Council and Peabody, found delayed UC payments were pushing many into debt and rent arrears, causing considerable stress.

UC tenants were on average £156 in arrears by week 20, while Housing Benefit (HB) tenants had overpaid by 4% of rent due, the report revealed.

Big underpayments and under-payers contributed most to arrears. 69% of the value of underpayments was from those failing to pay more than 75% of rent owed. The top fifth of those in arrears collectively owed over half of the level of arrears.

There is also a pattern of arrears accumulating each week for 11weeks. After the eleventh week arrears begin to be paid down, but not enough to pay back all arrears accumulated.

Southwark has already submitted evidence to the Work and Pensions Select Committee that shows the average council rent account in its area sits at £8 in credit. However, for UC recipients, it’s at £1,178 in arrears.

The borough has already seen a £5.8m debt from arrears for those on UC and this only represents 12% of residents.

The roll out of UC in Southwark has also coincided with increased demand on local welfare services. Pecan Foodbank has reported a 94% increase in the number of referrals it has received between 2016 and 2017.

The council’s own local welfare fund - the Southwark Emergency Support Scheme - also reported a 34% rise in the numbers of food parcels issued over the same period.

‘This report’s stark evidence is why we need to lead this debate; I implore the Government to listen to how this is affecting the poorest and most vulnerable people in our borough, and the potential effects reverberating nationally,’ said Cllr Fiona Colley, cabinet member for finance, modernisation and performance at Southwark.

‘Universal Credit, in its current form, has the potential to be catastrophic, not just for residents at an individual level, but for councils’ HRA budgets for housing.

‘The arbitrary delay in receipt of money – particularly for those already in difficult situations such as temporary accommodation, could mean a spiral of debt, poverty and people not being able to afford to eat. I cannot think of a more compelling reason to push for change on this.’

Cllr Alison Butler, Croydon Council’s deputy leader and cabinet member for homes, regeneration and planning, said: ‘This report underlines the major flaws in Universal Credit, which is placing more and more Croydon and Southwark families in rent arrears and at risk of losing their home.

‘The Government needs to fix this policy now or risk devastating thousands more people not only in Croydon but nationwide.’

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