Fears of spiralling rent arrears as benefits reforms start to bite

Leeds City Council documents show that a total of £1.27m in so-called ‘irrecoverable’ arrears run up by former tenants has been wiped from the slate in stages through the 2012-13 financial year.

The most recent write-off was approved earlier this month and relates to £275,748.42 of arrears, spread across more than 550 accounts.

Council chiefs say arrears are only waived when every avenue of recovery has been exhausted. They also stress that amounts left outstanding have fallen over the last five years.

But Coun Peter Gruen, the Labour-run council’s executive member for neighbourhoods, planning and support services, yesterday warned that the Government’s new ‘universal credit’ benefits system could send rent arrears in the city spiralling.

Universal credit will combine a range of benefit payments – including housing benefit – in a single monthly handout.

At present, council and housing association tenants claiming housing benefit have it paid directly to their landlords. However under the new system tenants will instead receive their housing benefit directly, and will then be responsible for passing it on to their landlord.

Concerns have been expressed that the new set-up could see tenants spending the money earmarked as housing benefit on day-to-day living.

When social housing provider Wakefield and District Housing trailed part of the universal credit system in Pontefract and Knottingley, arrears rose from two per cent to 11 per cent of total rent due.

Coun Gruen said: “I am extremely anxious about this situation. When the monthly payments start coming, some people will spend them on whichever bill is the most urgent.

“Then, when it comes to the rent payment, if there is no money left, then there is no money left.”

Describing the possible impact of the changes as “a car crash”, Coun Gruen added that a rise in arrears would leave the council with less money to spend on maintenance of its housing stock.

Universal credit is due to be rolled out nationwide in October.

A spokeswoman for the Department for Work and Pensions said: “Direct payments of housing benefit will help people take greater responsibility for their finances, which will make the move into work and off of benefits easier.

“However, we are absolutely clear that protection must be in place to help vulnerable people who might need extra support. We are carefully working with councils and housing associations now to ensure this protection is in place.”

The spokeswoman also said that the “vast majority” of claimants living in private sector homes already receive their own housing benefit and pay it to their landlords without any problems.

Leeds City Council yesterday defended the scale of its rent write-offs over the last 12 months.

Coun Gruen said: “This financial year we are on track to collect nearly £200m in rents and charges so the amount being written off represents a small fraction of that amount.

“Our track record in reducing arrears shows significant improvement and amounts outstanding over the past five years have reduced and remain consistently low.”

He went on: “Debts may be written off for a number of reasons – former tenants cannot be traced, have died, have no assets, are bankrupt or our debt collectors may judge the debt irrecoverable.

“Only when all other avenues of debt recovery have been exhausted will we reluctantly write off these arrears.”

The council is due to shed more than 300 jobs in 2013-14 following Government funding cuts.