Council rent arrears expected to double as impact of Universal Credit begins to bite

Struggle: More council tenants are falling into rent arrears after a switch to Universal Credit
Struggle: More council tenants are falling into rent arrears after a switch to Universal Credit

Rent arrears from council tenants are expected to double in Barnsley as the full impact of the Government’s switch to the controversial Universal Credit system takes hold, local authority staff have warned.

The process of switching benefit claimants from the old system onto Universal Credit has now begun and Barnsley Council officials have calculated a rise in the arrears figures for rent from those now on the new system.

By contrast, arrears rates among those still on the traditional benefits system have remained relatively static.

Now the council is expecting the rent payments it fails to collect from the current figure of 1.5 per cent to three per cent when Universal Credit has been fully rolled out.

A report to the council’s ruling Cabinet said: “The proposed budgets for 2019/20 and 2020/21 have been reviewed in light of the increase in tenants that are transitioning to Universal Credit.

“There is currently evidence from the 2018/19 performance on rent collection arrears to suggest that tenants that have been moved on to Universal Credit are accumulating larger levels of arrears when compared to non Universal Credit tenants.

“In respect of the total arrears from current tenants, the statistics show that these are steadily climbing quarter on quarter which predominantly relates to the increase in Universal Credit arrears across the period.

By contrast, arrears for non Universal Credit arrears have remained relatively static.

“With regards to the average arrears accumulated per tenant, the tenants on Universal Credit have accumulated over three times as many arrears as non Universal Credit tenants.”

On a practical level, the council has found the average debt for those with arrears while claiming Universal Credit is £508, while those on existing benefits are likely to be £155 behind with payments.

The report adds: “Therefore, the provision has been prudently increased to three per cent of gross rents, equating to £2.035m in 2019/20 and indicatively £2.083m in 2020/21.”

The situation is to be reviewed further as more tenants are switched onto Universal Credit payments.

When it was announced, the Government said Universal Credit was intended to simplify a benefits system which had become hugely complex, with a range of different payments made to those who qualified.

But it has attracted fierce criticism, with accusations that many claimants end up worse off and have to wait too long for their payments to go through.

Similar warnings have been made elsewhere in South Yorkshire, with Sheffield Council warning late last year that its arrears total could rise to £15m by the end of 2021, with Doncaster Council also reporting the prospect of future problems.

A difficulty for local authorities is that payments made through the outgoing Housing Benefit have been paid direct to cover accommodation costs, where they are paid direct to the tenant as part of their overall benefit payment, leaving them to budget adequately to make the necessary payments.