‘Serious flaw’ in UC worsens council tenants’ debts

Using data from London local authorities, new research claims that the roll-out of Universal Credit is leading to a growing number of council tenants falling behind on rent payments.

Commissioned by Southwark Council and produced by the Smith Institute, the report investigates rent account data from 12 London boroughs who collectively own over 210,000 homes – or 13 per cent of England’s total council housing stock. It warns that the five-week wait between making a successful Universal Credit claim and receiving the first payment is contributing to a spike in rent arrears.

Falling Behind: The impact of Universal Credit on rent arrears for council tenants in London also found that almost two-thirds of tenants saw a significant increase in rent arrears after claiming Universal Credit, with tenants accumulating an average of £240 in rent arrears in the 12 weeks after they first claimed.

Prior to the coronavirus pandemic there were around 135,000 working-age council tenants in London still claiming Housing Benefit. If they were all moved to Universal Credit, in line with the government’s planned next steps, the Smith Institute expects that their rental arrears would cost London boroughs more than £23 million. This comes at a time when London Councils is warning that boroughs collectively face a funding shortfall totalling £1.3 billion this year due to coronavirus’ impact, with boroughs’ income falling fast while spending has increased.

London Councils believes the simplest and fairest way to nullify the negative financial consequences of this waiting period would be for the government to introduce a non-repayable grant for new claimants. This grant would be based on an estimate of the claimant’s Universal Credit entitlement and could be paid immediately – boosting the claimant’s financial security and helping them avoid an accumulation of rent arrears and other debts.

Muhammed Butt, London Councils’ executive member for welfare, empowerment & inclusion, said: “The five-week wait is a serious flaw in Universal Credit’s design. This important research clearly shows that claiming Universal Credit is accompanied by a significant spike in rent arrears for the majority of council tenants. The five-week wait leads to low-income households piling up debts, which undermines Universal Credit’s effectiveness as a welfare support measure but also contributes to the serious finance pressures faced by councils and other social landlords.

“We’re calling on the government to fulfil its pledge to ensure Universal Credit works for the most vulnerable, which must surely include every claimant unable to afford their rent due to the five-week wait. Addressing the problems caused by the five-week wait should move to the top of the policy priority list – especially since the devastating economic impact of Covid-19 means more and more households are relying on Universal Credit to pay their bills.”