The Impact of Universal Credit on Social Housing Tenants

A new report by the Smith Institute ‘Safe as Houses 2: a follow-up report into the impact of Universal Credit on Southwark Council’s housing tenants rent payment behaviour’ show that what could have been argued to be ‘teething problems’ with the new benefit system, appear to have more systemic routes, with rent arrears appearing to be a longer-term consequence of Universal Credit for many social housing tenants in the council area.

Increasing rent arrears due to changing circumstances

The report highlights that those who drop in and out of the UC system due to changing circumstances appeared to be at greatest risk of building up rent arrears. The report argues that this shows that UC fails to address the fundamental principle of supporting people into work more easily.

The research compared the experiences of those tenants who transferred to UC between August and October 2016 with those who transferred between August and October 2017. However the research was purely based on their rent accounts rather than their experience of the UC system, which was addressed in the previous report. The report highlights that there was very little difference between the two groups in terms of their rent payment behaviour and that those in both groups who were on UC accrued more arrears than those social housing tenants who were on Housing Benefit. After a twenty week period, rent arrears for those on UC in both groups was 14% of rent due, whereas for Housing Benefit tenants there was an accrued overpayment of 5%.

Impact on rent arrears when housing costs paid directly to landlord

In Northern Ireland, payments of the housing costs element of Universal Credit will be made directly to the claimant’s landlord by default. However, tenants living in Southwark Council’s area will receive their housing costs assistance in their UC lump sum payment each month, and will then be responsible for paying their rent directly to their landlord each month. It is possible for tenants to request an alternative payment arrangement (APA), whereby the housing costs element will go directly to their landlord.  The report points out that rent arrears were reduced for those social housing tenants with APAs in place and suggests that greater usage of APAs should be considered. However, it also highlights that the significant time taken to arrange APAs resulted in higher arrears accruing before an APA is accepted

Universal Credit in Southwark Council area

The first claims for UC in Southwark Council were made three years ago and it now has one of the highest numbers of households claiming UC. This report follows on from the first ‘Safe as Houses’ report in 2017 which showed that more tenants were falling into significant or deeper rent arrears under UC than under the previous Housing Benefit system and those households were struggling to pay their arrears down.

In conclusion the report argues that whilst the UC system had become more established in Southwark Council, this was not having a positive impact on rent payments. The findings support research by the NAO in their 2018 report ‘Rolling out Universal Credit’ which found that a quarter of all new UC claims in 2017 were paid late, with one in five of these claimants waiting 5 months or more.  The report suggests that delays such as these seem highly likely to account for some of the sharp build up in arrears seen in Southwark Council. The DWP do not publish information on what proportion of those cases where full payment is not made on time are those where the shortfall was partly or wholly comprised of the housing cost element of their UC award, but the findings of this report suggest that on-going issues with rent arrears as a result of the UC system should be expected by social landlords.