Further evidence that Universal Credit is pushing more people into rent arrears in Southwark has been published by the Smith Institute after analysing the impact the welfare change has on councils across London.
The think tank’s report finds that London’s local authorities could find themselves with a £23 million rent black hole if around 135,000 working age tenants across on housing benefit are transferred onto the new system as planned.
Local government is already financially stretched; facing a £1.3 billion shortfall in funding due to increased spending to support vulnerable people during the crisis.
The report, Falling behind: The impact of Universal Credit on rent arrears for council tenants in London, echoes previous findings from Southwark Council after its first cohort of tenants were moved onto the new system.
This figures are likely to be conservative given since the pandemic the total number of Universal Credit claimants has risen from 2.9 million in February to 5.3 million in May – with almost half a million more in London alone, and is expected to continue to increase.
Among the authors’ recommendations are calls for the five-week wait to be reduced, and debt written off with advance payments replaced with a non-repayable grant.
Cllr Victoria Mills, Southwark Council’s cabinet member for finance, performance and Brexit, said: “Southwark Council is leading on this piece of work because, with one of the largest number of council homes in the country, we are acutely aware of the negative impact of Universal Credit on those who pay council rent.
“Simply put, when tenants transition to Universal Credit they almost always fall into debt and poverty, usually without recovery.
“This report highlights what was a worrying problem even before we were hit by a global pandemic, which has destroyed the livelihoods of hundreds of thousands of people who were already struggling.
“This unprecedented pressure on household finances has seen a hugely increased reliance on welfare and especially Universal Credit.
“We have long pressed the government to reduce the minimum five-week wait for people claiming Universal Credit to ensure they get money before they fall into serious new arrears.
“We have also called for deductions from Universal Credit for old debt to be further reduced or scrapped completely.
“But the urgency for these changes has never been greater than it is now.
“The number of households in Southwark claiming Universal Credit has already risen by 60 per cent and we expect that number to rise much further.
“Some of the temporary actions taken by the government to strengthen and improve Universal Credit are welcome but these need to become permanent.
“Should the government fail to act now, local authorities will be left to bear the brunt of a crisis in poverty and unemployment.
“These are extremely tough times for those on the lowest rung financially, and it is imperative that we support them before we hit a deeper crisis, where we could see an exponential rise in homelessness across the country.”
Commissioned by Southwark Council on behalf of the cross-party group London Councils, the research investigated rent account data from twelve boroughs who collectively own over 210,000 homes – or 13 per cent – of all England’s council housing stock.
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 twelve weeks after their first claim .
The report describes this as a ‘serious flaw’ in its design, especially with the added pressures of COVID-19 which has seen the number of claimants rocket.
Southwark Council was one of the very first places in the country to see the full roll-out of Universal Credit, back in 2016, and since then has published several pieces of research detailing the often catastrophic effects of the new system.
In September 2019, figures showed that the average Southwark tenant who moved onto Universal Credit in 2016 had rent arrears of £648. For those first claiming in 2018, this figure was £207.
And, as the News reported in April, Southwark saw a tenfold increase in Universal Credit claims by tenants that month compared to the same period last year as Coronavirus saw workers laid off or ineligible for the furlough scheme.
Bermondsey and Old Southwark MP Neil Coyle, who runs a food bank from his constituency office on Jamaica Road, has lobbied hard in parliament for the government to fix what he says are fundamental flaws through his position in the House of Commons’ work and pensions committee.
He told the News this week: “Ministers try to dismiss all evidence on Universal Credit as scaremongering, but this important research lays bare the reality for many people trying to access this failing system.
“People are forced to wait at least five weeks minimum for any help which means rent arrears build up and contributes to debt, destitution, in some cases homelessness and even sex work just to survive.
“More people than ever are having to rely on Universal Credit due to the pandemic, and many will be first time claimants unfamiliar with benefits, so they will not get any existing payments ‘rolled on’ as a sticking plaster.
“Action needs to be taken to address the root cause of most people’s problem with Universal Credit – the five-week wait.
“I completely support ending the automatic delay. In the absence of that fix, this report rightly concludes that DWP loans should be made grants instead.
“This would go some way to fixing the broken system, but sadly through my work on the DWP select committee I know that the government has very little appetite to do so, leaving many people exposed to the current inadequate framework.”
The DWP has consistently argues that Universal Credit cannot be blamed for arrears when many people already have accrued debt before being transferred.
It also refutes claims that people are waiting five weeks for payment.
A spokesperson told the News today: “No one has to wait five weeks for payment and more than one million advances have been paid since mid-March to help those most vulnerable.
“We have also increased the standard allowance by up to £1,040 a year as part of a £9.3 billion injection into the welfare system.
“It is wrong to attribute a rise in rent arrears solely to Universal Credit as many tenants moving on to the benefit may already be in financial difficulty.”
From this month new ‘run ons’ for DWP legacy benefits will be introduced, with claimants seeing a one-off gain of around £200 during their first assessment period.
The government has pledged an another billion in extra support over the three years to ease the transition and implemented a range of temporary extra support during the Coronavirus pandemic, including a £20 per week increase to the standard allowance.