‘Poverty without recovery’ – damning new report predicts tenants in London will accrue £23 MILLION in rent debt unless ‘fundamental flaws’ in Universal Credit are fixed

Katherine Johnston (23 July, 2020)

'No one has to wait five weeks for payment," a DWP spokesperson responded

14793Victoria Mills, cabinet member for finance at Southwark Council

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.

Contribute
Hayley Swift says:

Im a single mother of 3 teens, signed off as unfit for work and forced onto universal credit just before lockdown!
I live in herts. Not london and rent housing association property but im being charged £1291 per month for a 3 bed when the average cost of social housing in this area and in general is 6-800£ month!
Before signed off unfit, with mental health issues, i was self employed working 16hrs a week on minimum wage!
I was told, i didnt pay the right n.i, therefore cannot claim ssp, i was told if id earnt £1500 more in the tax year, regardless of losing march and april and with no allowance for business running costs id of had a 9 month grace period on the benefit cap!
Had my rent of been within the standard charge of social housing, the benefit cap would not of applied.
As my rent is as much as private lets and more than mortgage rates ive been penalised with a 1k benefit cap per month!
On the old legacy system, whilst earning £120-150 per week i was given FULL housing benefit!
Since being forced onto u.c 6 months ago, i am now in 4k rent arrears and being threatened with eviction! My rent account was in credit of £700 at start of the forced change!
I had to wait the 5 weeks and take out what they class a loan to cover my living for a family of 4 and have to pay back £100 a month! Im being told, as of next month.. my rent will be paid direct to landlord leaving me and 3 kids £70 to live on for the month (+£47child benefit wk).
If id been well enough to go back to work they would have calculated my reward by assuming i was earning 450 a week in self employed earnings which im not able to achieve on restricted hours.
I begged from march at the start of my claim for limited capability of work or PIP but was ignored!
In MAY .. the application for lcw arrived unexpected which i quickly filled in and returned enclosing all relevant info on meds and mental health issues that showed full evidence i was unfit for work.
These forms have sat in a box since MAY and i am still awaiting a response! DWP NEW i was unwell, they NEW i was signed off as unfit and they NEW i was under mental health and they STILL havent changed my claim! They NEW ALL OF THIS INFO. BEFORE COVID OR LOCKDOWN!
I have CAB, Legal aid solicitors, the council, family support worker, mental health nurse, even oliver dowden MP, various charities, several gps have all tried to help and ive been left to suffer inhumanely with my kids being forced into poverty as a result and reliant on food banks!
I have no family or friends i can borrow from and cant get credit.
Almost every appliance in my kitchen has packed up since lockdown and now my car has died and i cant afford to even put clothes on my kids backs or food on their plates! U.c is THE BIGGEST AND MOST PREVALENT CAUSE OF POVERTY AS IS ‘AFFORDABLE HOUSING’!
Social housing was intended for the poor! If we cant afford to rent privately or get mortgages how the hell can we be expected to sustain rent charges so high???
Not for profit, charity run housing that claims to want to erradicate homelessness and poverty but are carrying on like glorified private lettings agents!
IVE WORKED SINCE I WAS 14!!! They claim ‘Universal credit rewards those that work’ .. UNIVERSAL CREDIT HAS DESTROYED MY FAMILIES LIVES, CAUSED A DETRIMENTAL AFFECT TO MY MENTAL HEALTH AND MY KIDS AND FORCED US INTO POVERTY RELYING ON HAND OUTS FOR FOOD AND SOON TO BE HOMELESS!
DESPERATE AND INNOCENT FAMILIES ARE SUFFERING BECAUSE OF U.C! Mental health status is being ignored! Risk of homelessness is ignored! Needing to use food banks is being ignored! Childrens basic needs and their suffering IGNORED!
Housing Associations are being ALLOWED to FORCE families like mine into SEVERE POVERTY with unsustainable and unjust ‘affordable housing rent charges’! This is just the start! More and more families are going to be living on the bread line, desperate, and with no way out whatever they do! Uk 2020????

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