Majority of Universal Credit Tenants are in Rent Arrears

The majority of Universal Credit tenants are now in rent arrears, according to a study into the new benefits system.

The percentage of Universal Credit tenants living in council homes in rent arrears has increased to a “critically high” 86% over the past year, sparking “extreme concern” among councils.

The National Federation of Arm’s-Length Management Organisations (NFA) and the Association for Retained Council Housing (ARCH), which together represent more than one million council homes in England, conducted its annual research into Universal Credit tenants.

The number of Universal Credit tenants in rent arrears has risen by seven percentage points since March last year, from 79% to 86%. This compares to just 39% of tenants who do not receive Universal Credit.

Level of rent arrears

The average level of rent arrears has also increased, from £321 to a huge £616.

Of the Universal Credit tenants living in council homes that are in rent arrears, 59% have debts equating to more than one month’s rent.

The survey received responses from 33 organisations, which house 7,535 households.

The researchers said that although pre-existing rent arrears is an issue for many tenants moving onto Universal Credit, “it does not completely explain the higher levels of arrears among Universal Credit claimants”.

Majority of Universal Credit Tenants are in Rent Arrears

Majority of Universal Credit Tenants are in Rent Arrears

The study shows that 50% of Universal Credit tenants were in arrears before moving onto the new system, which combines several benefits –including housing benefit – into one monthly payment, rather than it being paid directly to landlords.

Long waiting period

The representative bodies are lobbying to reduce the waiting period for the first Universal Credit payment by a week. Currently, a new claimant will wait six weeks for their first payment, including a seven-day waiting period and a month of backdated payments.

As early as January last year, reports claimed that the waiting period was pushing Universal Credit tenants into long-term debt, which is forcing many to use loan sharks.

Respondents to the study said that some of the most common reasons for tenants falling into rent arrears were the six-week wait period and the Department for Work and Pensions (DWP) failing to promptly notify landlords when a tenant moves onto Universal Credit.

All respondents said the six-week waiting period was either a “very frequently or frequently” contributing factor in tenants falling into arrears.

Protecting your rental income

If your tenants have or are soon to move onto Universal Credit, remember that our Rent Guarantee Insurance provides cover for all tenant types. We will ensure you still get paid if your benefit tenants do fall into rent arrears – can you afford to miss out? Find out more about our ultimate peace of mind cover here: https://www.justlandlords.co.uk/rentguaranteeinsurance

The Chair of the NFA, Hugh Broadbent, says: “We believe the current, unacceptable waiting times and errors in processing claims are causing significant financial hardship to our tenants and communities.”

John Bibby, the Chief Executive of ARCH, adds: “We are extremely concerned with the upward trajectory of rent arrears for Universal Credit households. Not only are numbers of households increasing as Universal Credit is rolled out, but the percentage of households falling into rent arrears and experiencing financial difficulty is critically high.

“If this trend is not reversed, it will have significant impact on local authorities’ rental income streams and the long-term ability for housing departments to provide essential services to their communities.”

A spokesperson for the DWP, responds to the study: “The best way to help people pay their rent is to help them into work and, under Universal Credit, people are moving into work faster and staying in work longer than under the old system.

“As this report makes clear, over three-quarters of their tenants were already behind with their rent before their Universal Credit claim started.

“Our research shows that the majority of Universal Credit claimants are comfortable managing their budgets and that, after four months, the proportion of Universal Credit claimants we surveyed, who were in arrears at the start of their claim, fell by a third.”

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