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Universal Credit Plunges Renters Into Arrears

Universal Credit is one of the biggest changes to the welfare system this country has seen. It rolls six means-tested benefits into one, aims to simplify the benefits system and ensure work always pays. Who could argue with that? However, Universal Credit has been beset with issues since its introduction in 2013. Housing associations and tenants have been there from the start.

Housing associations are the largest provider of new social housing in England. Our members provide 2.7 million homes to around six million people, but housing associations are more than just landlords. They reinvest all profits into homes and communities and provide support to tenants at all stages of their lives. In recent years for many housing associations, the focus has been on supporting tenants through the rollout of Universal Credit.

Our evidence shows that those tenants receiving Universal Credit have higher rent arrears than those on housing benefit. Housing associations have seen how the waiting times, payment delays, system errors and a lack of support and information have caused considerable distress and financial difficulties for our tenants.

We can be in no doubt that the way the system has been designed means some social housing tenants are struggling financially, with increases in rent arrears and debt. However, an added complication is the administrative errors that are just as damaging for people on low incomes and has exacerbated some of these issues for tenants. We still hear of tenants not being paid on time or the system making mistakes in the amount of money they should be paid. 

It is important to recognise that some progress has been made to make Universal Credit work better. Many more people now receive the correct amount of money on time. The two week run on of housing benefit means it is easier for people to keep up with rent payments. Some welcome practical changes for social landlords, including rent money being paid directly to landlords, have also made it easier for our members to offer help and support to people moving onto Universal Credit. The new Secretary of State, Amber Rudd, also seems more willing to acknowledge some of the issues with the Universal Credit rollout- acknowledging the impact the roll-out had on foodbank use.

However, to ensure Universal Credit meets its aims and works for the people it has been designed to help, there is still much more to do. Here are five urgent improvements needed.

  1. The 5-week wait is too long. It must be reduced and claimants should be offered a payment in the middle of this period. Advance payments in the form of a loan to help people through this period is merely papering over a larger crack.
  2. There must be more funding for support and advice and backdating rules must be more flexible to ensure that tenants get all of the money to which they are entitled to. 
  3. Work must always pay. Work allowances were cut and have only been partly reversed in last year’s budget. These cuts must be fully reversed and the taper rate reduced.
  4. End the benefit freeze in 2020.
  5. Social landlords need a better payment system. So that when tenants have their rent paid directly to the landlord the landlord receives the payment in the same cycle as the tenant. 

If the Government implements these 5 changes to the Universal Credit system, it will make a tangible difference for those claimants it has been designed to support.

We must also recognise that Universal Credit coincides with some of the most significant cuts to the welfare system. Housing associations have seen how the household Benefit Cap, the spare room subsidy/’bedroom tax’ and the benefits freeze have reduced the amount of money people receive. Ending the benefit freeze in 2020 would make a tangible difference to many of those on the lowest incomes- many of whom live in social housing.

We want to see a social security system that is joined up, and creates a more secure environment for tenants and social landlords and creates fair access to affordable housing. The Government has an opportunity to do this with the anticipated Comprehensive Spending Review. The sector and our tenants will be watching. 

By Catherine Ryder, Head of Policy, National Housing Federation