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Universal Credit: direct rent payments ‘more effective than government reforms for curbing arrears’

Direct rent payments for tenants on Universal Credit have been more effective at keeping them out of arrears than government reforms introduced last year, new research has suggested.

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Southwark, London
Southwark, London
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Universal Credit: direct rent payments more effective than government reforms for curbing arrears #ukhousing

A report carried out for Southwark Council by The Smith Institute and shared exclusively with Inside Housing showed that tenants who joined the new benefit system in 2018 had much smaller arrears than those who switched over in 2016 – owing less than two weeks’ rent on average as opposed to six.

But researchers concluded that this was down to Alternative Payment Arrangements (APAs) being agreed with the 2018 group after only four weeks on average, compared with 58 weeks for the 2016 group.

APAs allow tenants to have the housing element of their Universal Credit paid directly to landlords rather than into their own bank accounts.

In 2018, the government scrapped the seven-day waiting period at the beginning of new Universal Credit claims and introduced a two-week housing benefit run-on.

But while urging caution on comparisons between the 2016 and 2018 groups, the report concluded “that it was the earlier use of APAs rather than other reforms which have led to reductions in arrears levels”.


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It added “that for those not on APAs reforms appear to have made little overall difference to arrears and that the big difference in reducing arrears lies with changes to the application of APAs”.

Early use of APAs “could potentially have the biggest impact” on reducing rent arrears, the researchers said, but they noted that this would not solve other issues with Universal Credit such as the five-week wait before the first payment.

The Department for Work and Pensions (DWP) claimed that it was wrong to blame Universal Credit for rising rent arrears.

The news comes as The Telegraph reported over the weekend that Labour will move to scrap Universal Credit if elected.

Victoria Mills, cabinet member for finance, performance and Brexit at Southwark Council, said: “This does seem to undermine the government’s view that a fundamental principle of Universal Credit is that it would improve people’s independence.

“We now have 40% of our Universal Credit tenants paying rent through APAs – presumably that is not what the government intended.

“As you get further roll-out, you are going to get increasingly vulnerable tenants on Universal Credit, and the only way to manage that is through APAs.

“Having to live in arrears doesn’t promote independence or reduce poverty, it does the exact opposite.”


Related Files

Safe As Houses 3 2019 v2.pdfPDF, 278 KB

She argued that the government should compensate Southwark Council for income lost by being an early adopter of Universal Credit since before a series of changes to the system.

The council predicts that it will be left with a total rent debt of £5.6m by 2024/25.

It has promised not to evict any tenants whose rent arrears can be directly attributed to Universal Credit.

A spokesperson for the DWP said: “It is wrong to attribute the rise in rent arrears to Universal Credit.

“Many tenants arrive on Universal Credit with pre-existing arrears, and there has been an upward trend in rent arrears which began before the benefit was introduced.

“Alternative Payment Arrangements allow for payments to be made directly to the landlord if the tenant is likely to have difficulty in managing their rent payments.”

The full report, Safe as Houses 3: Have government reforms to Universal Credit reduced the rent arrears of Southwark’s tenants?, is attached.

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