First data from the Housing Benefit Direct Payments
pilots, which finally emerged this week, show average arrears of 8
per cent in the first four months, at least double the level most
councils are used to managing.
The six pilots are testing the likely impact of the move to
payment of housing benefit direct to tenants as part of Universal
Credit, which will start to be introduced from October next year.
Tenants above a certain level of arrears will have their benefit
switched back to payment to the landlord. So far 316 tenants out of
the 6,200 involved have had benefit switched back.
Each pilot is testing a different arrears threshold for
switch-back - for example at 8 weeks arrears in Oxford but 12 weeks
in Shropshire - so these figures only tell a limited story. But it
is enough to warn councils that they need to think seriously about
the arrangements that will need to be put in place to manage
arrears once Universal Credit comes in.
These are early days, and it is much too soon to draw firm
conclusions. On the one hand, councils and other providers have
probably not yet got their act completely together and perfected
the systems and procedures they need to manage the new
There is almost certainly still room for improvement in their
management of arrears and switch-back arrangements. On the other
hand, one would need to know a lot more about the way landlords
chose the tenants invited to participate in the pilots to decide
whether they are a representative sample of benefit recipients as a
It seems likely that those who were not chosen or declined to
participate could be more likely to run up arrears than those who
have been included. And, as seasoned observers have commented, the
data do not cover the Christmas/New Year period which frequently
generates a spike in arrears. By the time of the next set of data
from the pilots, things could look better - or worse.
What the pilots do not yet tell us is how much it is costing
landlords to manage these new arrangements. The financial impact of
Universal Credit implementation is not just a higher level of
arrears and write-offs, but the additional resources needed to
manage rent collection under direct payments.
Councils will need to actively manage perhaps three times as many
rent accounts as they do now. Currently the only tenants who need
chasing for arrears are those on no or partial benefits. When
Universal Credit comes in they will be joined by maybe twice as
many more tenants formerly on full rent rebate.
And the latter group includes many without bank accounts, unused
to paying by direct debit and, by definition, are those on the
lowest incomes who are most likely to have difficulty making ends
meet. All in all an extremely challenging prospect.