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The impact of Direct Payments – first data Matthew Warburton - 20/12/2012

Britain_benefitsFirst 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 environment.

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 whole.

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.

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ARCH Member Comments 14 people like this

  • Jim Nicholl, Birmingham City Council - 30 December 2012

    Housing Benefit should be paid directly to the landlord. Those on the lowest income should not be put in a position of having to pay rent or putting food on the table. It's a awful situation to be in and it can only get worse!