Rent arrears among tenants of social landlords taking part in a trial of the Government’s flagship benefit reforms have soared.
The pilot is testing out the effects of paying the tenants their rent money, and trusting them to pass it on to their landlords.
Although private sector landlords of tenants on Local Housing Allowance have been familiar with this system, in the social sector landlords have been continuing to get housing benefit paid to them.
In one trial in South Wales, there has been a seven-fold rise in rent arrears in just seven months from £20,000 to £140,000.
Social landlords in the Torfaen area are now warning that there will be more evictions if the trend continues after the system is fully adopted when the Universal Credit system comes in.
Private landlords of LHA tenants have been arguing that the system is depriving them of rent, with arrears increasing, and that as a result, more private landlords are turning their backs on the benefits sector.
Government ministers say that receiving their own money for rent will help people on benefits to manage their finances better.
Torfaen is one of six areas where the Department of Work and Pensions is running trials ahead of the launch of Universal Credit this autumn.
Bron Afon Community Housing, the biggest social housing landlord in Torfaen with 8,000 properties, has 950 tenants receiving direct payment of their housing benefit.
Chief executive Duncan Forbes described the rise in arrears to almost £140,000 as “significant”, adding that a large proportion of the tenants had not been in arrears previously.
“That was a group of people who had a good track record of payment and pretty low level of arrears, thrust into a position where they are now in significant arrears,” Forbes told the BBC.
“At the same time we’ve increased our staff levels by about double what we would normally put into income recovery.”
The other areas where the trials are taking place are: Edinburgh, Wakefield, Shropshire, Oxford and Southwark in London. In Wakefield the increase in rent arrears is 9%, and in Edinburgh, Oxford and Southwark the increase is around 30%.
Southwark Council is predicting that it will incur £14m in arrears if direct payment is introduced to all its tenants.
The Department for Work and Pensions said it will use the pilots to learn lessons and ensure the scheme is effectively implemented.
Minister Steve Webb said: “We currently pay housing benefit directly to one million people in the private sector and that works pretty well.
“We are trying to treat people in council houses the same way, but we want to get it right.”
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