Rent arrears could rocket over 50% under new welfare plans

21 January 2013

A million people living in social housing could struggle with their rent and end up in debt as a result of the Government’s welfare shakeup, warns the National Housing Federation.

A report by Ipsos MORI and the University of Cambridge, commissioned by the Federation, found that most housing associations feared a significant rise in rent arrears and believed their residents had little or no idea how the welfare changes - which are being rolled-out later this year – would affect them.

• Read the full report (PDF, opens new window)

An Ipsos MORI survey of housing associations, which between them provide homes for over two million people, found eight out of ten (84%) thought rent arrears would jump by an average of 51%. If reflected across the sector, this is an equivalent rise of £245m in rent arrears. Fifteen per cent of housing associations think their rent arrears could double.

Housing associations say the introduction of direct payment of benefit to tenants, the bedroom tax and the household benefit cap will have a substantial impact on the lives of residents and on their organisations. But more than half of associations (57%) worry that their tenants know hardly anything or nothing at all about the benefit changes.

Previous research by Policis for the National Housing Federation found almost a third of working age social tenants in Britain (one million people) will need extra support to help manage their budgets when, under Universal Credit, their housing benefit is no longer paid directly to landlords.

National Housing Federation Chief Executive David Orr says:

“Within a few short months, hundreds of thousands of low-income families will see their housing benefit cut as a result of the Welfare Reform Act. Many could fall behind on their rents, putting at risk the roof over their heads.

“Housing associations are doing their best in tough circumstances to cushion the blow for their residents. But there is still a lot of uncertainty, including in Government, as to the full impact of its reforms. We need more time to understand and prepare for the impact of these massive changes to the welfare system.

“In these difficult times, the best way to help residents manage their finances is to allow them to continue having their support for housing costs paid direct to their landlord. Otherwise we are in danger of seeing rises in homelessness and families really struggling to make ends meet.”

Notes to editors:

• The report draws on existing evidence and primary data collected from an online survey sent to Federation members - housing associations in England – which generated 232 returns.
• Fieldwork took place between the 21 September and 5 November 2012 and responses have been weighted to be representative of the national profile of general needs stock owned and managed by region and by size of organisation
• The survey presents evidence on the perceived impact on landlords prior to implementation, and is the first in a series of planned reports.
• Housing associations were asked about their expectations of the potential effects of the new single benefit payment system, known as Universal Credit, the introduction of the bedroom tax and the direct payment of benefits to residents rather than landlords.
• Of all the reforms, the introduction of direct payments to tenants is expected to have the biggest impact – more than 80% of housing associations say it will affect their organisations a great deal or a fair amount. The bedroom tax is anticipated to have a significant impact for more than 60% of associations. This rises to 80% in Yorkshire and Humberside and the East of England, and 82% in the East Midlands.
• Housing associations are facing the challenges of welfare reform head on. More than four in five (83%) have considered the risks and opportunities, with the vast majority taking action, and many embedding welfare reform into their business planning and strategy development.
• In 2013, associations are planning to spend an average of £50,000 each to prepare for the impact of welfare reform and this will nearly double in 2014.
• Associations are increasing support for tenants as well as increasing resources to manage the anticipated increase in arrears. For example, over three quarters (76%) are providing extra money advice, two thirds are undertaking customer analysis to target under-occupiers with help and 61% are providing extra assistance to housing applicants.