Welfare Change Pilot Sees Council Rent Arrears Increase By 600%

Last September we reported on the Welfare Reform “Timebomb” that was on the cards involving changes to the welfare system to alter how rental payments are handled.

One of the first pilot schemes in South Wales has seen serious issues arise giving a possible scale to possible problems that have been predicted for Wrexham involving the payment of rental to councils and housing associations.

One section of the change sees rental benefit payments change from being paid direct to the Council, to being paid to the tenant as part of the single ‘Universal Credit’ payment. The responsibility to manage the money that is paid as a single monthly bank transfer is down to the individual, who has to then pay the Council. This brings the welfare system in line with the private rental systems which similarly moved from a direct payment system.

Torfaen, a county borough close to Newport in South Wales, is one of six areas where the Department of Work and Pensions (DWP) is running what it calls “demonstration projects” ahead of wider introduction of the Welfare Reform changes. In the first group of Torfaen residents on the pilot scheme rental arrears grew from £20,000 to £140,000 in just seven months.

A large proportion of this test group that incurred the 600% rise in arrears are said to have had ‘a good track record of payment before’ with ‘a pretty low level of arrears’.

Wrexham.com attended an information session with Wrexham Council recently where we asked if they had a prediction of what percentage of arrears they were expecting, as the BBC had reported a DWP source stating “a rate ‘in the teens’ rather than 20-30% reported“. No figure was placed or indicated, however it was recognised it is likely to be a problem.

The report to Wrexham Council from September 2012 stated “It is also clear that the workload of Officers managing rent arrears will increase with the proposed introduction of housing benefit payments direct to tenants, instead of electronically to landlords, as part of a claimant’s benefit entitlement. The local relationships built will be even more crucial in ensuring income streams are maintained and tenants can seek advice from a local officer that they trust. The proposed reduction in housing benefit payments to claimants will also impact dramatically on the Service, particularly on income collection, rent arrears recovery and consequential homelessness.”

Philip Walton, Strategic Director with Wrexham Council, said earlier in the year “There is concern amongst the various agencies that residents are not prepared or even aware that the changes may mean cash reductions in their benefits and changes to how and when they will be paid. Whilst we have done everything we can to inform those we are aware of we would encourage anyone who believes they may be affected to get help, advice and guidance now.”

Further information from Wrexham Council is available on the their website, via the welfare reform pages you can find directly here.

(Details of the Work and Pensions Committee ‘meeting the needs of vulnerable claimants’ discussion on direct rental payments can be found hidden away on the Parliment.uk site here)