Universal Credit poses a “significant financial risk” to Sheffield Council and could treble the cost of rent collection.
Senior council officers warn the new benefit could double or even treble the cost of collection and increase rent arrears to £15m by the end of 2021.
The controversial new payment replaces Housing Benefit for people of working age and started to be rolled out in Sheffield this month.
“The Government’s welfare reform continues to be a significant risk to the housing revenue account,” says David Phillips, head of strategic finance, in report to Cabinet.
“The risk to income collection will continue to become increasingly difficult as Universal Credit continues to be rolled out.
“A programme of welfare reforms, introduced in 2013, led to cuts in a range of benefits including Housing Benefit and Council Tax Support posing a risk to residents’ ability to pay their rent and council tax and therefore increases in arrears.
“Universal Credit poses a significant financial risk to the council as support towards housing costs, which is currently paid through Housing Benefit direct to the housing revenue account, will in most cases now be paid directly to individuals.
“It is estimated that this could double or even treble the cost of collection and increase rent arrears to £15m by the end of 2020/21. However, impacts are uncertain at present as there is limited data available “
The council has a locally funded hardship scheme to provide extra support to residents who cannot pay their council tax and there is a government funded scheme which supports those who can’t pay their rent.
Mr Phillips added: “The council will continue to take robust action to recover arrears from those who simply will not pay. It is, however, committed to not evicting a tenant as a result of arrears due to delays in Universal Credit payments.”
There is a working group which is supporting the rollout of the benefit and ensuring the council is prepared for full take-up. Extra officers have been funded to manage the impact of welfare changes on tenants.
A spokesman for the Department of Work and Pensions said: “Rent arrears are complicated and can’t be attributed to a single cause. Research shows that many people join Universal Credit with pre-existing arrears, but that number falls by a third after just four months.
“We can pay housing payments direct to landlords if necessary, and we’re working closely with social landlords to help them support vulnerable people.”