Universal Credit poses a “significant financial risk” to Dacorum Borough Council, according to a new report – with council tenants claiming the benefit significantly more likely to fall behind with the rent.

Universal Credit replaces six means-tested benefits - income support, jobseekers allowance, employment and support allowance, working tax credit, child tax credit and housing benefit.

It is designed to simplify the benefits system and to increase the number of people who are in employment.

But a report – prepared for Dacorum’s housing and communities overview and scrutiny committee – points to an increase in the number of residents living in poverty.

And it shows 74 per cent of the 517 council tenants claiming the umbrella benefit have fallen behind with their rents – collectively owing the council £345,000.

“Universal Credit is a significant financial risk for a number of services within the council, specifically housing,” says the preface to the report, due to be presented to the committee on Wednesday (June 5).

“With welfare benefits going directly to tenants instead of the rent element being paid directly to the housing service, rent arrears have risen significantly.”

According to the report, not only are council tenants in receipt of Universal Credit more likely to fall into arrears – they are likely to owe more too.

The average debt of a tenant in receipt of Universal Credit is reported to be £668.28 – compared to £179.22 for those in arrears who are claiming housing benefit.

And it reports almost a third of council tenants claiming Universal Credit owe more than £1000 in arrears.

Statistically the report says that while Universal Credit claimants account for five per cent of council tenants, they have 21 per cent of rent arrears.

“This shows the considerable impact of UC [Universal Credit] on arrears,” says the report.

The ‘trend’, it says, is for arrears hit a peak between six and 10 weeks, before reducing – as tenants become more used to this method of payment.

But, it says tenants will never return to the original level because of the 5-week delay in payment.

“We have predicted that this will lead to an increase in irrecoverable bad debt and evictions which is a concern for further homelessness,” says the report.

The report highlights the debts of two tenants that have already been written off. And it says the council has increased its provision for irrecoverable debts to £975,000.

By October the council’s housing service is planning to introduce a new system that will look at payment history and knowledge of Universal Credit claims to identify tenants at greatest risk of arrears and to target support.

Since December (2018) the number of residents claiming Universal Credit in the borough has increased to 1255.

The full roll out – or ‘migration’ – of the benefit in Dacorum will take place between December 2019 and 2023.

According to the report the council expect the full ‘migration’ to Universal Credit to increase rent arrears, to put increased pressure on support services and to increase demand for homelessness services.

It also says that if private landlords refuse to let to claimants it could lead to an increase in demand for accommodation.

The report to the committee was designed to update councillors on the roll out of Universal Credit in Dacorum and to highlight the impact on the council’s housing service.