Rent arrears to rise 51% under welfare reforms

Housing associations expect their rent arrears to increase by more than half as a result of the government’s welfare reforms.

A survey of 232 housing associations conducted by Ipsos Mori for the National Housing Federation has found on average registered providers expect arrears to rise by 51 per cent. If this is extrapolated across the sector it will mean an increase of £245 million.

Paying housing benefit direct to tenants rather than landlords is expected to have the biggest impact, with more than 80 per cent of housing associations saying this will affect them significantly. Twenty two per cent said the changes will make it harder for them to meet their loan covenants, with 10 per cent of those involved in the affordable homes programme saying direct payment will make it harder for them to deliver their house building commitments.

The under-occupation penalties for working-age families on housing benefit are the next greatest issue, with 60 per cent of associations raising concerns. This rises to 80 per cent for landlords operating in Yorkshire and Humberside, the east midlands, and east of England.

The survey also found 57 per cent of housing associations are concerned their tenants know little about the upcoming changes, despite efforts by landlords to prepare them for the reforms. It found 95 per cent of landlords are looking at the risks of welfare reform, and they are planning to spend an average of £50,000 during 2013 preparing for the impact.

The report is intended to act as a baseline for a series of reports the NHF is planning to examine the impact of the government’s welfare reforms on the housing sector.

NHF chief executive David Orr said: ‘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.’