The government's proposed reform of the benefits system threatens the financial well-being of a significant number of social housing tenants, according to a new report. The report looks at the potential effect of the new universal credit system, and the associated moves to (a) monthly benefit payment rather than weekly, and (b) payment of housing benefit direct to tenants rather than landlords.

Key points

• The dangers arise because tenants will be forced to move away from financial management patterns they have evolved to cope with the difficulties of living on a very low income.
• 68 per cent of tenants now managing weekly feel the shift to monthly payments will make it more difficult to manage their budgets. Weekly budgeting reflects the effort to ensure spending is closely controlled, by being limited to cash in hand, and minimise the risk of running out of funds. Those budgeting in this way are above all seeking to avoid a cash flow crisis, which usually means doing without essentials such as food or fuel, or falling into debt.
• 35 per cent of social housing tenants on benefit are not confident they can keep up-to-date with rental payments if they receive their benefit direct. This figure rises to 50 per cent in the case of those who have missed rental payments in the past. This warning is supported by the existing evidence on payment difficulties with rent: affordability pressures on rent, missed rent payments and serious social arrears currently arise primarily among those making a contribution to rental payments or those in work responsible for paying rent themselves.
• The new benefits regime is also based on the expectation that applications will be managed online, and that payments will be made via bank accounts. But a significant minority of social tenants are not well placed to operate effectively within this environment. A quarter of social tenants of working age have some degree of digital exclusion, lacking either broadband access or computer skills. Some 14 per cent of social tenants do not have a bank account with the ability to make direct debits.

Overall, the report concludes, a significant proportion of social tenants – around a quarter of the total – will require some degree of support if they are to make the transition to universal credit without undue risk to their financial well-being.

Source: Optimising Welfare Reform Outcomes for Social Tenants: Understanding the Financial Management Issues for Different Tenant Groups, National Housing Federation
Links: Report | Inside Housing report