Welfare reform trial sees rent arrears rise in Torfaen

Tenants in Torfaen have been taking part in a trial of the government's new benefits system

Tenants in south Wales taking part in a trial of the UK government's benefits reforms have seen rent arrears rise seven-fold to £140,000 in seven months.

Landlords in the pilot area in Torfaen warn evictions could increase if the trend continues after the system for paying benefits is fully adopted.

Housing benefit is currently paid to the landlord but it will transfer to the claimant under the reforms.

The minister in charge said it would help people to manage finances better.

However, an investigation by BBC Radio Wales' Eye on Wales programme highlights concerns that changes to the benefits system - beginning with the introduction of the so-called "bedroom tax" from April - could push both social housing tenants and landlords into financial difficulties.

Torfaen is one of six areas where the Department of Work and Pensions is running what it calls "demonstration projects" ahead of the introduction of the UK government's flagship welfare reform of Universal Credit in the autumn.

Eye on Wales has learned that the first group of Torfaen tenants selected for the trial saw their total arrears rise from around £20,000 to approaching £140,000 in the seven months from July to January.

Under the reforms, claimants' benefits will be rolled into one credit paid directly to their bank account on a monthly basis.

Housing benefit will become part of the Universal Credit, signalling an end to the current system where payments are made straight to local councils or housing associations, reducing the risk of the 100,000 social housing tenants in Wales falling into arrears.

Bron Afon Community Housing, the biggest social housing landlord in Torfaen with 8,000 properties, has 950 tenants receiving direct payment of their housing benefit.

Chief executive Duncan Forbes described the rise in arrears to almost £140,000 as "significant", adding that a large proportion of the tenants were "never in rent arrears before".

"That was a group of people who had a good track record of payment and pretty low level of arrears, thrust into a position where they are now is significant arrears," said Mr Forbes.

"At the same time we've increased our staff levels by about double what we would normally put into income recovery.

"We've been very successful up to now in getting the number of evictions right down.

'Squeezed and squeezed'

"But we can see that inevitably steadily rising.

"The difficulty for us is that if there's no long-term solution to paying that rent we can't sustain business as a landlord."

That combination of reduced income and increased costs concerns Nick Bennett, group chief executive of Community Housing Cymru, which represents housing associations across Wales.

He said its not-for-profit members use funds from the private and public sector with private funding, over 90%, coming from banks.

"If we have a model that starts to unravel because the people that we are trying to help can't afford to pay their rent, then that model could become unsustainable," he said.

"Or you have banks that are under pressure from their regulator to build up their balance sheets, looking for excuses to re-price the debt that is currently held by housing associations.

"So we could end up getting 'whammied' twice - more expensive lending from the private sector, less support from the public sector - and the misery of our tenants getting squeezed and squeezed from both sides."

Steve Clarke, managing director of Welsh Tenants Federation, told Eye on Wales that direct payments are one of the two major causes of concern.

The other is the housing benefits changes - or so-called "bedroom tax" - that come into force next month, which Mr Clarke's organisation has estimated could put 4,000 Welsh social housing tenants at risk of eviction even before Universal Credit begins.

"The general principle of Universal Credit is good but it is happening too fast," he said.

"The voluntary sector can't keep up with the changes, there's not enough support there to help people make the transition.

"There are a lot of people out there that are finding it difficult on very small incomes to be able to manage their budgets.

"You only need a broken washing machine or cooker and suddenly you are in a real difficult bind in missing your rent."

Similar concerns have been voiced by a Commons select committee which last November warned the Department of Work and Pensions not to rush into launching Universal Credit.

Its report said: "We believe that time needs to be allowed for a proper evaluation of the pilots which the government is running on direct payments to tenants, followed by a phased implementation of direct payments, after appropriate safety net arrangements for vulnerable people have been developed and tested."

The Department of Work and Pensions said it was committed to supporting vulnerable claimants.

Welfare reform minister Lord Freud said: "We've always been clear that Universal Credit will be simple and easy for claimants to access and we will ensure that vulnerable people get the support they need to make a claim and budget their finances.

"Millions of people will be better off on the new benefit."

Eye on Wales is broadcast on BBC Radio Wales on Sunday 10 March at 13:30 GMT.