Almost one half of tenants on Universal Credit are borrowing to pay rent

Oldham is one of the first pilot markets of the Universal Credit, and about 2,800 households are now receiving benefits from it. Many people are falling into debt or rent arrears, as the First Choice Homes Oldham housing authority shows that tenants are struggling with the new government benefit programme. A large percentage are turning to borrowing money in order to keep up with their rent payments.

The initial survey results from tenants is not good. The housing authority has completed studies of individuals that rent in the town, and the results show that over 50% of people are struggling to keep up. They are not receiving the budgeting support they need, and their housing payments are becoming difficult to make.

In fact, the study shows that about 44 percent of families need to borrow money to keep up with their bills and rent. To make matters worse, about 1 in 5 households are turning to high priced pay day lenders when they borrow, as they often can’t get funds from anywhere else.

There are many other concerns in the survey that was completed by First Choice Homes Oldham. As hard as it may be to believe, 19% of tenants do not say their rent bill is a priority to pay, and they are using their benefits for other important expenses instead, such as for heating bills or maybe food. So this will more than likely lead to more evictions and a higher rate of homelessness for those that receive the Universal Credit.

Another major issue is the timing of payments. The payments were not often made on the same day each month, so this makes budgeting even more difficult. There is also often a delay in processing applications for the Universal Credit, so during this time tenants often went into rent arrears, or they borrowed money and went into debt while their applications were being assessed.

Lack of budgeting support from Department for Work and Pensions

Many of these problems may be that the Department for Work and Pensions (DWP) has been slow to offer advice on budgeting to UC participants. The combination of the income-based jobseeker’s allowance, housing benefit, income-related support allowance, income support, and working tax credit are presenting problems.

The majority of people in the Oldham trial market have not been provided support, so they then do not know how to use the funds from the Universal Credit and can struggle with what bills to pay. For example, 48% of the tenants surveyed did not know of the advance payment that is part of UC, and they did not know how that can help them with their rent. So what they are doing instead is borrowing money, often at high interest rates from payday lenders as they do not know any better.

The survey from First Choice did show that most tenants that were offered budgeting advice did agree to it, but the problem is DWP is just not making the offer. So the fact people will sign up for budgeting help from DWP programmes is a positive sign that needs to be stressed by the government.

Improvements suggested by tenants from survey

The survey from First Choice Homes Oldham also asked what the government can do to improve the situation. Since many of these people in the trial market have been on UC for many months, their feedback can be worthwhile.

Most people wanted easier access to budgeting information and improved customer service for claimants. There are also some that wanted a freephone number, as the cost of the phone call may be more than they can pay and takes away from the money they have for their rent. Other suggestions had to due with increasing the frequency of when payments are made, as that can help people from needing to borrow while they wait for funds.