Increases in council tax and rents arrears, and rises in debt levels, are predictable yet avoidable

News today that council tax arrears are up 45% in a year sends shivers down my spine. 1.48 million homes were in arrears in April compared to 1.02 million a year earlier. Austerity and cuts to council tax benefit are to blame according to some, although the government has pointed out that changes to council tax benefit only came in April, so the increase can not be put down to that.

My worry is that the cumulative impact on various factors is yet to be seen, that there will be a further increase in council tax arrears, leading to more households, currently managing to get by, getting into difficulty. There will be an increase in rent arrears, and an inevitable increase in pay day loans. In some of the poorest households, around 50% of their monthly income is already used to service debt.

Universal Credit is now being rolled out across the country. One feature of UC is that the rent component will be paid monthly, and direct to the tenant. While there is provision to revert to payments direct to landlords, this will happen only when the tenant has built up arrears. Housing associations will have to spend more on rent collection and most are modelling an increase in bad debt provision.

I agree with some of the drivers behind the reform of welfare, but feel that the symptoms, rather than the causes, are being addressed. The housing benefit bill has increased massively in recent years but that is down to a number of factors, not least amongst them the massive shift from capital investment in housebuilding to revenue subsidy, and the spiralling cost of accommodation in the private rented sector. In places like Brighton and Hove, it is a landlords market.

In this blog I sometimes refer to the unintended consequences arising from government policy. With cuts to council tax benefit, the inadequate level of investment in social housing, direct payments to tenants, the consequences may not be those intended, but they are predictable. They are equally avoidable.

Courtesy of Andy Winter at Andy Winter’s BHT Blog