Sandwell Council rent arrears hit £5.7m as IT system struggles with Universal Credit

The authority is now set to spend more than £400,000 on new IT software which it is hoped will boost income by almost £700,000 in the first 12 months by correctly identifying tenants most at risk of not paying.

A total of £5,718,446 is owed in rent from around 14,000 homes in Sandwell, the council's cabinet was told, with the amount of debt increasing since Universal Credit was rolled out in the borough in November 2018.

Universal Credit bundles six existing benefits, including housing benefit, into one but the first payment is not made until at least five weeks after a claim is lodged.

Under the new welfare system new claimants have to pay landlords themselves - instead of the money being paid directly by the Government - but are often left in arrears while waiting for Universal Credit payments to be authorised by the Department of Works and Pensions.

Meanwhile the council's current arrears IT system, run by Capita, is flagging around 14,000 arrears cases for action each week despite many of those cases requiring no recovery action at all.

Council staff are thus wasting time manually managing the Open Housing system which Capita has failed to improve despite the council raising concerns since 2013, a report to the cabinet said.

Housing bosses have warned the debt could increase by an extra £3.8 million if changes in how payments are collected are not implemented.

Nigel Collumbell, a service manager for housing, told cabinet changes in welfare payments had seen staff workloads increase by 60 per cent.

He said: "With the backdrop of welfare reform this is producing a really challenging environment to collect and prevent rent arrears.

“We have had a trend of increasing rent arrears over the last three years and there has been a real steep increase in the amount of rent owed to us by local authority tenants since the roll-out of Universal Credit in Sandwell since November 2018.

“In terms of some of those specific challenges, Universal Credit is far much at the top of the tree.

“As a consequence of the full roll-out, we have an additional £3.4 million rent debit we have to collect that would have paid directly onto (our) accounts by housing benefit.”

Mr Collumbell added that unless the council invests in a new technology, arrears could increase by an extra £3.8m by the time Universal Credit replaces all existing welfare payments in 2024.

As a result the cabinet approved a two-year £408,442 contract with Mobysoft's RentSense system, which it is hoped will increase cash collection, reduce the staff workload and help stop tenants from falling behind by its use of algorithms and predictive technology which are unavailable with Capita.

Mobysoft predicted its system would reduce the amount of money owed by £353,978, based on current arrears, and deliver a "total benefit realisation" of £698,498 in the first year of the contract, excluding the benefits of better managing Universal Credit.

Based on the council’s current workload, under the new system the number of full-time staff needed to contact all the tenant's recommended for action through Capita's system would reduce from 40 to 31.

Despite "no guarantee moving forward that any future version upgrade will deliver on the functionality required to reduce arrears," Capita's system will continue to be used in conjunction with RentSense, the report said.

The cost of the new contract will be met from existing resources within the council's Housing Revenue Account.