Hundreds of millions owed in rental debts to councils and arrears on the rise, new data shows

Exclusive: Campaigners have warned of impending ‘crisis’ as councils lose out on rental income

The pandemic and cost of living crisis have been identified as two exacerbating factors (iStock/Getty)

Hundreds of millions of pounds are owed in rental debts to councils and arrears are on the rise, new data shows, as campaigners warn the shortfall will lead to a “crisis point” for councils.

Hundreds of thousands of social housing tenants owe money to their local authority, with the number of homes in rent arrears increasing by 8 per cent from 2019 to 2023, increasing pressure on cash-strapped councils and leaving those in debt facing homelessness.

Freedom of Information (FOI) data from 82 local authorities – around a third of the number of councils which own social housing – shows more than £240m was owed in rent arrears in June/July this year. This is up from £147m owed in 2019, according to analysis from payment specialists Access PaySuite.

Experts and charities pointed to rising rent costs, changes to the benefits system and entrenched inflation as causes of increasing rent arrears.

Suzanne Muna, co-founder of the Social Housing Action Campaign, said: “Chancellor Rachel Reeves has just promised social landlords that they will be allowed to raise social rents by the annual inflation figure plus 1 per cent. This is far too high. It follows the 7 per cent social rent rises in 2022, and 7.7 per cent in 2023.

“Wages have just not kept pace for most people, and are unlikely to do so over the next 10 years.”

Ms Muna added increasing rental debts and losses to council income “will eventually reach crisis point”.

The unpaid debts are increasing pressure on cash-strapped councils (Getty Images)

One man who wanted to be known only as Dave, 50, moved into his council house in Crystal Palace, southeast London, at the beginning of June but is already in £216 of rental debt.

Dave, who is Malaysian and has been granted refugee status in the UK, said he was struggling to adapt to the move from Home Office accommodation to supporting himself in a council home.

He said: “Coming from one system to another system, you are already in debt because you have no savings. The rent arrears started because they pay one month behind, and nobody told me this is how the system works. So the first day I moved into the property I was already in rent arrears.”

Furthermore, the current financial year will have 53 “rent weeks”, while housing benefit payments will cover only 52 weeks. Lambeth Council confirmed universal credit claimants will have to find an extra week’s rent this financial year and has published guidance for tenants about the issue.

The number of social houses in arrears has increased by 19 per cent from 2019 to summer 2024, FOI data from local authorities across England, Wales and Scotland showed.

Nearly 363,000 social housing tenants were in arrears to the 82 councils surveyed, up from around 307,000 in 2021. But some 221 local authorities in the UK own social housing, with a total of 1.56 million properties recorded in 2023.

The arrears increase has also been mapped by the Association of Retained Council Housing (ARCH), which found there was a sharp rise in debt post-pandemic.

Matthew Warburton, policy advisor at ARCH, said: “Our 2023 study concluded that the two main reasons for the sharp increase between 2022 and 2023 were the cost of living crisis, which hit shortly after the pandemic ended, and the roll-out of universal credit.

“The continuing increase that these figures show is striking as inflation has recently abated, but it is likely that many families are still struggling to recover financial stability.”

Some 1,247 people were evicted from council-owned properties in 2022-23 over rent arrears, the latest figures show. This is down from nearly 5,500 evicted in 2015-16.

Increasing debts owed to councils are mounting pressure on their already fragile finances. For example, Bristol City Council is currently owed £229m in total unpaid debts, including council tax and rent arrears. Council leaders have warned they face going effectively bankrupt and have a yearly overspend of £22m.

Rising rent arrears have also been reported by housing associations – not-for-profit organisations that are set up to provide affordable housing. In March the Regulator of Social Housing recorded an 8.4 per cent rise in rent arrears owed to housing associations, hitting a record high of £800m.

Gillian Oliver, 46, in Tyne and Wear, was able to pay off the £3,000 she owed to housing association Gentoo with the help of debt charity Christians Against Poverty (CAP).

She had been evicted through rent arrears in 2003 and still had the debt hanging over her nearly a decade later. Tenants can be evicted for any amount of rent arrears, but they can negotiate with the council to help them repay their debt - for example, by setting up a repayment plan - to avoid eviction.

Oliver was evicted after she got into rent arrears but is now debt free (Gillian Oliver)

“When I got offered another house from Gentoo in 2021, I didn’t have to pay the arrears because of the time that had passed but CAP helped me to pay it off so that it wasn’t hanging over my files,” Ms Oliver explained.

She became debt-free in 2022 and has stayed on the right track since then. “Housing benefit pays for a lot of my rent and then I have to pay £15 a week for service charge. Then I pay my council tax every month,” she said.

“£76 a week goes direct to Gentoo, so at the minute, for the first time in my life I am a little bit in credit.”

Ms Oliver is also disabled and is dependent on her partner and daughter to care for her. She has been on the council housing waiting list since 2020 for a two-bed property so they can stay over when she is very ill.

Kiri Adams, from CAP, said: “It’s concerning to see this new data highlighting that more people are struggling to afford their rent. Around two in five of our clients at CAP have rent arrears when they come to us for free debt advice.”

Director at Access PaySuite, Alex Common, said: “Social housing budgets have been squeezed significantly over recent years. On top of this, the cost of living crisis has caused real difficulties for many people to meet their living costs.

“If we apply our representative sample across the 221 local authorities which own social housing, the total value of rental arrears across local government could be as high as £650m.”

A spokesperson at the Department for Housing said: “We will set out plans at the next fiscal event to give councils and housing associations the rent stability they need.”

A Department for Work and Pensions spokesperson said: “We are committed to ensuring customers receive the assistance they are entitled to, and have a wide range of support, such as the Transition to UC payment, to ensure the move from legacy benefits to universal credit is seamless.

“The calculations we use for claimants paying their rent weekly have been upheld by the High Court.”