More than three million people have applied for Universal Credit since the Government advised people to stay at home.
But it turns out rent arrears are rising as more people go on to the new welfare scheme.
Council and housing association representatives say they have seen increases in people getting into rent arrears, using food vouchers and needing to rely on loans from family and friends.
And the five-wait for the first Universal Credit payment has been blamed for the cash crisis.
That’s because Universal Credit is a monthly benefit. It’s based on an applicant’s income in the preceding month, with the first payment taking five weeks to arrive in their account.
Hugh Owen, of the Riverside Housing Group which provides affordable housing, care and support services in England and Scotland, said “very few” of its customers who move on to Universal Credit had money to fall back on – “in fact it is more a story of debt rather than savings”.
His firm’s money advisers had suggested that encountering clients who had savings would be “very, very rare indeed”, he told MPs at a meeting of the Work and Pensions Committee.
He added that self-employed people, who were now out of work and had not been able to benefit from Government support, “were clearly having to make lifestyle adjustments and they were clearly struggling”.
The coronavirus pandemic has sparked fresh calls to scrap the wait for people’s first payment of Universal Credit.
Jeremy Hewer, of the Scottish Federation of Housing Associations, said the pandemic had also caused problems for those who had a small amount of savings.
He said: “There had been people who had been in steady jobs and may have had a few savings but they also may have had expenses which are very hard to suddenly stop with the loss of work.”
Sue Ramsden, of the National Housing Federation, pointed to a recent survey of 3,000 tenants in England which found that 84 per cent did not have the equivalent of a month’s wage to tide them over the five-week period.
She said there was “quite significant periods of hardship” including 55 per cent of people who said they were struggling to pay for essentials such as food, gas and electricity and 27 per cent who said they were using food banks.
It left people without anything to fall back on borrowing from friends and family, she told MPs.
Ms Ramsden added that coronavirus had also led to an increase in the level of arrears but “that is what you would expect when you have seen the numbers of people that we have seen over the past few months moving on to Universal Credit”.
She praised the efforts of Department for Work and Pensions (DWP) staff to keep Universal Credit up and running.
She said: “The system has coped, but within the system there is an issue around arrears and that is the same issue that was there six months ago, we just have far more people on Universal Credit.”
Mr Owen added: “At Riverside, while Universal Credit claimants represent around 30 per cent of our social housing tenants, they account for 60 per cent of arrears now which totals £6.29 million as of last week.
“So we are carrying really, really significant arrears.”
He suggested that some of that debt would have been there anyway because before moving on to Universal Credit, some housing benefit claimants may have already been in arrears.
The difference was that the outstanding balances were now “significantly higher” on average than for those on housing benefit, he added.
Mr Owen noted that councils and housing associations also faced additional administrative costs.
He said: “If we could use that to repay additional borrowing and lending, we would be able to build significant additional homes – there is no doubt about that.”
Jacqueline Hickmore, of Cornwall Housing, stated that the lockdown had seen “a big increase” in Universal Credit claimants.
It rose from an average of 16 new Universal Credit tenants a week to an average of 75 new claimants a week in the three weeks after lockdown was imposed.
She noted that a lot of the people seeking help were in hospitality, restaurant and seasonal trades.
She added: “Quite often, Universal Credit does not really mirror how they may have been paid weekly or fortnightly.
“Having to wait five weeks if you are used to having your money weekly is very tricky for people to budget.”
Around 90 per cent of people are paid their Universal Credit in full and on time, according to the DWP.
A DWP spokesman said: “With Universal Credit no one has to wait five weeks for money as urgent payments are available.
“We are wholly committed to supporting the lowest paid families, which is why we injected over £6.5 billion into the welfare system, including increasing Universal Credit and working tax credit by up to £1,040 a year, as well as rolling out income protection schemes, mortgage holidays and additional support for renters.”
Work and pensions minister Will Quince recently insisted: “Labour’s broken legacy benefit system simply wouldn’t have coped with the unprecedented demand that we have seen during Covid-19.
“Universal Credit has passed that test with flying colours.”