A survey of 75 local authorities and housing associations in England, conducted by Grant Thornton UK LLP, predicted that the continuing impact of the ‘bedroom tax’, together with moves to extend the benefit cap and impose further limits on housing benefit, will put further financial pressure on tenants.

It concludes that the ability of councils and housing associations to mitigate growing arrears has been severely eroded, and increasing numbers are issuing possession orders to tenants who have fallen behind with the rent.

‘Easing the burden: The impact of welfare reform on local government and the social housing sector’ investigated how local welfare reform has developed over the last two years from the point of view of local authorities and housing associations.

The majority of local authorities and housing associations in the survey had seen a rise in average council tax and rent arrears since 2012/13, which they attributed at least partly to welfare reform.

Reforms to housing benefit have led to increased movement to smaller properties, but generally less than 10 per cent of those affected have moved. A shortage of smaller properties for people to move to plays a key role in this.

Following reform, 47 per cent of local authorities and 51 per cent of housing associations surveyed said housing benefit is significantly more costly to administer, partly due to the increased complexity of cases.

Paul Dossett, head of local government at Grant Thornton UK LLP, said: “In general, welfare reform has prompted an impressive response from many local authorities and housing associations and has been a key driver for innovation and improvement. The question is, can they continue to make efficient use of rapidly reducing resources? Our research suggests that without flexibility from Whitehall and further measures, such as devolution of welfare funding, this is unlikely.”

Paul Dossett added: “The collective impact of welfare reform on those in need of support is to some degree hidden due to the lack of data on the causal link between welfare reform and poverty. Our research found that only 42 per cent of local authorities track poverty levels to measure the impact of welfare reform.

“We urge the new government to consider carefully the impact of the cuts to welfare reform that are put forward, not just in isolation, but collectively. Whilst Whitehall fiscally sees only individual cuts to local authorities, the people affected and we, as auditors, see the cumulative impact.

“A significant cohort of people – both working and unemployed – will remain in need of support, so local authorities and housing associations will need to focus any available money on them. Further devolution of powers to local government for welfare administration could be the key to a sustainable future, especially if different agencies work together.”

The report identifies a number of areas of national policy that need to be better co-ordinated so that the financial burden for welfare placed on local authorities can be fully understood and more effectively managed.

These include: