Up to 30 housing associations have threatened to boycott new tenants in Hackney because problems in the housing benefit IT systems have delayed payments worth more than £1.5m.
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The showdown is a further blow to Hackney and its housing benefits IT outsourcer ITNet, which has been battling for more than a year with a raft of IT and business process problems.
At an emergency meeting last week, 30 housing associations demanded dramatic improvements in the service. The housing associations have given Hackney until tomorrow (18 February) to respond.
David Cant, chief executive of the New Islington and Hackney Housing Association, said the housing associations were owed more than £1.5m in unpaid rent since the council outsourced housing and council tax benefit to ITNet in January last year.
Cant said the housing associations were unhappy that the council and ITNet had repeatedly broken promises for service improvements.
He said, "Confidence in ITNet and Hackney is the lowest I have ever known it."
Cant predicted a financial crisis for Hackney if the housing associations refuse to take homeless people put forward by the council. Hackney will have to put people into B&B accommodation, at much greater expense, he warned.
A council representative said, "The council is acutely aware of the serious nature of the current problems and is taking all possible steps to resolve this situation."
An ITNet representative said, "We appreciate the difficulties housing associations face as a result of delays in the payment of housing benefits. We are working with housing associations to deal with outstanding claims."