Angus Council chiefs have expressed fears that struggling residents could fall into the grip of payday loan firms if the bedroom tax is not scrapped.
Leader Iain Gaul and deputy Paul Valentine have made a renewed plea to the Government to ditch the controversial tax following a sharp increase in rent arrears.
The council has calculated the changes will mean that its 850 tenants will be around £600,000 a year worse off.
The reduction in benefits as a result of the tax has also sparked fears that residents will turn to loan firms with exorbitant interest charges to meet the shortfall.
Mr Valentine said: “Debts will accrue and will put pressure on families to find stopgap loans which, as we all know, have horrendous interest rates.”
A new survey of all local authorities in Scotland carried out by councils’ umbrella group Cosla revealed significant financial pressures are being placed on local authorities because of the changes.
Three-quarters of councils blamed the bedroom tax for the rise in arrears.
Under the changes tenants with an extra bedroom have seen their housing benefit reduced by 14% while those with two extra have seen their benefit cut by 25%. All benefits are now paid direct to the recipient rather than to landlords or councils.
Lord Freud, the minister for welfare reform, has said he will make a number of changes to the system in response to criticisms from councils and social landlords.
These include an intervention if the tenant builds up a month of arrears and a switchback to managed payments direct to the landlord if two months of arrears are accumulated.
There are also plans to accelerate the rate that arrears are collected.
Angus Council leader Iain Gaul said the changes were just “plastering over the cracks” and did not address the main problems thrown up by the welfare reform act.
He said: “Changing back to direct housing payments only for those who get into debt with housing arrears by two months means absolutely nothing in real terms.
“All this means is that the two months debt will probably never be able to be addressed by those affected and will be left hanging over their heads.
“Plastering over the cracks like this does nothing to address the underlying reason for vulnerable people being forced into debt, which is the removal of benefits for having an extra bedroom.”
He said Angus did not have enough one bedroom properties to meet demand, which meant tenants living in properties with two or more bedrooms were being penalised financially.
He said: “Angus, in common with every other council in Scotland, does not have enough one bedroom properties needed to meet the demands forced upon us by this draconian legislation. As with other councils, we have no solution to this problem, other than calling on the Westminster Government to scrap this horrible act.”
Cosla, the local authority umbrella body, surveyed 20 of the 26 councils which have their own housing stock.
Every council surveyed, except for one, recorded a rise in arrears. Debts for April were up £2m on the same month the previous year. Cosla said if that trend continued the policy would result in rent arrears of about £25m a year.