Universal Credit claimants who fall behind on rent payments could see up to 20% of their monthly allowance redirected to landlords, the DWP has announced.
The move comes after housing organisations raised concerns that the previous amount of just 5% could result in increased arrears and possible evictions.
Universal Credit brings together six different benefits into one monthly payment and the housing element will, in most cases, be paid directly to the claimant – rather than their landlord.
The new system is designed to “encourage financial responsibility”, says the Department for Work and Pensions. However, some housing organisations and charities are concerned that vulnerable claimants – which may include people with learning difficulties or debt problems – may struggle to manage their finances and fall into rent arrears.
The DWP say “work coaches are being trained to assess a claimant’s financial capability and will refer to personal budgeting support where appropriate”.
Where Universal Credit claimants need additional support to help keep up with their rent payments, the DWP may make rent payments directly to landlords, and deduct additional amounts from a claimant’s monthly Universal Credit payments if requested by landlords.
Communities Minister Kris Hopkins said:
“Universal Credit helps claimants and their families to become more independent through simplifying the welfare system. I welcome this initiative to help social landlords and tenants prepare for Universal Credit.
“I’ve been impressed by the work I’ve seen that social landlords do in supporting their tenants and it’s clear to me they have a vital role to play in helping them to make this change. A large number of social housing tenants will over time move onto Universal Credit so I would encourage landlords to get involved.”
In a ‘support pack‘ published for housing organisations, the DWP said:
“The amount that can be deducted from a claimant’s universal credit if they fail to pay their rent, has been increased from 5% to an amount of up to 20% of the universal credit standard allowance, which will ensure claimants are back on track with payments quicker. The minimum amount that will be deducted is 10%.”
If a claimant accumulates a months worth of rent arrears it will trigger “early intervention” by the DWP, who will review a tenants financial status and may consider making rent payments directly to landlords where appropriate.
Should a tenant accrue two months of rent arrears, the DWP will step in immediately and divert the housing element of Universal Credit to a claimants landlord.
20% of a claimants ‘standard allowance’ could be deducted and diverted to landlords to clear rent arrears as quickly as possible. The DWP had consulted with charities and experts on deducting as much as 40% from a claimants standard allowance.
However, like many others, The Money Advice Charity described this amount as “excessive”, which “could ultimately compound the financial difficulties that led to the arrears building up.”
Responding to the consultation (pdf) the charity said: “A maximum deduction rate of 20% for housing-related arrears would strike a more appropriate balance between increasing repayments and ensuring that these repayments do not have unintended negative consequences.”
Social landlords are being encouraged to identify tenants who may be struggling to keep up with their rent payments under Universal Credit.
Lord Freud, Minister for Welfare Reform said:
“Social landlords have been playing a vital role in welfare reform and supporting tenants who are already receiving Universal Credit. There is great work happening in the sector.
“Universal Credit is now available in 1 in 10 Jobcentres and will be in almost 100 by Christmas, with national roll-out beginning early next year – so now is the ideal time to boost preparation activity.
“For the first time many tenants will be paid their Housing Benefit directly and I would encourage landlords to think about identifying tenants who need support to prepare for this, and put those who are ready onto a direct payment early.
Universal Credit has been beset with delays and costly IT problems. The DWP has already written-off £40 million failed IT system with a further £90 million predicted to be thrown away over a five-year period.
Work and Pensions Secretary Iain Duncan Smith originally promised that 1,000,000 households would be on Universal Credit by the end of 2014. However, DWP figures show that less than 18,000 households were claiming Universal Credit by 9 October.
The national roll-out of Universal Credit is expected to be fully completed by 2018.