05 October, 2015
Universal Credit is a new type of benefit designed to support people who are on a low income or out of work. It replaces six existing benefits and is based on a single monthly payment, transferred directly into the recipient's bank account.
Universal Credit is paid in the following ways:
The biggest change is that tenants will receive one single monthly payment, including their housing costs, meaning that it is the tenant's responsibility to pay their rent which is no longer paid directly to landlords by the Local Authority.
If a tenant gets into rent arrears, landlords are expected to follow their usual rent collection practices. When arrears reach the equivalent of one month's rent, the Department for Work and Pensions (DWP) will review the situation following notification and can offer the tenant budgeting support and may decide to pay the rent directly to the landlord under an Alternative Payment Arrangement (APA).
When arrears reach an equivalent of two months' rent, the landlord (or the tenant) can ask DWP to consider if an APA would be an appropriate course of action.
Under an APA, housing costs benefit is paid directly to the landlord. The Universal Credit regulation states that "The secretary of state may direct that Universal Credit be paid wholly or in part to another person on the claimant's behalf… to protect the interests of… the claimant." This means that landlords are able to ask the DWP to take the entire rent cost straight out of the tenant's overall Universal Credit claim, if it is in the tenant's best interest.
When using Universal Credit alongside an APA, some landlords have realised that they are able to receive the full gross rent, without the bedroom tax deduction meaning that landlords are not having to chase tenants for the shortfall in rent as a result of the bedroom tax.
However, this does not protect the tenant from the bedroom tax because the deduction is still taken from their overall Universal Credit award. For this reason, using an APA alongside Universal Credit is clearly going to be a desirable option for many landlords who may have been struggling previously to receive the full rent from some of their tenants.
However, the DWP have said that if a landlord is putting large numbers of tenants straight on to APAs to protect their bottom line they could lose their "trusted partner" status, for this reason, landlords need to be extremely careful about how they approach using these APAs alongside Universal Credit in order to obtain full rental income from tenants.
Statistics relating to Universal Credit and the bedroom tax
456,959 Tenancies hit by the bedroom tax in May 2015
£15.24 Average bedroom tax deduction amount
89,357 People claiming Universal Credit in July 2015
36% percentage of Universal Credit claimants in social housing on APAs in May 2015
Source: Department for Work and Pensions/ Inside Housing research
For more information, please contact a member of the Housing and Regeneration Team on 01772 220022.