14th August, 2014
In an earlier bulletin http://www.ucadvice.co.uk/housing-associations/2014/06/universal-credit—dwp-explains-housing-costs-anomaly I highlighted concerns over the way Universal Credit operates when there’s a change in the claimant’s household make-up and/or financial circumstances. For example, couples separating or two individual households coming together as one; son/daughter leaves school or starts work; a rise in family income etc. can create a nightmare scenario for both tenants and landlords, as there’s every likelihood their rental income will be adversely affected.
Why is this?
The answer lies in the fact, UC is paid monthly, in arrears, and DWP has incorporated this ”whole-month” approach to the various changes which can occur, during the life-time of a claim. This enables automation, avoids the need for DWP staff intervention, and the need to, for example, apportion rent liability increases, arising from the annual uprating of RSL rents or during a move to a larger and more expensive property. It also means that where the change results in more UC being payable, the rule can produce a windfall, for the tenant, as the change is effectively backdated to the start of the tenant’s “benefit assessment period”. The good news is, this, in turn, should help landlords secure payment of rent, at least in that month!
To illustrate the point, let’s say Eleanor (26) & John (28) are joint tenants of one of your homes. They’re married, are claiming UC, as a couple, including an amount for housing costs. UC is paid on the 7th of each month, in arrears, covering the benefit assessment period (BAP) 1st to 31st of each month. Eleanor gives birth to a baby girl on the 25th of May 2016. John immediately alerts the DWP by phone of the change. By reporting the change immediately, the couple can expect an additional £274.58 in their UC award, effective on 1st May 2016 i.e. the start of their “assessment period”. Under Housing Benefit rules, the change would kick in, the Monday following the birth. So UC is clearly more generous than HB in this respect.
However, here’s the rub – where a change is to the disadvantage (less UC) of the tenant, it’s also effective from the start of the claimant’s “assessment period”. The retrospective nature of this rule could almost certainly mean that landlords will find it more difficult to collect rent from the affected tenant’s reduced Universal Credit award, where, for example, a partner/dependent child leaves the household; one of the partners starts full-time work, earnings rise during the month; all of these incidents will result in a much reduced award.
Where couples split, even if it’s only for a period of weeks or months, the change has to be reported to DWP. Who reports the split determines who continues to use the original payment date and assessment period. So let’s say, the outgoing male partner reports the change; the remaining spouse/partner retains her BAP (benefit assessment period) and payment date. The outgoing partner needs to make a new claim and wait the 1 month + 7 days before another UC payment is made to him. He also needs to ask for a “backdate” to the date of the earlier BAP, so he doesn’t lose out.
Where two separate families come together (e.g single male tenant moves in with single parent) they have to firstly make a joint claim & confirm their joint claimant commitment; decide whose payment date (BAP) they wish to use. The adjustment is then made to that payment to reflect they’re now living as a couple. The other, depending on their payment date, might not receive any “housing element” for most of the previous month. Added to this, under UC there is no facility to make a “two homes” or overlapping liability payment. Clearly, this is a recipe for rent and/or “former tenant” arrears rising significantly. Landlords need to fully appreciate the importance of such a move!
One exception to this rule, is where someone in the household dies; the households’ UC continues, at the same rate, for that month and the two that follow the death; a form of transitional protection, designed to prevent an immediate financial loss and unnecessary hardship. This is provided for in part 4, Regulation 37 of the UC Regulations 2013.
Surprisingly, this more generous transitional protection rule, does NOT apply where there’s a single tenant. So for example, let’s say you have a tenant, George (56) living on his own, whose UC is paid on the 27th of each month with a benefit assement period of 20th to the 19th of each month. He dies on the 19th of May; the change comes into effect from the 20th of April (again, the start of his assessment period). Poor George, won’t be bothered, but his landlord can forget receiving payment of the housing element for that month, even where Alternative Payment Arrangements are in place. His liability to pay rent, for the month up to the date of death, has no bearing on Universal Credit, creating, in turn, the new concept of a “cradle to the month before the grave” approach in some tenancies.
Whilst it’s easy to see the attraction of the “whole month” approach, in terms of its simplicity, situations like the one I’ve just described, need to be provided for by an “exception” to the normal rule. I dare to say, this is something you might wish to raise directly with your local MP or Government Minister!
Universal Credit incorporates a great many anomalies and differences to housing benefit, which your staff need to know about. Importantly, none of these factors were evident during the “demonstration projects or pilots” so it’s unsurprising most landlords are completely unaware of their potential effects.
I explain all such anomalies & differences to those attending our training/mitigation sessions which can be delivered for you in-house http://universalcreditadvice.com/housing-associations/training/universal-credit-the-key-risks-to-direct-payments-rent-collection-arrears-control-debt-recovery-explained
If you’d like to discuss this or any other Welfare Reform matter with me or are considering subscribing to our website www.ucadvice.co.uk services, please e-mail me firstname.lastname@example.org or phone me on 07733 080 389