Universal Credit briefing The National Housing Federation supports the principles of Universal Credit to simplify the benefit system and to make work pay. However, we are concerned that elements of the design and implementation have the potential to cause hardship for many claimants. Universal Credit (UC) replaces six existing in- and out-of-work benefits 1 with one single household payment. It is currently available to a restricted group of new claimants in specific local areas. There are currently fewer than 10,000 people receiving UC. The roll out of UC to over 7 million households is planned to be completed in 2017, with the majority of existing benefit claimants migrating in 2016 and 2017. What do the changes mean? There is broad, cross-party support for the principles behind UC to simplify the benefit system and to increase work incentives. The system will remove some of the cliff-edges and rules about the number of hours individuals can work which exist within the current system, and should mean that claimants keep more of their earnings and are better off in work. UC is a single payment, made to the household and paid monthly in arrears. The payment will also (if applicable) include support for housing costs. This is a significant change from the existing system, where the majority of benefits are paid weekly or fortnightly and the majority of social housing tenants have their housing benefit paid direct to their landlord. What are the risks? If the system works, Universal Credit has the potential to benefit millions of people. However, for many, it also presents significant risks to their financial security. Monthly budgeting - Our research shows that the majority of tenants budget on a short term basis and wouldn t be confident budgeting over a monthly period. If you are struggling to make ends meet, it s very different to cut back on essentials for a day at the end of a week, compared to several days at the end of a month. Paying rent - 92% of social housing tenants currently receiving housing benefit prefer to have it paid directly to their landlord. Tenants no longer have this choice under UC. Tenants should be able to choose whether or not they want their housing costs to be paid direct to their landlord. For many, this is an entirely sensible choice. Online access - UC applications are made online. Our research shows that approximately a third of social tenants don t have access to the internet, and of those who do, around half wouldn t be confident filling in a benefit application online. 2 People who will struggle with Universal Credit are concentrated in social housing. There are 2.26 million working age households living in social housing and currently claiming Housing Benefit (GB). These are the numbers we can anticipate transferring onto UC. 1 Housing benefit, income-based Job Seekers Allowance, income-related Employment and Support Allowance, Income Support, Working Tax Credits and Child Tax Credits 2 See Ipsos MORI (2014) One year on: The impact of welfare reforms on housing association tenants www.housing.org.uk/publications/browse/one-year-on-the-impact-of-welfare-reforms-on-housingassociation-tenants-1/#sthash.ia0gcdyl.dpuf
What is the experience so far? The Federation is undertaking a live evaluation of Universal Credit 3, ensuring that the experiences of housing associations and tenants are fed back to the Department for Work and Pensions. The evaluation has shown that tenants and landlords have experienced significant problems with the UC process and procedures including Digital by design, Personal Budgeting Support, Advance Payments and Alternative Payment Arrangements. Universal Credit has been live in some areas since April 2013, however it should be noted that there are still only a small number of Universal Credit claims. Given the current restricted claimant group (newly unemployed, without children) only a very small proportion of these claims are from social housing tenants. Nevertheless, this anecdotal evidence still provides a useful insight and has already resulted in improvements being made to some of the Universal Credit systems and processes. We support the DWP s test and learn approach and will continue to press for improvements needed to ensure that claimants are able to successfully manage the new system. Housing associations report that some tenants are managing their Universal Credit claims well and paying their rent. The process also appears to work well for tenants who are working (as UC smooths the transition to employment). However, many tenants are struggling on Universal Credit, with particular needs for support only identified once they hit crisis point. Safeguards not working Personal budgeting support is available in all Universal Credit live areas for claimants who need help managing their money. Additionally, for those unable to manage the standard monthly payment, alternative payment arrangements (APAs), where payment can be made to the landlord, more frequently or split between members of a couple, can be made. However, early experience from the live running sites has revealed a range of weaknesses in the implementation of these safeguards, which are designed to protect claimants finances. In particular, the triage process, for identifying whether support or an APA is needed, is not working well. For example, a very high proportion of tenants who have claimed Universal Credit have existing arrears and other debts. However, there are many instances where this has not been identified when a tenant makes their claim. Very few referrals to personal budgeting support have been made and the majority of alternative payment arrangements have been applied only when a tenant has two months of rent arrears, meaning that they are already at risk of losing their home. For the safeguards to work, risks and support needs need to be identified earlier. DWP is currently reviewing the triage process and testing new approaches. The Federation believes that making better use of the information held by other organisations, including housing associations, could help to identify more claimants needing support before they hit crisis. 3 Latest report, Universal Credit One Year In: The experiences of housing associations www.housing.org.uk/publications/browse/universal-credit-one-year-in-the-experiences-of-housingassociations/#sthash.tt4cfdj7.dpuf 25 Procter Street www.housing.org.uk
Causing hardship Many tenants have increased rent arrears since claiming Universal Credit. Alternative payments (to landlord) are in place for a high proportion of housing association tenants as a result of the two month arrears trigger. Housing associations are not informed if one of their tenants claims Universal Credit, meaning that they often only find out once a tenant starts to get into rent arrears. This means that they are only able to provide advice and support once a tenant is already in difficultly. Universal Credit is paid monthly, in arrears, with the first payment received one month and seven days after the claim is made. During this time, claimants can apply for a short term advance if they are in financial hardship, including having difficulty paying rent. This needs to be paid back and is deducted from future benefit payments over the course of three (six in exceptional circumstances) months. Very limited take-up of Universal Credit advances have been reported. Tenants have told housing associations that they are put off by repayment terms which are too short. Housing associations are concerned that the processes within Universal Credit are putting pressure on tenants. The cumulative effect of the sanction regime, the month and seven days it takes to process the claim, and the repayment schedule for advance payments may push people into poverty. In addition to using foodbanks, some associations are aware of claimants relying on family and friends to provide not only financial support, but also food. Recommendations 1) Tenants should be able to choose whether or not they want their housing costs to be paid direct to their landlord. 2) The safeguards designed to protect claimants finances need to work properly before Universal Credit is rolled out more widely. 3) There needs to be a minimum standard of support available to UC claimants in every local area and the Government needs to ensure that support services are adequately funded. 4) Efficient two way data sharing between DWP and social landlords is needed so that housing associations are able to support tenants with the transition to Universal Credit. 5) Housing associations should be able to make recommendations for tenants who need an alternative payment arrangement and make direct referrals to personal budgeting support. 25 Procter Street www.housing.org.uk
Annex: Universal Credit claimant case studies The following case studies are taken from Universal Credit One Year In: The experiences of housing associations 4. They should not be treated as representative due to the small numbers of housing association tenants currently claiming UC. However they do serve to highlight some of the challenges faced, as well as the benefits for some claimants. Making the claim Claimant A made the claim over the telephone in July 2013 and found the process very difficult and said that the local Jobcentre would not help them. The claimant has no internet access and no mobile phone, but was not offered support when making the claim. Claimant B made a claim online in July 2013 using a friend s computer; the friend also helped the claimant complete the form, and they found it easy to complete. Claimant E made a claim online in January 2014, receiving no support, and found it very difficult. Claimant F is in work and made a Universal Credit claim. They made the claim online, in the council office, and found the process easy. Looking for work Claimant A tried to upload a CV onto Universal Jobmatch as they were advised not doing so would affect the claim. The Jobcentre computer does not have a hard drive so they couldn t save the CV and upload it. The claimant wanted to apply for various jobs using Universal Jobmatch, but couldn t do so as they needed to upload a CV. Claimant B was also concerned about looking for jobs using Universal Jobmatch. Using Universal Jobmatch registers on your Universal Credit claim, but using other job search sites does not. The claimant was therefore concerned about being sanctioned for not looking for work when they were. Claimant F is a working claimant and is better off on Universal Credit than under the previous system. The claimant has agreed to do 25 hours of job searching activity if they work ten hours a week. Rent arrears Claimant C s rent arrears rose from 71 when making the claim to around 800 by the time the first payment came through. The claimant explained that the biggest temptation is not to spend all the Universal Credit money and ensure that the rent is paid. A rent recovery plan has been agreed with the housing association, and once in a routine the claimant believes they will be able to cope. Claimant D s final wage from his last job was taken into account which reduced his first Universal Credit payment to 350 rather than the 630 he thought he would get. Because he had set up various direct debits, he incurred charges when these bounced. The claimant does not want to move to a Direct Debit for his rent payment, as the halving of money has scared him. The claimant owed 800 in rent at the point of claim. This rose to 1,030 when the first payment came through. Claimant E obtained their tenancy agreement, as required in the application process, but was called two weeks later by the DWP asking for a copy of an up to date rent statement. The claimant took this to the Jobcentre but this wasn t processed, so the 4 www.housing.org.uk/publications/browse/universal-credit-one-year-in-the-experiences-of-housingassociations/#sthash.tt4cfdj7.dpuf 25 Procter Street www.housing.org.uk
claimant s first payment did not include housing costs. The claimant owed 250 in rent at the point of claim, which rose to 620 by the first payment. 25 Procter Street www.housing.org.uk