What is Universal Credit?

Introduction

Universal Credit (UC) continues to roll out to replace existing benefits and it will usually be paid as one lump payment including the element for rent. The roll out started out with single claimants with no dependants, but Universal Credit is gradually being rolled out to couples and families.

An overview

The Government have introduced new procedures as to how payment will be made under the Universal Credit system as it is rolled out. The new procedures apply across the board to local authority tenants, housing association tenants and tenants in the private rented sector. At the heart of the new procedures is the idea of promoting tenant's abilities to manage their own finances and to bring the benefit system in line with conditions that apply to working people.

Full service and live service

It is important to work out whether the claimant is in a full service or live service area.

Full service, the long term form of Universal Credit, is available to all kinds of claimants in certain areas of Great Britain. You can identify a full service area if it has an asterisk in the list of Job Centre areas where Universal Credit is available to couples and families. Universal Credit full service claimants will have an online account to manage their claims. They will use their account to report the changes and send them to The Department for Work and Pensions (DWP) fine support etc.

Live service is an interim more limited service which is available to:

  • All single people across Great Britain, who are not in a full service area.
  • Couples and families with children who live in an area (with an asterisk) in the list of Job Centre areas where Universal Credit is available to couples and families.

Universal Credit live service claimants will manage their claim by telephone. Live service claims will eventually move across to the full service. Claimants will be notified when this will happen and what they need to do at the time. Work is still to some extent evolving in this area.

Different rules can apply depending on whether the claimant is in a full service or live service area.

How does Universal Credit work?

The way Universal Credit will work is evolving. It is a new combined benefit for working age claimants whether in work or out of work, normally paid monthly with no separate identified payment for housing costs. It incorporates various existing benefits such as housing benefit, Income Support, Job Seekers Allowance and Employment Support Allowance, as well as various tax credits (all of which are called legacy benefits). It is administered by DWP on a national basis. Eventually, H M Customs and Revenue will drop out of the picture in the sense that they will no longer administer tax credits, although they will collect real time information from employers to enable the correct amount of Universal Credit to be paid for those who are working. Importantly, Universal Credit is an in work and out of work benefit for those of working age. It can be claimed by anyone aged between 18 and 60 years and 6 months. It is paid to households.

Although it is a single payment, Universal Credit will be made up of a number of components including basic personal allowances, allowances for children and, importantly for PRS landlords, housing costs to pay towards the rent payable by tenants to private landlords (and social landlords).

Universal Credit is a means tested benefit. It is calculated on a calendar monthly basis (not a weekly basis as at present for most benefits). There is a taper of 65% of earnings and at the heart of Universal Credit is the idea that it pays to work. Certain earnings will be disregarded altogether as claimants are entitled to a work allowance, i.e. an earnings disregard, and then the taper applies to earnings so that claimants can retain more of their earnings than at present.

As it is rolled out Universal Credit will replace housing benefit and local housing allowance (LHA). The two systems will operate in parallel for some time. Click here to see the list of areas covered.

Roll out of Universal Credit to claimants

Until May 2016 Universal Credit largely covered newly unemployed single persons, although there has now been an extension to couples/families. Universal Credit is being put in place in 30 Job Centres per month from around July 2017. This will increase to 55 per month from October 2017. It should be rolled out completely by September 2018. Claims will no longer be taken for existing benefits once it comes into full service operation in that area. The intention is that by September 2018 Universal Credit should be operational across Great Britain and claims to the current system of out of work benefit should stop altogether.

As the case load builds to what is now expected to be a final total of 7 million families, including 2.4 million working families, it is anticipated that there will be three ways in which couples/families can move into Universal Credit:

  • New claims - people who received no prior benefits but due to a change in their circumstances mean that they are now eligible for support.
  • Natural change - couples/families already entitled to some form of support, e.g. tax credits, whose circumstances change sufficiently that their current entitlement to existing benefits could be affected. If they then make a claim for other benefit entitlement they are transferred over to Universal Credit. Reasons for this could include moving in or out of work, having a first child, or moving into rented accommodation.
  • Manage changed cases - These are most likely to be working families and those in receipt of employment support allowance (ESA). This will be the final category but it is not now anticipated that they will not start moving across to Universal Credit in large numbers until July 2019 and this process should be completed in March 2022.

Additionally, the same rules will apply to single parents and single claimants who are not already in receipt of Universal Credit.

It is expected ultimately that two thirds of Universal Credit claimants will receive housing costs (whether private tenants or social tenants).

Pensioners and Universal Credit

The intention is that housing benefit for Pensioners be incorporated into pension credit but this process will not begin until Universal Credit is fully rolled out.

Digital by design

The intention is that eventually Universal Credit should normally operate by way of an online service (digital by design), as already happens in full service areas. Claimants will have an online account which they can access using a password. This will be used for claims, notifying changes in circumstances etc. The roll out of digital service areas is ongoing.

Beside the online facility there will be call centres available for claimants. Also there is an intention that claimants will be given more support and advice than under the present benefit system.

At the moment the number of areas where the full digital services in operation are limited.

There are also dedicated operational centres dealing with housing costs.

Impact of Universal Credit on landlords

Implementation of Universal Credit means a range of issues like: alternative payment arrangements (APAs), the new system of direct payments to landlords; the "whole month rule" where claims are processed by reference to a month rather than on a weekly basis; the effect of tenants splitting up and two households combining; backdating of claims; overpayments & their recovery; conditionality etc., will become everyday issues for landlords to contend with.

It is centrally operated and managed by DWP, and paid as part of a lump sum in arrears.

What happens outside the full service areas where Universal Credit is operational?

The "gateway conditions" should still apply for the foreseeable future. There are reports, in the "live" areas, of instances of tenants being invited to claim Universal Credit, even though the barriers to entry should have prevented such applications. In some of these areas the claim is limited to single people and in others single people together with couples or even families in some instances.

Part of the problem is caused by the claimants themselves not appreciating they fall into a "gateway" or "exempt" classification, so they give misleading answers when completing their online applications. More worryingly, DWP staff, through their own lack of understanding, are not asking the right questions or just skipping past them when dealing with tenants either at the job Centre or over the phone.

When a tenant who clearly doesn't satisfy the gateway conditions in a live service area, claims Universal Credit, in the way described above, and receives payment, there is little likelihood of back-tracking and reclaiming housing benefit again. Instead, the "lobster pot" notion applies with them claiming their "housing element" under Universal Credit.

Data sharing/disclosure of information

Tenant mandates, designed to permit landlords to be given ongoing information about claims are not being accepted. The DWP takes a strict view on Data Protection and "claimant confidentiality" which often prevents landlords having access to what's happening to new claims and APAs

There are specific rules that now apply in live service areas relating to data protection, published by DWP.

In full service areas, as the tenant has access to their own information via their online account, they can share the information from their account with their landlord if they wish as this contains information about housing payments made.

The claimant can also ask via the journal, face to face or telephone the Service Centre to provide explicit consent to share their personal information with their landlord (or other representative).

DWP policy is, in the first instance, that the landlord should try to engage with their tenant about any issues but if the landlord is unable to engage with the tenant the landlord can contact 03456 004 272 for cases relating to full service area cases.

There is no system of notifying private landlords that their tenants have made a claim; nor to tell them that payment has started. DWP should give information amount payments where an APA is in place under which direct payment is made to the landlord.

There are considerable problems over data sharing where a tenant is on Universal Credit. This means that the landlord will not be able to find out even basic information from DWP as to whether their tenants are claiming Universal Credit, unless they have the tenant’s consent and this is provided to DWP.

Payment to households

The basic unit for a claim is the household. Couples living together must therefore claim jointly. Currently, there are about 12 million claimants for the legacy benefits but it is estimated that this will reduce to around 8 million household claimants once the new system is fully up and running. Other adults in a household will be paid separately.

Claiming Universal Credit

Once you are on Universal Credit you may as well stay on for the remainder of your working life, e.g. if you are claiming Universal Credit to top up wages and are a low earner.

Unlike housing benefit and LHA you will not make a new claim each time you move properties. Instead, it will be treated as a change in circumstances. As at present, evidence will be required to support the existence of the tenancy, Usually through the tenant providing their tenancy agreement.

Changes of circumstances

As is normal for any benefit payments, changes in circumstances must be notified by claimants, e.g. birth of a child or a partner moving in or out. There are particular complications around the formation of a new household or the breakup of a household when spouses/partners separate. We have prepared a more detailed guide on this aspect of Universal Credit here.

When are Universal Credit claims paid

The first payment of UC is intended to be paid 1 month and 7 days after the "date of claim". So, for example, if someone claimed UC on 19th May 2015 their first payment of UC could be expected on 26th June, covering the period 19th May to 18th June. However, in many cases there is a further 7 days waiting period added on when a claim is first made.

Tenants are very likely to struggle with the up to 6 week waiting time and can apply for an advance payment of Universal Credit. We have prepared a more detailed guide on this for tenants available here.

Applying for direct payments as landlord

As with LHA there is the potential for direct payment to the landlord where their tenant is in two months or more of rent arrears. The landlord has the right to request a direct payment at that stage.

As with Local Housing Allowance, it is possible to apply for direct payments as a landlord but it has become more of a challenge under Universal Credit. We have detailed guidance on direct payments and deduction for arrears available here.

Enquiring about a managed payment

Where the tenant receives Universal Credit live service queries on non compliance issues about a specific case from a landlord can be raised directly with the Universal Credit Service Centre by telephoning 03456 000 723 or emailing uc.servicecentrehousing@dwp.gsi.gov.uk.

This email address is for use by landlords to escalate issues relating to APA’s and rent arrears payments. If there is a threat of eviction landlords are requested to note the subject field accordingly "potential eviction". It must not be used for new APA requests or for raising any other issues.

Enquiries noted as potential eviction cases should be cleared within 24 hours and all other enquiries within 5 days.

If the tenant is receiving UC full service - the landlord should engage with the tenant about the issue first, if possible. The tenant has access to their own information via their online record. They can share this information from their account with their landlord if they wish to do so as it includes information about housing costs made. If more assistance is required the claimant can ask, via the journal, face to face or telephoning the Service Centre to provide explicit consent to share their personal information with their landlord.

If the landlord is unable to engage with the tenant the landlord can contact DWP on 03456 004 272.

How the new system works

For Universal Credit the existing system of regulations does not disappear but their scope is much reduced and much of it is replaced by guidelines. As with LHA the guidelines provide for a switchback of payment to the landlord if there are 2 months arrears of rent.

There is a screening process at the outset to hopefully identify those who are not able to receive payment direct to themselves at the beginning allowing payment to be made to the landlord instead. This is not automatic and in some cases the tenant may still receive payment but also be given help budgeting support. Even if payment is made to the tenant once there are one month's arrears the case will be reconsidered and at that point direct payments to the landlord may be implemented but do not have to be. Decisions as to payment will be made individually on a case by case basis according to the guidance. All cases will be reviewed from time to time even if direct payment to landlords is being made. Payment can be suspended while an investigation is made where there are rent arrears.

Claims

As regards to claims, the intention is that these should be made mainly online or by telephone and where made by telephone the agent taking the call will complete the details. They are also made in Job Centres. Exceptionally, claims can be made face to face at an office or by home visit.

Each claim period will be dated from the date of the original claim e.g. if the claim is made on the 7th of the month then each subsequent claim period will start on the 7th of the month and the amounts will not be varied because individual months are of a different length in terms of the number of days in them.

Claims will normally be continuous so long as the claimant is eligible so a new claim will not need to be made for a new tenancy if the tenant is already claiming Universal Credit. Instead it will be notified as a change in certain circumstances.

Claimants are then interviewed by Jobcentre staff. A key element of the interview is to steer the claimant towards work but the interview also looks at issues relating to the Universal Credit claim

Payments

The default position is the same as under LHA where the tenant is paid Universal Credit directly. The important difference that it is paid as a single payment including the housing costs element for rent. Any other arrangement will be treated as an alternative payment arrangement.

Universal Credit will normally be paid calendar monthly in arrears. The effective date of the claim will fix the first calendar month and the intention is that payment will be made seven calendar days after the end of this initial period of one month (brought forward to a working date if it falls on a Bank Holiday/weekend). Thus, if you have a claim made on the 7th July the first payment should be due on the 14th August and thereafter on the 14th of the month. Assessments will also be made on a calendar monthly basis (rather than weekly, as at present).

It is proposed that for a minority of claimants they may be paid otherwise than monthly (e.g. fortnightly). However, this sort of arrangement will be time limited. Third parties will act for those who are incapable of looking after their own affairs (e.g. due to mental disorder) and they will then receive payment instead.

The fundamental rule is that there will be one single payment to the claimant, including the housing cost. This will be paid into a nominated account. This could be at a High Street Bank which could be a normal current account or basic bank account or alternatively to a Credit Union. In the case of Credit Unions it must be a Credit Union current account. This may mean that a fee is payable by the Credit Union for opening the account (normally around £5 per month) which may be deducted from payments made to the landlord. Normally, one account will have to be nominated by joint claimants. This can be paid into a joint account or a single account in the name of one of the joint claimants but, exceptionally, there may be split payments between two joint claimants.

Advance payments

Advance payments will be available where appropriate but they will then have to be paid back by the tenant and be deducted from subsequent monthly payments. They may be paid in the first month of claiming for instance. For further information about tenant claims for advance payments click here.

DWP complaints procedure

The formal complaints process for all complaints regarding operational delivery, as set out in the DWP Complaints Procedure. The guidance includes consideration of Universal Credit complaints, and sets out the escalation process. Although the complaints procedure refers to Jobseeker's Allowance (JSA) it is open to landlords.

In summary, the process to follow is:

  1. In the first instance, any complaint should be raised with the office that has been dealing with the case.
  2. If escalation is required, then the case can be referred to a Complaint Resolution Manager (CRM). The CRM will look into the complaint and try to resolve it, but if this is not possible they can refer unresolved complaints to the DWP Complaints, Redress and Stewardship team. This represents the final business review.
  3. Should complainants remain dissatisfied with this final response, they can escalate their concerns to DWP's independent complaints reviewer, the "Independent Case Examiner".
  4. If this still does not produce the desired result, the complaint can be referred via your MP to the Parliamentary and Health Service Ombudsman.

DWP has also confirmed that this new procedure should, in future, be outlined in the various decision notices, issued to landlords pursuing APAs and that the whole process will be continually reviewed and hopefully improved upon. Experience shows that this does not in fact always happen.

Details of the Complaints Resolution Manager are meant to be included in the decision notification.

Once the case is referred to the Complaints Resolution Manager they will consider whether any further action is needed. They can issue further payments of Universal Credit or an ex-gratia payment, where payment has been mistakenly paid to the tenant. Compensation awards have been made by adopting this process, so we know it's already working!

Information on ex-gratia payments is available in DWP guidance on Financial Redress for Maladministration.

Unfortunately, as a matter of policy DWP are in practice refusing to make such payments even where they admit maladministration.

Further guidance on how to make a complaint online is available here.

The process for alternative payment arrangement (APA) applications is explained in more detail. Guidance on how landlords escalate or complain about the progress of their application is provided by the government.

If a landlord cannot satisfactorily resolve their complaint, they can contact their local Partnership Manager as they have access to an additional escalation route for complaints.

Region Partner Manager
London and Home Counties Corinne Gregory
North West England Linda Watson
North East England Phil Adams
Central England Danielle O'Connor
Southern England Kim Goodall
Scotland Susanne Barr
Wales Kevin Morgan

This route is only available in areas offering the live service.

Appeal rights

There will be no appeal rights regarding payments even for claimants let alone for landlords. At the moment, where there are 2 months arrears, if a local authority fails to implement a request properly then potentially the landlord can seek remedies against them. However this is unlikely under the new system.

The RLA is currently exploring with DWP how their complaints procedure can be utilised.

Are there any rules or sanctions that may affect payments to the landlord?

There are a number of different rules that the tenant should follow to avoid losing out on Universal Credit payments. Landlords should be aware of these topics too. The RLA has prepared a guide on this topic here.

What can landlords do when tenants receive Universal Credit to try to protect them?

Private rented sector landlords who rent to benefit claimants have learned to adapt and are going to have to adapt even more. Clearly, many will consider giving up renting to Universal Credit claimants altogether. The Universal Credit will be received by more people because it is intended to be both out of work benefit and an in work benefit to replace the existing system of tax credits. Different considerations for the landlord may depend on whether the tenant is out of work and solely dependent on state benefits; in work receiving benefits as a top up; or retired/a pensioner. You have to remember that people will be able to switch in and out of receiving benefits more readily under the new system; or at least that is the Government's intention. Even a landlord who only takes on tenants who are in work may become involved because their tenant may become unemployed.

More and more landlords may well decide on a policy of not taking on out of work claimants, or even Universal Credit claimants altogether. This, however, very much depends on local conditions and whether there is a sufficient supply of working tenants. In a lot of areas this is simply not practical.

The one thing that comes out is that landlords will have to tighten up their procedures and monitor payments more closely than they do at present. The norm for the tenancy agreement is likely to become that the rent is paid calendar monthly now rather than weekly. The tenancy should state that it is to be paid in advance as at present. Landlords are going to have to decide what they do about payments at the beginning of the tenancy. At the moment many landlords are prepared to wait until benefit is paid. Even in those cases where payment is to be made to the tenant some authorities make the first payment direct to the landlord. There is no provision for this under the new Scheme, unless the tenant qualifies for alternative payment arrangements at the outset.

Landlords will have to consider other ways of protecting themselves if they take claimants e.g. taking a guarantee from a householder. Landlords would also normally consider taking a tenancy deposit but whether this is practicable for a claimant is another matter.

An evolving system

The whole system is evolving as it develops. A considerable number of policy decisions will have to be made by DWP. Therefore, anything outlined in this note could well change.

Important Note: This Guidance is based on currently available information.

As indicated above the rules are being developed and policy decisions are still to be made. Things may well change. Do not rely on this note without checking for changes.

Landlord & Investment Show
Martin Co
Envirovent
Landlord Broadband

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