What is Universal Credit?V1-JW-20161005

Introduction

Universal Credit 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 will gradually roll 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. To a large extent Universal Credit is still a "work in progress." 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. Essential computer systems needed for this are not yet fully developed however.

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 UC to claimants

Until May 2016 UC has largely covered newly unemployed single persons, although there has been some extension to couples/families. As from May 2016 DWP intends to embark on the new "full service". This will go live in around five Job Centres a month. If this goes to plan then UC will be put in place in 30 Job Centres per month from around July 2017. This increases to 55 per month from October 2017. It should be rolled out completely by September 2018. As you will see when it comes into full service operation in an area claims will no longer be taken for existing benefits in that area. The intention therefore is that by September 2018 UC should be operational across the UK 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 the final case load approaching a total of 7 million families (1 million less than previously expected due to cuts in generosity), including 2.4 million working families, it is anticipated that there will be three ways in which couples/families can move into UC -

  • New claims - people who receive no 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 UC. As reason 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 be moved across to UC at large scale 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 UC.

Pensioners and UC

The intention is that housing benefit for Pensioners be incorporated into pension credit but this process will not begin until UC 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 it is called, 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 role out at digital service areas is ongoing.

Beside the online facility there will be call centres which will service 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.

Live service areas and full service / digital service areas

Once the roll out has started in an area it is treated as a "live service area". As the roll out proceeds the intention is that the digital approach to Universal Credit should be expanded area by area or a full service area as it will now become known. Once expanded to a new area that area will be treated as a digital service area. The first digital service area was in the London Borough of Sutton. Different approaches to issues can apply depending on the area where the Claimant lives and this is particularly relevant to the changes of circumstances - see below.

By the middle of 2015 the rollout was gaining pace with much wider geographic coverage, and evidence is emerging that the LB of Sutton "digital system" trial is showing signs DWP is actually making some progress. So much so, that it's use is to be extended to other postal districts of London.

This is the "digital service" that DWP is pinning all its hopes on, in terms of the future expansion of the new scheme. If it works, as planned, the national rollout could quickly expand to allow all types of claims from June 2016. For now, the extension of the digital service area affects further sub-postcodes in Sutton, Croydon and Southwark.

In each of these digital service areas, claims for Universal Credit will be taken from singles, single parents, couples with children, and people with disabilities. Effectively, there will be little or none of the "gateway conditions" or barriers to entry which apply elsewhere in the "live service areas".

You can find out if Universal Credit is operating in your local Job Centre.

New sites are constantly being added so keep checking the GOV.UK Universal Credit page and Universal Credit Map to see when your local job centre will be going 'live'.

From May 2016 five areas per month will be added as full service areas initially. As time goes on the intention is to role out full service areas in 50 Job Centre areas per month. In a full service area, importantly, the "gateway conditions" do not apply. Up to now these have restricted the number of eligible claimants but this will no longer be the case in these areas.

Roll out of digital service areas

DWP plan to start the "Digital System" roll out from May 2016. DWP has confirmed its digital system, will proceed, as planned, and will be rolled out, between May - July 2016 in 5 Job Centre Plus areas in Bath, Newcastle, Rugby, Bridgewater and Lowestoft. A further 25 JCP areas will be added between July to December, 2016 with the expectation that all JCP areas will be completed by June 2018.

What exactly does this mean to those landlords with properties in the notified areas and those kept in the dark wondering when they will be affected?

The DWP statement suggests - "The full Universal Credit service remains on track to be delivered nationally for all types of claimants from May 2016, completing in June 2018.

The full Universal Credit service will be open to:

  • All new claims, from all claimant types.
  • Anyone who is currently on existing benefits or Tax Credits and has a change of circumstance that would trigger a new claim to Universal Credit, meaning the entire household affected would migrate to the full service.
  • Additionally anyone who is currently claiming Universal Credit through the "live service" will then migrate onto the full service over the first three months of operation.

After the transition process has completed in mid 2018 DWP will then begin migrating all remaining existing benefit claimants to the full Universal Credit service, this part of the process will complete in 2021."

Clearly, this represents a major step forward for DWP and Universal Credit's future. Private landlords, in the areas concerned, can expect a significant increase in Universal Credit claims from all tenant types, as the "gateway" conditions that currently apply to restrict claims to mainly single men are effectively removed. Assuming the initial tranche of areas progresses well, the numbers of JCP areas affected in 2017 will escalate at a much quicker pace if the plan to conclude this implementation is actually completed by mid 2018. The problem for most landlords, outside these areas is, they probably will not receive much, by way of advance notice, before the DWP bandwagon rolls into their area. Many private landlords in the Manchester, Liverpool and Wirral areas, received only 1 months notice before the July 2014 implementation.

FULL implementation means a range of issues like: APAs - the new system of direct payments to landlords; the "whole month rule" - 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. Do not anticipate assistance from DWP, as to date, it has operated at arms-length, is quite ambivalent to tenant/landlord enquiries/complaints and recently banned landlords from utilising its "Complaints Process" when trying to secure compensation for wholly avoidable rental loss

What happens outside the digital service areas where UC is operational?

In short, the "gateway conditions" should still apply for the foreseeable future. However, more and more there are reports, in the "live" site 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.

DWP has now confirmed that tranches 3 & 4 of the national rollout, should complete between September to November 2015 and January to April 2016 respectively.

It also confirms, tranches 1 & 2 have been completed successfully, meaning Universal Credit is now being delivered, albeit, still in low numbers and carefully selected cases, in 50% of Great Britain's Jobcentre and local authority areas. DWP claims that by April 2016, the first stage of the expansion exercise should be complete. If this is achieved, and the DWP deliver its "digital system" by that date (still very much doubted), the rollout could quickly gather pace.

However, at this stage, it's important to remember, tranches 3 & 4, for the most part, involves ONLY single, newly unemployed claimants, who would otherwise have claimed JSA or Working Tax Credits and who can overcome the long list of gateway barriers. The "gateway" is designed to keep the numbers of "eligible" claimants to a minimum, because of the regularly reported ongoing IT problems.

Nevertheless, we also mustn't forget, that, in some areas, like the original Pathfinders and "live sites" in North West of England, couples and families have been invited to claim Universal Credit.

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 jobcentre or over the phone.

When a tenant who clearly doesn't satisfy the gateway conditions, claims UC, 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.

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

Data sharing/disclosure of information

Tenant mandates, designed to permit landlords to be given information about claims are not being accepted. DWP's over-reliance on Data Protection and "claimant confidentiality" is preventing landlords' access to what's happening to new claims, APAs and Third Party requests. DWP have now indicated that they will accept written authorities from tenants to allow private landlords to obtain basic information at least on a one off basis. However, there is no system of notifying private landlords that their tenants have made a claim; nor to tell them that payment has started. Only if a tenant cannot produce a tenancy agreement or DWP wish to confirm a tenancy will private landlords be contacted. Any such contact will, of course, indicate that a claim has been made.

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 UC, unless they have the tenant’s written 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.

Therefore 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. Normally, this will be by way of 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 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.

Tenants are very likely to struggle with the 5 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. Additionally, there is often a 7 day wait before a claim can be made at all so that it can be at least six weeks before Universal Credit starts to be paid.

Applying for direct payments as landlord

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.

How the new system works

For UC 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 in which case an alternative payment arrangement is made for payment to the landlord to be made 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 alternative payment arrangements to the landlord may be implemented so that the landlord is paid direct (but not necessarily so). 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. The longest that direct payment may be made without review may well be 2 years. 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 Jobcentres. 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.

As indicated above, couples will have to make joint claims.

Claims will normally be continuous so long as the claimant is eligible. Therefore a new claim will no longer need to be made when a tenancy starts 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 UC claim

Payments

The default position would be the same as under LHA in that the tenant will be paid Universal Credit direct but with 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 UC complaints, and sets out the escalation process.

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. Lastly, if 1) to 3) doesn't produce the desired result, the complaint can be referred via your MP to the Parliamentary and Health Service Ombudsman, as detailed in the above link.

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 should consider, whether any further action is needed, to remedy any delay and/or injustice, including consideration of a further payment 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 Jennifer Willis
Southern England Kim Goodall
Scotland Jacqueline Brown
Wales John Beasley

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 if a local authority fails to implement a request properly made where there are 2 months arrears then potentially the landlord has remedies against the local authority but 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 UC 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 dependant 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
Property Six Pack (Gas Elec)

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