Blog: Universal Credit: Rollout speeds up but leaves problems in its wake

A key parliamentary committee has re-launched an inquiry into Universal Credit after receiving disturbing evidence of the problems encountered by tenants from councils. Heather Spurr believes the UK government should use the opportunity to listen to the concerns of tenants and landlords who are dealing with the worrying fallout of the once ‘flagship’ welfare reform.

In January this year, nearly half a million people were claiming Universal Credit. Despite repeated delays and timetables slipping back, the rollout of the combined benefit is ramping up across the UK and claims now stand at an average of 12,000 new claims per week.

What is Universal Credit?

Universal Credit, brought in under the Welfare Reform Act in 2012, combines six benefits, including Jobseeker’s Allowance and housing benefit. One of the most important changes is that rent is paid directly to tenants unless they fall into rent arrears or report that they find it difficult to manage their money and rent should instead go straight to their landlords.

Another change is that tenants are not eligible for Universal Credit for the first seven days of their claim. Add this to the four to five-week processing time, that is a long wait for the first payment to arrive and allow tenants to pay their rent.

The Work and Pensions Select Committee has re-launched an ongoing inquiry into Universal Credit, following worrying evidence from local authorities and social landlords that the new payment has been causing payment delays and rising rent arrears.

Shelter is helping many tenants who have encountered significant problems with Universal Credit. These problems often mean that tenants do not receive their benefit in time to pay their rent and are put at risk of eviction and homelessness.

Here are two of the key problems encountered by Universal Credit claimants that the government needs to address urgently:

1. Rising arrears are putting landlords off

The main council housing bodies say 85% of tenants they surveyed on Universal Credit are in arrears compared to 39% of tenants overall. The DWP has attempted to explain this by saying that many Universal Credit claimants were in arrears before. But the National Federation of Almos tracked a specific cohort moving onto Universal Credit and found that only half of these arrears can be attributed to pre-existing payment issues. More shocking is the amounts of unpaid rent. While average arrears went down for all tenants overall,  the arrears for those claiming Universal Credit nearly doubled from £321.05 to £615.89.

Lord Freud, the policy’s former architect, told the Work and Pensions Select Committee that the idea of landlords sticking up signs saying “No DSS” is being abolished under Universal Credit. According to the former minister, this is because more of the population – in and out of work – will be claiming Universal Credit, it will be more difficult to identify benefit-reliant households.

But anecdotal evidence shows that the opposite is often true and that prejudice against welfare claimants can be worse if they are claiming Universal Credit. Many landlords are getting fed up with the combined benefit and the delays involved in recouping their rent money. In some cases, landlords are refusing to let to any renters claiming Universal Credit, fearing the resulting arrears.

One council homelessness officer says: “It’s just not working for landlords.”

2. Universal Credit does not work for all types of housing

It is important to realise that some of these problems are due to design – such as the waiting days rule, where households have to wait seven days before they are eligible for benefits. Lord Freud admitted to the committee that this rule “does not help” tenants.

Some are unintended, such as the delays and administrative errors in issuing direct payments to landlords for tenants who struggle to pay their rent.

Other issues are due to Universal Credit being inherently problematic when encountering certain types of housing, such as accommodation for homeless families. Universal Credit is not designed for temporary accommodation, but the Department for Work and Pensions has insisted that homeless families should still claim housing support through UC. Temporary accommodation is meant to house people for a short period of time. By the time claimants have waited six weeks for their Universal Credit to come through, they may have already left the accommodation. Croydon Council has seen its collection rates in temporary accommodation drop from 91% to 59% under Universal Credit.

Lord Freud has recommended that temporary accommodation is taken out of Universal Credit altogether, as is currently done with refuges and homelessness hostels. The evidence suggests this would be a sensible way to improve the system.

Time to make changes?

Half a decade after the passing of the Welfare Reform Bill, Universal Credit is finally gaining steam. Some of the motivations behind the reform remain good ones, such as smoothing the gap between work and unemployment, and simplifying the benefits system. (Even though cost-saving actions such as cutting work allowances mean the positive things have been heavily diluted.)

The DWP has said it is taking a ‘test and learn’ approach to Universal Credit. It has tested the policy for quite a few years now. Maybe now is the time to learn.

  • Heather Spurr works in Shelter’s policy team