Work and Pensions Committee - Universal Credit implementation: meeting the needs of vulnerable claimantsWritten evidence submitted by the National Housing Federation

1.0 Summary of Key Federation Recommendations

1.1 Additional resources should be made available to provide advice and support to help tenants make a successful transition to Universal Credit (UC). This should include help with budgeting and access to banking, help with making and managing claims online, and help in understanding responsibility for rent payments and other bills.

1.2 The definition of vulnerability—to determine which groups of tenants should continue to have their benefit paid direct to their landlord—should be broad and flexible and include financial vulnerability. Failure to draw this definition realistically risks leading to significant increases in arrears among tenants.

1.3 An efficient “switch-back” mechanism is required to ensure rent is paid direct to the landlord if a tenant builds up eight weeks of arrears. Without an effective trigger, tenants’ arrears could build up very quickly.

1.4 The definition of supported and sheltered housing needs to be revisited to ensure that tenants in these types of accommodation are indeed protected from benefit deductions for under-occupation, as the Government has said it intended.

2.0 Introduction

2.1 Housing associations operate in some of the most deprived and disadvantaged communities in the UK, and understand the importance of getting people into work to tackle poverty and raise aspirations. The National Housing Federation supports many of the principles behind the introduction of UC, from making sure work always pays through to simplification of the system.

2.2 As with any major reform there are substantial risks that the Government will want to be aware of and mitigate against. The introduction of UC will bring about significant changes to the way support for housing costs is handled. While the Welfare Reform Act sets out the overall framework, the success or failure of the changes will be determined by the secondary legislation and guidance that will govern how the new regime operates. If implemented without due care, changes could actually undermine the Government’s objectives on housing and tackling disadvantage.

2.3 The National Housing Federation has provided significant input to Government at each stage of the legislative process, during the passage of the Bill, and now in relation to the multiple sets of regulations. The Federation’s discussions with the Department of Work and Pensions (DWP) on the design and implementation of UC, in particular, have been open and constructive and the Department has proved willing to listen and act upon issues raised by the sector. We are also working with the Department in a number of practical ways; for example, our members are involved in the Direct Payment Demonstration projects, and we are helping to second people to key implementation projects to lever in sector expertise.

2.4 Below we have summarised the current key issues for our sector as they relate to implementation of UC, under the headings set out in the call for evidence. We would welcome the opportunity to discuss these matters with the Committee in due course.

3.0 Evidence

The proposed arrangements for claims and payments and the provision of support and advice for claimants

3.1 Between October 2013 and 2017, almost eight million households will start receiving UC. There is a clear need for advice targeted at the specific needs of people transferring to the new system. A clear commitment from Government to provide a comprehensive support programme is required together with details about what that will entail.

The presumption of a predominantly online, self-service claims process

3.2 If the large majority of UC claims are to be made online, without assistance, significant investment will be needed over the period of transition. This is because a substantial proportion of the population either do not have the skills needed to use the internet or cannot access it because they live in a broadband “not-spot” cannot afford a home broadband connection, or cannot access public resources to get online.

3.3 Recent research published by the DWP found 78% of working-age benefit claimants use the internet and 74% have a broadband connection in their home.1 Based on the projection of eight million UC claimants by 2017, this means as many as two million households could lack online access. Research by Circle Housing Group indicates that in some areas the problem will be even more significant. Findings suggest up to 45% of tenants do not have internet access at home and 58% do not have access via a mobile phone—excluding them from online banking.2

3.4 We are also concerned about the level of support claimants will receive to manage their UC claim online after their initial claim has been made. Even those who use the internet may not do so on a regular basis—only 48% of main claimants use the internet every day.3

Arrangements for providing telephone and face to face support and independent advice for claimants who need it

3.5 Since online claims will not be suitable or accessible for all claimants, we welcome commitments by Government to continue telephone and face to face assistance for making a claim where it is needed. More details are required to set out how this undertaking will work in practice. How will DWP identify people who need either support with online claims or access through other channels?

3.6 After the initial claim has been made, will those who have used the phone or face to face services have to log in to find out the amount of their award and when it will be paid? Will email be the only form of communication, or will other means of communication be available? Some groups of claimants, such as the self employed and those whose employers do not have access to Real Time Information systems, will have to regularly update information on their claims. What support will be available for them if they do not currently have home internet access or sufficient digital skills?

What support will be required?

3.7 We suggest the following types of support will be necessary to help claimants successfully manage the transition to UC:

Help with budgeting—managing change to monthly payments.

Help with online access to make and manage claims.

Access to banking—help setting up and using bank account and help setting up a secure method of paying rent.

Help in understanding responsibility for rent payments and other bills.

3.8 It is important that funding for face to face support is maintained as telephone and internet support will not always be appropriate, especially for vulnerable people. This type of support cannot be provided without additional resources. Even for housing associations that are already providing some of this support and have incorporated it into their business plans, the scale of work needed to manage these major changes will be substantially greater than current “business as usual” provision.

3.9 Given the great pressures on social housing tenants to manage their limited budget in a new way, we believe that the Money Advice Service should have particular regard to targeting its services at people living in social housing. This could be done through working with social landlords and tenants to look at the most effective means to support people to budget and avoid and manage debt, including rent arrears. Social landlords have a role to play in promoting services to tenants but it is vital that tenants are both able to access the services and make effective use of any advice.

Monthly payment to one person in the household

3.10 The move to UC means that many people will have to move from budgeting weekly or fortnightly to budgeting monthly. Most working-age social housing tenants will also lose the option of having their support for housing costs paid direct to their landlord.

3.11 Research from Policis shows more than half of social tenants feel that a shift to monthly payment of benefit will make it more difficult to manage their budgets.4 Existing patterns of money management and weekly budgeting have evolved to manage the challenges of living on a very low income. Over a 12 month period, 23% of social tenants struggled to afford food, 24% fuel and 31% shoes and clothing.

3.12 When money is short, it is easier to save on essentials, such as food, for a day at the end of a week, rather than for several days at the end of a month. The same research also shows the overwhelming majority (93%) of social tenants in receipt of Housing Benefit believe it is better to have it paid direct to their landlord.

3.13 Advice and flexible options need to be readily available to help people manage the shift from fortnightly to monthly payments and any options around UC advance payments need to be well publicised and easy to apply for, to prevent people getting into debt and arrears.

Gap in payments on transition to UC

3.14 UC will be paid seven days after each assessment period, meaning that claimants will receive their first UC payment about five and a half weeks after submitting their initial claim. The Federation is concerned about the long gap between a claimant’s final Housing Benefit payment and their first UC payment. It should be possible to speed up this assessment process for claimants migrating across from Housing Benefit.

Financial products

3.15 Advice needs to be sensitive to the unique pressures faced by low-income social tenants; for example, tenants may be reluctant to manage rent payments via direct debits because they have had bad experiences, including with penalty charges, of bank accounts with such facilities. A significant number of social tenants do not have a bank account at all. Despite strides forward in the provision of basic bank accounts over the last few years the Family Resources Survey showed more than 15% of local authority tenants and 13% of housing association tenants still do not have a bank account5 and would not therefore be able to pay rent by direct debit.

3.16 Research suggest that, of those who have moved into banking in the last five years, more than a quarter have experienced a net loss, with any savings from direct debits outweighed by penalty charges for missed direct debits and over-limit fees.6 Financial products appropriate to the needs of this group must be more widely available but there is currently insufficient appetite among mainstream banks to invest significant resources in providing a solution to the challenge posed by UC and direct payments to claimants. It is clear that a significant step change is required if there is to be an effective supply of appropriate products to support the personal budgeting requirements of UC.

Exceptions and vulnerability

3.17 Some claimants will struggle to cope with the changes introduced by UC. DWP needs to work closely and in partnership with social landlords, local authorities and other agencies to identify and support people in need of exceptions before they get into debt or crisis. This means considering split payments within a household; more frequent (than monthly) payments; or having housing costs paid direct to the landlord. It is important that measures are in place to identify and support those who are vulnerable or have complex needs.

3.18 The law does not provide a definition of “vulnerable” for the purposes of Housing Benefit recipients. However, DWP has in the past provided guidance on how to decide if a claimant is vulnerable in the context of claimants of Local Housing Allowance in the private rented sector.7 The guidance set out various factors for consideration, including learning disabilities, medical conditions, addictions and severe debt problems. The Federation believes this provides a useful starting point for defining vulnerability in the context of UC claims. Consideration should also be given to including the following within the definition of vulnerability for exceptions purposes:

Claimants who live in short or long-term supported or sheltered housing.

Claimants who are in receipt of floating support, such as Supporting People-funded services or intensive tenancy sustainment support.

Claimants who are moving on from supported housing.

Claimants with recommendations from other appropriate agencies (for example, community mental health services).

Claimants who are financially vulnerable. This definition could include those subject to a suspended possession order or notice seeking possession, anyone who is about to be evicted, anyone with a direct deduction for arrears from their benefit, and people who are facing sanctions for work requirements. A definition of financial vulnerability could also take into account information from rent records and credit checks.

3.19 We would like to see a transition period where arrangements already in place to pay rent direct to the landlord remain in place for a fixed period after a claimant transfers to UC. This would ensure the tenant has a more gradual introduction to the new payment arrangements under UC and reduce the risk of arrears. A transition period could be particularly beneficial for certain groups, such as care leavers, allowing support to be provided until a claimant is ready to move onto payments direct to the tenant.

3.20 We would like housing associations to be considered as “trusted intermediaries” in being able to verify that a tenant falls into a vulnerable category, and also advocate for split payments for households where necessary. There needs to be flexibility in the definition of vulnerability, to accommodate those who become vulnerable for a short time, for example after experiencing a trauma such as a death in the family.

3.21 Failure to tackle these issues will not only increase the risks of tenants falling into significant arrears, but could also threaten the stable income of housing associations, which is essential for the development of much-needed new affordable homes.

The arrears trigger

3.22 There must be speedy and effective processes for switching payments from claimant to landlord after a specified period of non-payment of rent by any claimant. This is vital to ensure that, for example, an eight week limit on arrears does not in practice become a 10 or 12 week limit. We would welcome clarification on how this will work within UC.

3.23 Landlords should be able to argue for a shorter switch time for some tenants to prevent people getting into serious debt and to reduce the risk of arrears to the landlord. The use of this type of flexibility could be periodically reviewed to ensure it continues to be appropriate.

Progress with developing the necessary IT systems to administer Universal Credit, including the Real Time Information system for PAYE (Pay as You Earn) taxation being developed by HM Revenue & Customs

3.24 Housing associations will be better able to provide support for tenants if the system is designed to maximise efficiencies for both landlords and the DWP. Automation of systems should allow associations to concentrate resources on supporting tenants, many of whom have poor literacy and financial skills. As set out in paragraph 3.6, above, it will be important to ensure that tenants who are self-employed or who work for employers that do not have access to RTI are not disadvantaged.

3.25 The DWP is opening up an effective dialogue with social landlords, and using the experience of the six direct payment demonstration projects, but we remain concerned about whether the system will have full functionality by October 2013.

The proposed arrangements for the “claimant commitment”, sanctions and hardship payments

3.26 If the sanctions regime under UC works, by encouraging claimants to stay in work, show up for interviews and supply correct information, and is applied only in a small number of cases, then it might be effective. However, as no one can predict how many claimants will be sanctioned it is important that safeguards are put in place.

3.27 Tenants who receive a UC sanction may be at risk of getting into arrears with rent as they struggle to budget on less money. If the tenant does not already have a direct payment to landlord then DWP should consider establishing direct payment for the period of the sanction to prevent arrears accruing. Sanctions should not affect payments for housing costs.

Changes in the income entitlement of disabled people under Universal Credit, including those who may receive less income under Universal Credit than at present

Benefit on two homes

3.28 The Federation believes the definition of a disabled person able to receive benefit on two homes for one month to allow a house to be adapted should be extended to include people who receive the mobility component of Personal Independence Payment or Disability Living Allowance. There is an obvious connection between needing adaptations to a home and having mobility problems. A suitably adapted home can reduce a disabled person’s need for care.

Treatment of supported accommodation under UC

3.29 The UC regulations are silent on what help tenants of supported accommodation—many of whom are disabled or who have specific support needs—will receive towards their housing costs. More detail is necessary because the housing element of UC for general needs housing may be insufficient to pay for the additional costs of housing and support under supported housing. The definition of supported and sheltered housing also needs to be revisited to ensure that tenants in these types of accommodation are protected from benefit deductions for under-occupation, as the Government has said it intends.

The impact of the changes on local authorities, including budgets, staff and support for claimants. The changes include those to Housing Benefit; the introduction of the benefit cap; and localisation of Council Tax Support

3.30 Housing Benefit in the social sector is currently paid—often directly to landlords—by local authorities. There are several advantages to such a system, including councils’ local knowledge and the ability to provide claimants with face to face meetings and advice. Under the Government’s changes, local Housing Benefit structures will be replaced with a centrally administered system responsible for providing a range of vital support under the umbrella of the UC. The changes will be significant for both users and administrators. Removing the administration of Housing Benefit from local authorities and passing it to central Government risks the loss of effective joint working between landlords and administrators that can provide administrative efficiencies.

3.31 More urgently, local authorities face substantial pressure to implement changes to Council Tax Benefit (CTB) by April 2013. Many CTB claimants are tenants of social housing, and are already facing a number of financial pressures due to reductions in entitlement to other benefits. Housing associations are putting resources into financial inclusion work and supporting tenants to budget effectively to cope with the changing circumstances. The Federation considers the involvement of housing associations in the process of drawing up local support schemes to be important.

Impact monitoring: what the DWP’s priorities should be for monitoring the impact of the transition to Universal Credit

3.32 Any review of the transition to UC should consider the impact on levels of arrears, online access, over-payments, supported housing tenants, access to money advice, and the welfare of families and communities.

3.33 The Committee will understand that the impact of the new UC regime on behaviours will not be properly understood until the bulk of existing claimants are in the system—this may not be until the second half of 2014. With the initial UC system focusing on new claimants it will be some time before we understand the full impact of, for example, direct payments on tenants and on the social housing sector.

3.34 The National Housing Federation has commissioned longitudinal research, from Ipsos MORI and the Cambridge Centre for Housing and Planning Research at the University of Cambridge, into the impact of welfare reform. We will share the results of this work with the Committee when they are available.

4.0 Conclusion

4.1 The introduction of UC provides the opportunity for positive improvements including a simpler, more streamlined benefits system and greater work incentives. We hope that the Government will give serious consideration to the risks and issues, as highlighted in our response, and set out plans to address them. The Federation remains committed to working constructively with the DWP to ensure the most effective implementation possible.

16 August 2012

1 DWP (2012), Work and the welfare system: a survey of benefits and tax credits recipients,

2 Circle Housing Group, unpublished research, August 2012

3 DWP (2012), Work and the welfare system: a survey of benefits and tax credits recipients,

4 Policis, The impact of welfare reform on social tenants and their finances (forthcoming)

5 Family Resources Survey 2008–09. Figures exclude post office accounts, which do not accept payment by direct debit.

6 Policis, The impact of welfare reform on social tenants and their finances (forthcoming)

7 Housing Benefit Local Housing Allowance Guidance Manual Amendment 4, September 2005:

Prepared 21st November 2012