Government rolls-out Universal Credit changes to address arrears spike

Changes to Universal Credit will come into force this month , including changes to the controversial 42 day waiting period for claimants to receive their first payment.

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The changes, first announced by the chancellor in last year’s Autumn Statement, are intended to ease some of the pressure on vulnerable households and address the growing discontent from MPs, including Conservative backbenchers.

From 1 February 2018, the 42 day period between applying for Universal Credit and receiving the first payment will be reduced to 35 days. Furthermore, the seven-day period between a claim being made and entitlement for benefit beginning will be scrapped.

The news has been greeted with cautious optimism by those in the housing sector where both private and public landlords have experienced a spike in the level of rent arrears accumulated by tenants on Universal Credit. Some campaigners have suggested that this could lead to an increase in evictions and homelessness if left unchecked. It is hoped that the changes to the existing waiting periods will help tenants to make their rent payments on time.

According to a freedom of information request by The Observer, half of all council tenants on Universal Credit are at least a month behind on rent. 30 per cent are two months behind. The issue has been particularly pronounced in Wales, where rent arrears have trebled under Universal Credit compared with England.

Under the previous system (prior to Universal Credit), Housing Benefit was paid directly to the landlord or housing association, rather than the applicant. According to a recent freedom of information request by The Observer, those councils which had not yet implemented the Universal Credit system were significantly less affected by rent arrears. Across the board, only 10 per cent of council tenants receiving housing benefit – rather than Universal Credit – were a month behind on their rent and less than five per cent were two months behind.

Furthermore, in December 2017, a spokesman for Swansea-based Coastal Housing Group said that the increasingly large-scale rent arrears could affect investment in new affordable homes.

Louise Hebborn, a partner and leading commercial lawyer at Stephensons, said: “Any changes which improve the current situation regarding Universal Credit and rent arrears are to be warmly welcomed by the sector. However, whether they go far enough – or are the ‘silver bullet’ needed to tackle the problem – remains to be seen.

“In theory, the effect of scrapping the current waiting periods is a simple one. The less time applicants have to wait to receive Universal Credit, the quicker they can pay their rent and get any arrears under control.

“Aside from the obvious benefits to the tenants themselves, this should help in improving the cash flow of registered providers and allow them to plan the use of their housing stock with greater certainty. Furthermore, a consistent cash-flow makes the business of developing new and affordable homes a much simpler process.

“However, there are some influential voices within the sector who believe the changes do not go far enough in addressing what they call ‘systemic problems’ with the Universal Credit system.”

Critics of Universal Credit have cited feedback from claimants that the new system is still too complex and cumbersome. Some have complained that the staff employed to manage Universal Credit applications are badly trained and the system is difficult to navigate for those without internet access.

According to The Guardian, councils – who are already facing difficult conditions in providing new housing stock – are spending hundreds of thousands assisting Universal Credit applicants. Newcastle City Council has spent £390,000, of which only a quarter has been used to address the problem of rent arrears.

ENDS

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