Written evidence from Community Housing Cymru [UCW0084]
Community Housing Cymru (CHC) is the representative body for housing associations and community mutuals in Wales, which are all not-for profit organisations. Our members provide over 158,000 homes and related housing services across Wales.
CHC members work closely with local government, third sector organisations and the Welsh Government to provide a range of services in communities across Wales.
Housing Associations provide support and advice to tenants who claim benefits such as Universal Credit. They also play a key role in the system of alternative payments arrangements, helping vulnerable tenants who require managed payments to landlords. Our members have data on the impact of benefit changes on the level of rent arrears experienced by social housing tenants, and they also have a detailed understanding of the financial challenges that tenants face.
We welcome the opportunity to provide evidence to this Work and Pensions Select Committee inquiry into the economics of Universal Credit (UC).
In this response, we focus on the impact that the initial wait for UC has had on housing association tenants in Wales, and on associations themselves. We also provide information on the impact of advance payments for UC.
We base this response on a study into the impact of UC which CHC commissioned from Opinion Research Services. This study was conducted between January 2018 and May 2019. Its final report was entitled Monitoring the Impact of Universal Credit on Rent Arrears in Wales[1]. We also refer to input we have received from members with regards to the specific questions raised by this inquiry.
Based on this evidence, we recommend that the UK Government should act to end the hardship caused to claimants by the five week wait for initial payments under UC. We call for the introduction of an interim payment (not a loan) during this time.
The Monitoring the Impact of Universal Credit on Rent Arrears in Wales study found that, within the 24 housing associations surveyed:
Alongside this quantitative research, Opinion Research Services carried out six in-depth case study interviews with housing association staff.
Interviewees explained that arrears often increase when tenants initially transition to UC. This is because they are required to wait five-weeks before receiving the money needed to pay their rent.
The five-week waiting period between making a claim and receiving payment is intended to immediately shift claimants to budgeting their money on a monthly schedule. However, this requires a significant adjustment for those who are used to the weekly schedule of Housing Benefit payments, particularly as some are also paid more frequently than monthly by their employers. In addition, housing association tenants are less likely to have the financial reserves required to avoid falling into debt during this waiting period.
Since the introduction of UC, the Government has introduced advance payments in order to reduce the impact of the initial waiting period. These advance payments function as loans which claimants pay back through deductions from their monthly UC payments over twelve months. The maximum amount that can be claimed is equivalent to an estimation of the monthly UC payment a claimant is likely to receive.
Opinion Research Services’ in-depth interview participants explained that these advances can be very problematic for housing association tenants. Indeed, advances can exacerbate the issues caused by the delay in payment for some claimants. This is because claimants can ‘struggle to pay the money back (especially single tenants who do not receive much money from benefits and those on zero-hour contracts’[2]. One explained “Someone is offered money and it seems brilliant, but they don’t understand the impact of having to pay it back over 12 months. The fact that this money is supposed to go towards their rent is not being explained to them thoroughly enough and it almost gives them a false impression of how much money they’re going to be getting.”[3]
Opinion Research Services’ interview participants felt that some tenants had been able to ‘claw back’ the money over time.
They attributed this partly to the gradual roll out of UC, and to other specific mitigations which the Government has introduced to address both the impact of the initial wait for payment and the shift away from payments to landlords. These included:
They also identified internal changes that housing associations have made which have mitigated key risks, such as:
However, as this ‘claw back’ takes time, claimants are vulnerable to falling into debt and/or are forced to take difficult decisions on whether to pay for food, utilities or rent in the interim.
Given all of this evidence with regards to the challenges of implementing UC, CHC has significant concerns over the impact of the huge increase in numbers of claims due to Coronavirus (Covid 19).
When interviewed with regards to likely increases in numbers of claimants due to managed migration, Opinion Research Services’ interviewees explained that as the number of UC tenants increase, so will the proportion of ‘complex’ cases of tenants who at greater risk of falling into greater levels of rent arrears. This risk could be mitigated by address the challenges caused by the initial five week wait for payment.
CHC recommends that the new Government make the following adjustments to the system in order to ensure the success of UC:
We could stop people falling into real hardship if people could get a payment (not a loan) before the end of a 5 week wait and if people were given more support to claim on time.
UC needs to work better for the millions of people who rely on it. With better data sharing between DWP and social landlords we all could provide more support to the people that need it. This could help prevent fraud, homelessness and situations that escalate into crisis, and build on the success of the landlord portal.
[1] Monitoring the Impact of Universal Credit on Rent Arrears in Wales, Opinion Research, September 2019
[2] Monitoring the Impact of Universal Credit on Rent Arrears in Wales, Opinion Research, September 2019
[3] Ibid