Universal Credit inquiry echoes findings from direct payments trials
Published by 24publishing for allpay Limited in Housing and also in Central Government, Local Government, Universal Credit
Mind the welfare cap – housing benefit in a 'universal credit system'
Landlords will need to provide a range of payment options for their tenants to help safeguard their rental income under Universal Credit, writes Nick Peplow, business development director at allpay
The conclusions from today’s Work and Pensions select committee inquiry into Universal Credit are consistent with some of the early findings we are picking up from the Government’s direct payment demonstration projects.
In summary, the committee of MPs believe that the new system will be “effective for the majority of claimants” but that current plans “don’t take account of some of the more vulnerable benefit claimants”. It warns the shift to monthly payments would disrupt weekly and fortnightly budgeting patterns and calls for social tenants currently having their housing benefit paid directly to their landlord to retain the choice during the initial phases of Universal Credit. “We believe that time needs to be allowed for a proper evaluation of the pilots,” the report said.
Evidence submitted to the inquiry from Shelter highlights that the provision of bank accounts with direct debit facilities would be necessary to enable Universal Credit claimants to manage their rent payments. This ties in with the Department for Work and Pensions’ (DWP) expectations to make the vast majority of Universal Credit payments into a nominated bank account using the BACS system.
However, the Women’s Budget Group argues that some people operate in cash because they may not want bank accounts, “partly because of the risk of penalty charges and that banks may not be keen on their business”.
The committee’s conclusions thus reflect some of the early findings we are seeing from the direct payment demonstration projects where tenants are preferring to use a range of options to pay their rent, and that for a certain percentage of tenants the move to direct payments won’t be much of a problem, but that a range of additional support from low to high is required for the remainder.
GreenSquare – one of the demonstration projects – revealed that around half of its 400 tenants have adapted to direct payments, but that the other half it has had issues, with residents prioritising other bills and items.
Like all of the demonstration projects, GreenSquare has encouraged tenants to make rent payments by direct debit, which I believe, will suit those that adapt to it. This will be the cleanest way to do things, and is seen by another of the landlords in the demonstrations, Wakefield and District Housing, as “the most effective way to manage direct payments”. Around half of its 850 tenants taking part in the project now use this method.
One of the trickier elements to manage under direct payments, as cited by Oxford City Council – the local authority pilot in the GreenSquare project – will be managing the process where Universal Credit (UC) claimants will be allocated a pay date seven days after the end of their initial assessment period. This means Universal Credit payments could occur on different days of the month.
This is a concern landlords have expressed to us as most current in-house direct debit systems offer only two collection dates. Fortunately, at allpay we have been able to help housing associations with this concern as our direct debit service will collect payments on every date of the month, allowing landlords to align rent payment dates with Universal Credit award dates, limiting their exposure to arrears.
It’s also clear that this is the preferred method of collection for landlords with a number launching campaigns to sign tenants up to direct debits ahead of Universal Credit.
We collect rents on behalf of each of the housing associations involved in the demonstration projects and it has been somewhat of a learning curve to understand tenants’ preferred method of payment.
For example, a proportion of those with bank accounts still prefer to pay in cash – using allpay’s traditional swipecards to pay with cash at Paypoint and Post Office outlets – or to set up a weekly or fortnightly direct debit or standing order.
While the Government may wish for tenants currently seeing their housing benefit go directly to the landlord to set up bank accounts and monthly direct debits, it’s clear from both the committee’s findings and the demonstration projects that many will still prefer to budget weekly under Universal Credit and will feel more comfortable using cash, a debit card or a weekly direct debit.
What we can glean from the emerging information is that to safeguard rental income, it’s important for landlords to offer a range of payment options that suit the preferences and circumstances of each tenant.