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Universal Credit and LHA reform causing hardship to Scottish welfare claimants

Thursday 17 May 2018

A recent report published by the Scottish Government shows that recent changes to welfare policy and Universal Credit are causing hardship to Scottish welfare claimants.

The Scottish Government say that policies introduced by the UK Government have had an impact on the housing sector in Scotland and profound implications for devolved policy, placing enormous pressure on all parts of their housing system. 

In Scotland there are 2.4m households of which around 20% are in receipt of support for housing costs through Housing Benefit or an award of UC which includes housing costs. The total cost of this support in 2015 was about £1.7bn.

The most recent report, published last week, is the third in the series and focuses on two specific areas of particular interest, the impact of the benefit freeze and the LHA cap on tenants and landlords in the private rented sector, and the impact of Universal Credit on rent arrears in the social rented sector. The previous two reports were aimed specifically at the impact on disabled people and families with children. 

In 2015 amongst households claiming housing benefit, social rented households had on average of 94% of the value of their housing costs covered by housing benefit whereas privately rented households received an average of 83%.

The impact of reform on individual private sector landlords as a result of tenants falling into arrears may be substantial, especially where properties are let with a mortgage in place and as such failure of tenants to pay rent may impact the ability of a landlord to maintain their own mortgage payments. The report cites evidence provided by Shelter which argues that in extreme cases this may lead to private landlords withdrawing properties entirely. In general private sector landlords are likely to respond to their own experience and perception of welfare reform by taking steps to protect their income streams, including taking eviction action against tenants in rent arrears and seeking to avoid taking on tenants in receipt of benefits to meet their housing costs.

Local Housing Allowance

Local Housing Allowance (LHA) rates are used to set the maximum payable under housing benefit and is set in relation to household size, not the property itself. LHA rates have been reduced from the 50th percentile of market rents to 30th percentile and are now also subject to a cap.

The report highlights the impact of the freeze on LHA rates, which they say has substantially limited the availability of affordable accommodation in a number of areas. 

Research included in the report illustrates that in only 10 out of 90 rates does the LHA policy meet its original intention of allowing a household to access a property in the 30th percentile of the local market.

In half of the LHA rates less than 20% of the local market can be accessed at the level payable, and in nine rates only the bottom 10% of the market is accessible. The Scottish Government argue that in these areas it is seriously questionable whether a household would be able to access suitable accommodation without having to meet at least some of their housing costs out of the household’s other resources, including other social security benefits.

Universal Credit

Universal Credit combined previous benefits into a single monthly payment, which can include a housing element. This type of benefit was introduced as a live service, but has since been rolled out on a staged basis in the form of the newer 'Full Service' by DWP's own digital service which gives claimants more control with an online account. 

The Scottish Government say that: "Changes to UC announced in the recent UK Budget can be viewed as an acknowledgement of the failure of the UK Government to tackle the big problems. Whilst any improvements are welcome often the changes are too little too late with remedial measures lagging behind UC roll out."

In addition, the Scottish Government introduced UC flexibilities to give claimants a choice over how often they receive their payment and whether they make the payment direct to their landlord. 

They say the take-up rate of the UC Scottish choices has been high with over 2,500 people choosing one or both of the choices between 11 November and 31 December 2017. Of those 2,100 requested to be paid twice monthly, 1,000 elected to have the housing element of UC paid directly to their landlords, and of that around 500 chose both.

In the report, attention is drawn to the widespread criticism of the way Universal Credit was introduced and it's connection to rent arrears. 

Local Authorities and Registered Social Landlords (RSLs) identified that the build up of arrears was due to issues at the start of claims, in particular delay in first payments. Changes to UC credit announced at the last UK Government budget along with Scottish UC choices may help mitigate these problems, but as of yes it's too early to tell. The report also acknowledges the important role that landlords have played in helping their tenants prepare for UC changes, and they expect landlords to continue to develop and improve the way they support tenants.  

The Scottish Government argue that Local Authorities and landlords have reported that it is harder to support households in receipt of UC largely because neither local authorities or landlords are able to access (or access as easily) information about tenants/claimants UC award.

Stakeholders and groups representing private sector tenants have also provided evidence which shows that in some areas only a very small portion of the market is now available under LHA levels, and that as such a high proportion of tenants need to make substantial additional contributions to their rent.

Evidence provided by landlords and councils and social tenants is referenced throughout, but ultimately the report concludes that the evidence is not robust enough to draw firm conclusions as to the impact on arrears. This is partially due to the staged introduction of Universal Credit and partially due to low numbers involved. They do however, argue that in-depth research should be carried out by DWP themselves. 

Read the full report