Universal credit was introduced in 2013 to replace various benefits and tax credits. It combined Jobseeker's Allowance, Housing Benefit, Working Tax Credit, Child Tax Credit, Employment and Support Allowance and Income Support. The idea was to give people a bigger incentive to find work.
Whether or not it was a good idea is still being debated, but either way, there are some important things that landlords should be aware of. Here are our top five…
Previously, social landlords whose tenants were receiving housing benefit received their tenants’ monthly rent from the local council. Now, tenants receive their housing allowance direct and are responsible for paying the rent themselves. But for most landlords in the private sector, there was no visible change – non-social tenants already paid their rent direct.
When someone applies for Universal Credit, there’s a waiting period of at least six weeks before the first payment is made. This can mean that tenants may fall into arrears on their rental payments, and they might need to borrow to meet their other living costs during this time. Most landlords understand this and are flexible over the delays, as it’s beyond the tenant’s control.
If someone renting from a local authority, housing association or a registered social landlord is considered to have a spare bedroom, their housing benefit is reduced. This is sometimes called the ‘Bedroom Tax’, the ‘under-occupation penalty’ or the ‘removal of the spare room subsidy’. The reduction amount is 14% for one unoccupied bedroom or 25% for two or more.
It means that someone who starts claiming Universal Credit may seek to rent a smaller property so they can keep their full benefit.
If you’d like more information on what Universal Credit means from a landlord’s point of view – and how letting agent might be able to relieve some of the hassle, speak to a member of the Progressive Lets team. We’ll be glad to help.