Universal Credit (UC) was introduced as a new benefit for people of working age when they are out of work or on a low income.
It will eventually replace Housing Benefit, Income Support, Income Based Jobseekers Allowance, Income Related Employment and Support Allowance, Child Tax Credit and Working Tax Credit. It was originally planned to be rolled out to all parts of the country by 2017 however, this is now unlikely to happen until March 2022.
Section 11 of the Welfare Reform Act 2012 states that the calculation of an award of Universal Credit is to include an amount in respect of any liability on the part of the claimant to make payments in respect of the accommodation they occupy as their home.
Regulation 111 of the UC Regulations 2013, which came into force on 29 April 2013, allows for deductions of up to 40% from the basic standard allowance (the part of the benefit that covers living allowance) in respect of housing costs.
This means that a single person under the age of 25 can be left with as little as £151.06 per month for them to buy food, clothing and to live on. If the full 40% is deducted from their UC by the Department for Work and Pensions ("DWP"). It would appear there is an unbalanced approach as a result of the DWP deducting the full 40% in some areas of the country, and in others 20%, which is causing undue hardship to those unfortunate enough to be subjected to a deduction.
This therefore raises the question as to whether a common approach should be adopted or whether the 40% should in fact be reduced so that it falls into line with the current rates which are set by the Court. The rate for 2016/2017 is £3.70 per week and is the maximum the Court can order a tenant to pay towards their arrears in rent possession proceedings where they are unemployed and in receipt of welfare benefits; the amount generally increases by £0.05 every financial year.
The current rate of deductions is based on 5% of the personal allowance for Income Support, Income Based Jobseekers Allowance and Income Related Employment and Support Allowance. The question is: should the DWP reduce the maximum amount which can be deducted from a claimant's UC from 40% to 5%?
As stated there is an inconsistency in the amount DWP is deducting ranging between 20-40%. Social landlords obviously want the amount reduced to be affordable to tenants, the idea being that a tenant will be more likely to be able to sustain their tenancy thus reducing the risk of possession proceedings being issued against them. DWP has stated that they do not have the power to deduct any sums from a person's UC entitlement unless the amount which can be deducted has been set by the Secretary of State. Tenants have a right to appeal to a tribunal against any deduction in any event.
Some social landlords are requesting Suspended Possession Orders knowing that the DWP is already deducting 40% towards a tenants' arrears. This could be seen as a social landlord having "two bites of the cherry" to the financial detriment of tenants. Surprisingly, some District Judges appear to be willing to do this which goes against the rent arrears Pre-action Protocol for Possession Claims by Social Landlords which is aimed at the parties taking all possible steps to avoid Court action. In light of this, it is questionable whether the Court should be granting a Suspended Possession Order in cases where the DWP is already making deductions from a tenant's UC.
The Pre-action Protocol also states that a landlord should try and agree affordable repayment sums with a tenant. It could therefore be argued that a 40%, or even 20%, reduction of a tenant's UC is far from affordable and this amount should fall to 5% in line with the level currently set by the Court.
Therefore, when UC is eventually completely rolled out, consideration will need to be given to what amount the DWP can deduct at source to pay towards a tenant's rent arrears and if such a deduction is made, social landlords should consider adjourning possession cases generally rather than also seeking the payment of additional sums via the making of a Suspended Possession Order which is contrary to the Pre-action Protocol for Possession claims by Social Landlords and may cause tenants undue hardship.
