How Universal Credit is weakening the welfare system’s housing safety net
Universal Credit undermines the welfare system’s ability to provide a safety net against eviction, argues Iain Hardie, and presents evidence of an increase in landlord repossession claims, orders, and warrants since its rollout. This blog was originally posted on by LSE on their British Politics and Policy blog.
Nearly three million people have moved onto Universal Credit since its gradual (and subsequently much delayed) rollout began back in 2013. In this time, the Department for Work and Pensions (DWP) have invested in, and published, analysis into the impact of Universal Credit on employment outcomes. Yet, as pointed out by the National Audit Office, similar analysis into its wider impacts, e.g. relating to housing, have been lacking, and the DWP have tended to dismiss any suggestion of claimant hardship rather than working with others to build an evidence base.
In an article recently published in the Journal of Social Policy, I examined the impact of Universal Credit rollout on landlord repossession rates (i.e. rates of legal actions made by social or private landlords to evict tenants) within 323 English local authorities. Universal Credit rolled out in different local authorities at different times, and this staggered rollout schedule meant that it was possible to track each local authority over time and measure whether Universal Credit led to an increase in their rates of landlord repossession actions in the quarters immediately following the rollout of the policy.
A clear link
The findings of this research suggest that Universal Credit is weakening the welfare system’s ability to provide a safety net against eviction, as a clear link was found between its rollout and rates of landlord repossession actions.
When compared to rates in the pre-rollout period, Universal Credit ‘Full Service’ rollout, on average, led to a 4.6% increase in landlord repossession claims, 4.8% increase in landlord repossession orders, and 3.8% increase in landlord repossession warrants within local authorities up to the first quarter of 2019.
Importantly, this impact tended to be greater when ‘Full Service’ had been rolled out for longer, and therefore reached more claimants and had more time for effects to become apparent. In local authorities where ‘Full Service’ had been rolled out for longest (12+ months), it led to a 6.9% increase in landlord repossession claims, 9.8% increase in landlord repossession orders and 5.9% increase in landlord repossession warrants. With over 4 million additional people expected to move onto Universal Credit by 2024, a key concern is that this impact may continue to increase in the coming years unless significant changes are made to the policy.
Long wait periods, sanctions, and monthly direct payments
Landlord repossession actions most commonly occur due to rent arrears. According to housing charities and qualitative studies, there are multiple design issues under Universal Credit that are likely explain an increase in rent arrears and repossession actions following its rollout.
The most widely criticised design issue has been the five-week wait between households initially making a claim for Universal Credit and receiving the first payment. Claimants can be left with little or no income to meet rent payments in this period. The DWP have acknowledged this issue – those requiring immediate financial support can receive an advance payment (effectively an interest free loan), whilst those ‘migrating’ from Housing Benefit onto Universal Credit will receive a two-week Housing Benefit extension during the wait period. However, this extension does not help those without existing Housing Benefit claims, and Shelter have highlighted that the rate at which advance payments are repaid is unaffordable for many.
Beyond Universal Credit’s initial waiting times, its system of “ubiquitous conditionality” is also likely to contribute to increased rent arrears and repossession actions. Whilst it is difficult to compare Universal Credit sanction rates to those of the old system, some evidence suggests that Universal Credit sanction rates are at historically high levels. This can result in a greater number of claimants struggling to afford their rent whilst their income is reduced by sanctions.
Finally, Universal Credit’s system of monthly direct payments can also impact upon the ability of claimants to avoid rent arrears and repossession actions. Under this system, the housing costs element of Universal Credit is by default paid once per month, directly into the claimant’s own bank account. This is in contrast to the legacy system, in which Housing Benefit tended to be paid fortnightly and go straight to the claimant’s landlord (at least in the social rented sector). The DWP’s rationale for this is to encourage greater responsibility amongst claimants. However, qualitative research suggests that it can lead to claimants struggling to meet rent payments, e.g. due to a lack of budgeting skills or having to spend the housing costs money on other essential costs.
Universal Credit’s impact on landlord repossession rates has wide-ranging implications. Tenants who are facing repossession actions may be forced to cut back spending on other essentials, e.g. food, in order to pay off rent arrears and avoid actual eviction. This can contribute to increased demand for food banks. Given that housing security is a known determinant of mental health, increased repossession actions are also likely to be contributing to the increased levels of psychological distress that have arisen due to the introduction of Universal Credit.
There are also implications for landlords. The build-up of rent arrears, and resultant repossession actions, negatively impacts upon the income streams of social and private landlords. The end result of this is that, aware of this issue, private landlords are becoming unwilling to let to those claiming Universal Credit, whilst social landlords are increasingly needing to use ‘affordability assessments’ to determine whether prospective tenants are likely to be able to meet rental costs. This reduces Universal Credit claimants access to new accommodation, which in the long run may ultimately increase homelessness and its associated costs.
The DWP have already been criticised by the United Nations Special Rapporteur on extreme poverty and human rights for having a single-minded focus on improving employment outcomes at all costs. Going forward, the DWP should not judge Universal Credit’s success as a policy on employment outcomes alone, but also on its wider impacts, including its ability to provide households with an adequate safety net against eviction.
Note: the above draws on the author’s published work in The Journal of Social Policy.
Views expressed by authors may not represent the views of CaCHE.
Date: March 17, 2020 3:58 pm
Author(s): Iain Hardie
Categorised in: Wider Drivers