Universal credit to be paid 4 weeks in arrears

As Universal credit is rolled out to all districts, many recipients will be blindsided by one huge change in how their housing benefit is delivered. The change is expected to cause an increase in rent delinquencies as tenants struggle to budget for all expenses.

Housing benefit has traditionally been paid directly to landlords. These payments have been made in advance just like all other tenants are required to do. This prepayment of rent is expected.

Universal credit is designed to be more of a reimbursement. Landlords will not receive direct payments. The tenant will receive a lump sum payment, of which the rent portion will already be four weeks in arrears. Those who do not budget properly can find themselves in hot water with their landlords.

Many housing associations are proactively preparing for the switchover by encouraging their tenants to begin paying a few extra pounds per month. Over the course of many months, enough of a credit can accumulate so that the tenant is paid up for a full four weeks.

Tenants who successfully accumulate this credit will likely avoid the pitfalls associated with falling behind on rent. Others will not be so fortunate.

Some residents lack the discretion to properly manage a budget. They may spend money on other items and then run short on the rent payment. Others may spend the rent money on an occasional financial emergency, thereby leaving them unable to make the full rent payment. Either scenario could put them into a dangerous cycle of arrears and late fees that could ultimately jeopardise their tenancy.

The Department for Work and Pensions (DWP) is aware of the concerns. A commitment towards providing additional advice for those on universal credit should address some of the problems.

For counsellors that help households deal with financial emergencies and money mismanagement, the expectation is that the move to universal credit is going to increase the number of delinquent tenants. The assumption is that people will take personal responsibility. However, the temptations of gambling and overspending will cause many tenants to spend the rent money. Others who are suffering from drug or alcohol abuse could likewise end up dropping the rent on their vices.

Ultimately, more people will seek emergency rent help following the switchover to universal credit. The agencies that help delinquent tenants will be there ready for that need.