Tenants on Universal Credit

Universal Credit was introduced back in 2013 in an attempt to simplify the welfare system. It has not been without its challenges, and as of January 2021, there were 6 million people on Universal Credit in England, Scotland and Wales. This is a 98% increase since March 2020, largely as a result of the COVID-19 pandemic.

Whether you have a tenant who has been on Universal Credit since the start of their tenancy or has recently been moved onto Universal Credit, it is important to understand as much about it and their circumstances as possible. Here’s some information to help you when talking to and helping these tenants.

What is Universal Credit?

Universal Credit is designed for people who are on a low income or are out of work. It is usually paid as a single monthly payment to a household and can be put towards housing costs. As with many kinds of benefits, the amount that a household receives depends on their individual circumstances, such as their income.

Universal Credit merges six benefits into one payment:

• Income support
• Income-based jobseeker’s allowance
• Income-related employment and support allowance
• Housing benefit
• Child tax credit
• Working tax credit

In Scotland, claimants can choose to have their housing costs paid straight to their landlord, however in England it is normally paid directly to claimants, and it is their responsibility to then pay their landlord the rent. A tenant’s rent can sometimes be paid directly to the landlord in England, and this is known as an Alternative Payment Arrangement. It is only arranged if the claimant is particularly vulnerable, struggles to budget or is currently in rent arrears.

If you believe that your tenant is having difficulty paying their rent, you can apply for a Managed Payment to Landlord using the Apply for a Direct Rent Payment service. This means that you may be able to have your rent payments sent directly to you by Universal Credit.

Will Universal Credit cover the rent?

This will differ between claimants, but there will likely be cases where Universal Credit does not cover the entire cost of rent. This can make it all the more difficult for claimants to cover all expenses and meet their rent obligations each month.

There is additional help out there though. In these cases, a tenant may be eligible for a ‘discretionary housing payment’ to cover any extra housing costs not covered by Universal Credit. They can explore this option by contacting their local council.

Helping tenants manage their rent

It’s important for a landlord to understand that some tenants on Universal Credit may need help managing their rent payments. Depending on their circumstances, they may not be used to dealing with the extra money coming into their account.

It’s a good idea to keep a strong and open line of communication with any Universal Credit tenants. Understand their situation and help them to understand their responsibility of paying rent on time. Make sure they know exactly how much they need to pay, and when by. Perhaps you could send out a friendly reminder a few days prior to the payment date, as opposed to having to chase them up if it passes.

A Universal Credit claimant will need to have a bank account in order to receive their payments. Perhaps suggest that your tenant sets up a direct debit or standing order to ensure that their rent payments are made on time. Understand that this may be a daunting prospect for someone with less financial stability, and who isn’t used to having moderate-sized payments coming in and going out.

If you have a tenant whose financial circumstances have changed for whatever reason, it’s a good idea to encourage them to utilise Universal Credit. It’s exactly what it is designed for. That little bit of financial help could become a roof over their head, whilst enabling you to be able to meet your own financial responsibilities.

We hope you now feel familiar with Universal Credit. To read more guidance for landlords, visit our advice centre. We talk about topics such as finances, property damage, disputes and more. Did you know we also compare landlord insurance to find the best quotes for your needs? To find out more, call us on 01788 818 670 or get a quote now.