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Andrew ParfittHead of Housing Policy, DWPandrew.parfitt@dwp.gsi.gov.uk0207 449 5365

Social Housing and Universal Credit

Preparing for the challenges of Universal Credit in social housing, Lemos & Crane, London

10th May 2012

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Most HB reforms so far directly affect PRS only…

From April 2011:• Local Housing Allowance (LHA) reform (removal of 5 bed rate and

£15 excess, caps to weekly rates)

• size-criteria: additional room for a non-resident carer where a disabled person has need for overnight care

• staged increase in non-dependant deductions

• LHA set at the 30th percentile of rents in each Broad Rental Market Area, rather than the median

From January 2012:• LHA – extend shared accommodation rate to those under 35

From April 2012:• LHA rates frozen

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…but a major reform to working age SRS from 2013

• LHA rates to be uprated annually by reference to the Consumer Price Index from April 2013 – this will end the monthly uprating of LHA rates and bring the system in line with other pensions and benefits

• Housing Benefit for working age social-rented sector customers will be restricted for those who are occupying a larger property than their household size and structure would warrant from April 2013:

– affecting 19% of working age Social Rented Sector Housing Benefit claimants in London, with an average loss of £21 p/wk; compared to 32% and £13 p/wk in GB

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Size Criteria in the Social Rented SectorThe June 2010 Budget announced that size criteria rules would be introduced into the social

rented sector.

Housing Benefit entitlement for working-age tenants in the social rented sector will be restricted to reflect the needs of their household.

This will take effect from April 2013 for all current and new claimants.

Claimants will see a reduction in housing benefit of 14% for under occupation by one bedroom and 25% for under occupation buy two or more bedrooms.

The number of bedrooms housing benefit will cover will be based on the Local Housing Allowance size criteria rules (but with no Shared Accommodation Rate):

One bedroom for each of the following:- a couple- a person who is not a child (age 16 and over)- two children of the same sex- two children who are under 10- any other child

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Preparing for the change – Communication is key

• We have been working closely with Local Authorities and Housing Associations in developing implementation plans and writing guidance.

• The Chartered Institute of Housing is producing a toolkit designed to aid landlords in the implementation of this measure.

• We have engaged with welfare rights organisations while developing this policy to ensure the needs of different customers are taken into account.

• We will be producing products to aid with implementation that will include letters, leaflets and posters designed to draw customer attention to the changes.

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Universal Credit vision

• reducing workless households

• helping to end child and adult poverty

• a simplified welfare system in which

claimants and taxpayers can have

confidence

Poverty is a life and death matter …

• For every tube stop on the Jubilee line going east, from Westminster to Canning Town, life expectancy decreases by one year.

• Life expectancy in two different neighbourhoods of Glasgow, one rich, one poor, vary by as much as 28 years.

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Personal Independence Payment

Universal Credit

How are we simplifying the system?

Child Benefit, Carer’s Allowance (will remain)

Income related JSAIncome related ESAIncome Support (including SMI)Working Tax CreditsChild Tax CreditsHousing Benefit

Disability Living allowance

Current system New system

Contributory JSA and ESA (still considering how these will work)

Council Tax Support (still considering how this will work)

… will include support for housing and children

Pension credit

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A simpler system with clear work incentives

200

100

0100

£100

£500

£400

£300

£200

£100 £300£200

£0

£400 £500

Universal Credit payment

Total in-pocket income

Universal Credit: lone parent with two children

£600 £700

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Oct ‘13Apr ‘13 Oct ‘14 Oct ‘15 Oct ‘16 Oct ‘17

Path-finder Go Live

New claims from out of work customersApr ‘14Feb ‘11

Design & build

New claims from in work customers

“Natural” migrations as a result of changes of circumstances

Managed migrations

Legacy load

JSA, ESA, IS, HB, WTC, CTC

8m6m4.5m2.5m

UC load

When will we deliver Universal Credit?

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Universal Credit and housing (1)

Housing Benefit will be:

• integrated into Universal Credit, over time

• potentially more broad brush in its approach - less tied to individual

rents and with fewer exceptions

• available to pensioners through Pension Credit • social sector - will build on current support provided by Housing

Benefit and announced changes. No further change in short to medium term

We are currently considering policy for eligible service charges and non dependants

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Universal Credit and housing (2)

Direct payments in Universal Credit

• responsibility prepares people for the world of work:– managing your rent or mortgage is a social responsibility– progress has already been made through the LHA

• private rented sector tenants will generally be paid as now

• social-sector landlords need stable incomes:– Welfare Reform Act pledges appropriate protection– Demonstration projects to commence June 2012

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35%

Working age adults, not claiming Housing Benefit

10%

Working age adults in receipt of a partial Housing Benefit payment

10%

Estimate of vulnerable group of working age adults claiming Housing Benefit

25%Pension age tenants claiming Housing Benefit

20%

Working age adults claiming Housing Benefit & new to Direct Payments

All households in the Social Rented Sector, Great Britain

Impact of the direct payment to tenant policy

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Direct payments - Demonstration projects• In January 2012 we announced the five areas selected to take part in the

demonstration projects to test some key elements of the incorporation of housing support into Universal Credit whilst protecting social landlords’ financial position

• The purpose of the projects is to:– test the impact of various trigger points and safeguard mechanisms on

social landlords– test the mechanisms to safeguard vulnerable groups, and trigger points

for making payment to landlord; and support them, where possible into the transition to direct payments

– test financial products and budgeting tools used by claimants for financial management

– evaluate the claimant communication strategy used ahead of the demonstration project roll out to inform preparations ahead of Universal Credit implementation

– test the strategies adopted by social landlords to minimise the loss of income and maintain financial viability

• The demonstration projects will run from June 2012 to June 2013, with a five-month lead in starting in January 2012

• For further information, please contact us at: demonstration.projects@dwp.gsi.gov.uk

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The Direct Payment Demonstration Projects

Shropshire

Torfaen

Wakefield

Oxford

Southwark

Participating Local Authority areas:• London: Southwark, with Family Mosaic Housing Association• West Midlands: Shropshire, with Bromford Group, The Wrekin Housing Trust, Sanctuary Housing• Northern England: Wakefield, with Wakefield & District Housing (WDH)• Southern England: Oxford, with the GreenSquare group• Wales: Torfaen, with Charter Housing, and Bron Afon Housing

Evaluation will be led by Professor Paul Hickman of the Centre for Regional Economic and Social Research at Sheffield Hallam University.

Direct payment: impact on the tenant

• Bank account needed

• Monthly budgeting discipline

• More support and monitoring from landlord

• Understanding the risks of arrears

Direct payment: impact on the landlord

• Greater tenant engagement and communication

• Budgeting and financial support for tenants

• Arrears monitoring

• Staff training

•Increase in rent collection

Direct payment: the plan

• Tenant selection and information gathering

• Risk and support process and decisions on involvement

• IT changes in place

• Support products and information provided

• Payments made

• Arrears monitoring

• Ongoing management

Benefits for LAs and Housing Associations

• Early preparation for Universal Credit in a controlled environment

• Effective lessons learned and implemented early

• A chance to influence and contribute

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Conclusion

• Major programme of welfare reform to help achieve fiscal consolidation in a way which is fair and strengthens work incentives.

• Transitional protection and increased discretionary housing payments to help smooth implementation.

• Radical changes to move towards Universal Credit over time.• Similar reforms envisaged for pensioners.• Housing element of UC for social tenants will be based on actual

rents, subject to the underoccupation penalty. • Demonstration projects to explore direct payment of rent to landlords

in social rented sector.

Annex

Universal Credit and related welfare reforms in 2013/14

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Household Benefit Cap

• The Household Benefit Cap will be introduced from April 2013 and will apply to the combined income from the main out-of-work benefits, plus child benefit and child tax credits

• The working assumption is that the cap will be:

– £500 per week for couples and lone parents

– £350 per week for single adults

• 67,000 households will be affected by the cap in 2013/14 (75,000 in 2014/15)

• The average benefit reduction is £83 a week per household

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Household Benefit Cap - Exemptions

The following households will be exempt from the cap:• those entitled to:

– Working Tax Credit• those in receipt of:

– Disability Living Allowance– Attendance Allowance– the support component of ESA – Constant Attendance Allowance– War Widows and Widowers pension

• claimants who have been in employment for 52 weeks or more when they claim benefit (and the loss of employment is not of their own making) will be exempt from the cap for up to 39 weeks

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Household Benefit Cap - Implementation

• Phase 1 - from April 2012, Jobcentre Plus and Local Authorities will

be providing support to those households claiming out-of-work

benefits that will be impacted by the Benefit Cap in April 2013

• Phase 2 - implementation of the Benefit Cap for new and existing

claimants from April 2013, via a deduction from Housing Benefit

• Phase 3 - new claims to Universal Credit will be subject to the cap

from October 2013

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Other 2013 Reforms (1)

• introduction of localised support for Council Tax:– DCLG has consulted on plans to localise support from April 2013

and introduced a Local Government Finance Bill in December 2011

• April 2013 - abolishing the discretionary elements of the Social Fund. New locally-based provision to replace Community Care Grants and general living expenses Crisis Loans will be designed and administered by local authorities in England and devolved to Scotland and Wales

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Other 2013 Reforms (2)

• Disability Living Allowance to be replaced with a new benefit to be introduced for eligible working age people (16-64) in 2013/14 called the Personal Independence Payment

• Single Fraud Investigation Service:

– to consolidate benefit/tax credit investigation service across the DWP, local authorities and HMRC

– to increase investigations, improve efficiency, consistency and fairness and provide better value for money

– to co-design an organisational structure for 2013

– high level design workshops are underway including regional workshops with operational staff

• …and of course introducing Universal Credit

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What are our key aims? (1)

1) Reduce worklessness, reward work and personal responsibility

• as a result of the single withdrawal rate under Universal Credit, 1.2 million households will see a reduction in their marginal deduction rate (MDR)

• virtually no household will have a MDR above 80 percent, compared to 500,000 households with a MDR above 80 per cent in the current system

• a single taper rate and a simple system of earnings disregards so people in work to see clearly how much support they can get while making sure that people considering a job will understand the advantages of work

• clear conditionality rules that strike a balance between dependency and support

What is a MDR?

• MDR measures the incentive for someone to increase their hours of work

• as the earnings of a household increase, means-tested benefits and tax credits start to be withdrawn

• in addition, above a certain level of earnings, the increase in their wages will also be partially offset by income tax and national insurance contributions

• MDR is calculated as the proportion of a small increase in earnings which is lost in lower Benefits/Tax credits and/or higher income tax and national insurance payments

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What are our key aims? (2)

2) Simplify the application process

• no need to ‘sign-off’ benefits to take an employment opportunity

• support continues seamlessly based on dynamic financial need rather than simple employment status

3) Tackle the cost of the benefits system

• automating the delivery of the system

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What is Universal Credit? (details)

• Universal Credit will provide a new single system of means-tested support for working-age people who are in-work or out-of-work. Support for housing costs, children and childcare costs will be integrated in the new benefit. It will also provide additions for disabled people and carers

• under Universal Credit, couples living in the same household will make a joint claim for the benefit payment. We will assume that ordinarily the benefit will be given in a single monthly payment to a household. It will be for the family to decide who receives the benefit

• no entitlement if capital of claimant or couple exceeds £16,000

• the Government has agreed a package of transitional protection which will ensure that there are no cash losers at the point of change as a direct result of the migration to Universal Credit, where circumstances remain the same

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Lone Parent with 2 children, earning NMW , Rent £100pw, Council tax £15pw- 2014/15 benefit system

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0 5 10 15 20 25 30 35 40 45 50

Hours worked by household head

Par

ticip

atio

n T

ax R

ate

Current System Universal Credit

07/10/2011

source: HERCULES MODEL - release 1.0; 2011 prices

UC: How are we making work pay?

Lone Parent with 2 children, earning NMW , Rent £100pw, Council tax £15pw- 2014/15 benefit system

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0 5 10 15 20 25 30 35 40 45 50

Hours worked by household head

Par

ticip

atio

n T

ax R

ate

Current System Universal Credit

07/10/2011

source: HERCULES MODEL - release 1.0; 2011 prices

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How will we deliver Universal Credit?

Universal Credit is being designed from the outset to:• support policy outcomes, helping people become more self-sufficient• support efficient delivery, cutting out unnecessary paper and

processing• provide high quality service, understanding and meeting claimants’

needs

The service will be:• digital by default, but supported by other channels for those who need

them• automated, to reduce processing costs and increase responsiveness

Everything we are doing is based on practical understanding:• claimants and frontline staff have been involved in designing the

service from the outset

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DWP National Service Offering

Labour market servicesClaimant support Complex needsBudgeting supportVisitsOnline accessRisk identified

Local Flexibility

Claimant support Complex needsBudgeting supportOnline access

Developing Face to Face Services

Since the announcements in May 2011 we have worked in partnership with local authorities to co create the design options for the face to face service delivery from 2013

The joint design team established that a national service offering with targeted local flexibility is the optimum solution from October 2013.

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Migration: what’s the plan?

• Phase 1 October 2013 and April 2014: 500,000 new claimants will receive Universal Credit in place of one of the old working age benefits or credits. At the same time a further 500,000 existing claimants (and their partners and dependants) will also move on to Universal Credit when their circumstances change significantly, such as when they find work or when a child is born.

• Phase 2 April 2014 to around end of 2015: will give priority to households who will benefit most from the transition, such as those Working Tax Credit claimants who currently work a small number of hours a week but could work more hours with the support that Universal Credit brings. Overall 3.5 million existing claimants (and their partners and dependents) will be transferred onto Universal Credit during this second phase.

• Phase 3 end 2015 to end 2017: will see around 3 million households being transferred to Universal Credit by local authority boundary. This phase will have the flexibility to respond to the circumstances of particular local authorities as they change and will focus on safeguarding financial support, such as Housing Benefit payments, to claimants as the old benefit system winds down.

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How will people migrate?

• new Universal Credit claims – where legacy benefits are closed to new entrants

• natural migration – where a change of circumstance no longer results in new legacy award but a migration of the entire household entitlements to Universal Credit

• managed migration – where DWP initiates the transfer of an entire household from legacy benefits to one Universal Credit entitlement

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Who will deliver Universal Credit?

• from October 2013, Universal Credit will be delivered by DWP,

drawing on the expertise of HMRC and local authorities

• the best of the current capability will be used to deliver the new

service, taking the opportunity to modernise and improve it to deliver

better efficiency for the taxpayer and better service for claimants

– minimises risk to implementation

– based on external advice

• how Universal Credit will be delivered in the longer term is under

active consideration. Decisions will be taken in 2015, so that we can

learn from our early experience of delivery

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Preparing customers for the changes

• we have set up a Support and Exceptions Working Group, at the request of Ministers. This group will look at support required for claimants to make the move and what exceptions are needed

• the Migration Strategy will look at the steps required to prepare claimants for the behavioural changes and what moves can be made ahead of transition:

– Household Accounts and managing household budgets– four weekly/monthly payments– budgeting and Financial Management– conditionality and variable conditionality– self service/Digital

• the Migration Plan was published on 1 November 2011

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Working with Local Authorities to Test the Universal Credit Proposition

Model Business and Model Office• Programme initiatives to develop the end to end business

proposition for delivering Universal Credit and test the (physical) space for delivering Universal Credit

The Direct Payment Demonstration projects• will test the impact of direct to claimant rent payments and means of

managing the associated risks to social landlords' financial position

The LA led pilots• will test service integration at local level for improved claimant

support and work focus

The Pathfinder• will test live running of the Universal Credit offering in a real world

setting

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Changes to Pension Credit (1)

• as a result of the introduction of Universal Credit the following changes will be made to Pension Credit:

– help with eligible rent. Support for eligible rent for customers over Pension Credit qualifying age will be provided through a new component of Pension Credit called Housing Credit

– help with dependent children. A new additional amount will be included in the Guarantee Credit element of Pension Credit for dependent children

• the earliest date that these changes will be incorporated into Pension Credit new claims is currently 12 months after the go-live of Universal Credit e.g. October 2014

• Housing Credit will broadly replicate existing Housing Benefit rules so that pensioners should continue to receive the same support as now

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Changes to Pension Credit (2)

• the current planning assumption is that migration of Housing Benefit and Tax Credit information for Pension Age customers will be completed by October 2017

• the number of customers over Pension Credit qualifying age in receipt of the above benefits is as follows:

– Pension Credit only – 1.4m

– Pension Credit and Housing Benefit – 1.3m

– Housing Benefit only – 0.3m

– Child Tax Credit – 0.1m

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Implementation and support for Universal Credit

• work with local authorities, Housing Associations and other government departments on implementation is a key priority

• Stakeholder and communications strategy – new working groups and workshops

• a new dedicated Universal Credit web page accessible through the local authority area of the DWP website is now available

• guidance, best practice and model products

• transitional protection and new direct payment safeguard