From October 2013, Universal Credit – a new benefit for people of working-age – will be rolled out across the country, replacing housing benefit. Find out how Universal Credit will affect your housing benefit payments.
Universal Credit is the government’s new benefits system, which will replace lots of different existing benefits (including Jobseeker’s Allowance, Income Support, Housing Benefit and Tax Credits). You can find out more with our general guide to Universal Credit – but this article focuses on how Universal Credit will affect housing benefit.
Universal Credit is the government’s new benefits system, which will replace lots of different existing benefits
How will Universal Credit affect my housing costs?
A household’s Universal Credit award will be made up of one basic allowance, plus any additional elements that apply – including a ‘housing costs element’ to help with your rent or mortgage.
Who does the housing costs element help?
People who claim Universal Credit will receive an amount towards their housing costs if they are responsible for paying their rent or mortgage. The housing costs element can also cover some service charges.
You will not usually qualify for help with housing costs if you live with a close relative in their home; or if you are a full-time student (unless you have a disability or have children).
If you are a homeowner, the housing costs element could be included in your Universal Credit award, but only if you (and your partner if you have one) are not earning income. This can help towards the interest payments on your mortgage and other loans for home purchase, certain repairs and home improvements. There will be restrictions on this if your mortgage or loan was taken out, or increased, after you became entitled to Universal Credit, or if your housing costs are deemed excessive.
There will be a ‘qualifying’ period of three months before homeowners who are eligible for the housing costs element can make a claim (and support may be time limited for certain claimants). If you are receiving Jobseeker’s Allowance or Employment and Support Allowance immediately prior to your Universal Credit claim, the time spent on that benefit can count towards your qualifying period.
How is the housing costs element calculated?
How your housing costs element amount is worked out will depend on whether you are a private or social tenant, or a homeowner.
You will not usually qualify for help with housing costs if you live with a close relative in their home
If you’re a private tenant…
If you are renting from a private landlord, your housing costs will be calculated using the Local Housing Allowance (LHA). The LHA rate is based on rental prices in your area and the number of rooms you need for the size of your household.
This could mean that your housing costs element will not cover all of your rent if your home is larger than you need or too expensive. You can check your LHA rate at Gov.uk.
If you’re a social tenant…
If you are renting from a social landlord, your housing costs element will be based on your eligible rent; however a size restriction will be applied i.e. there will be deductions if it is considered you have more bedrooms than your household needs. (This is the so-called ‘bedroom tax’ that’s been in the news so much). Find out if you will be caught by the new bedroom tax rules.
If you’re a homeowner…
If you are a homeowner, your housing costs element will be calculated as your loan amount (or £200,000, whichever is lower) multiplied by the standard interest rate (currently 3.63%) divided by twelve to give a monthly amount.
As the standard interest rate, as opposed to your lender’s actual interest rate, is used, there may be a shortfall between the help provided and your contractual payment, if your interest rate is higher.
Deductions may also be made from your housing costs element for certain non-dependants in your household. These are people living with you in your home, who are not your partner or dependant children – usually a grown up child, friend or relative.
It will be your responsibility to budget and pay your rent under Universal Credit
How will I receive the payment?
If you are a private or social tenant, your housing costs element will be paid directly to you, monthly in arrears, as part of your Universal Credit award.
It will be your responsibility to budget and pay your rent from this and any other income you have. If you would like any help with budgeting, have a look at MyFamilyClub’s how to make a budget article (which includes an easy to use budget planning tool).
You may also find the information on the Turn2us managing money pages useful.
It is likely that there will be some exceptions to people receiving their housing money direct – vulnerable tenants and pensioners will continue to have their housing costs paid directly to their landlord.
For homeowners, payment of their housing costs will be made directly to their lender.
Will all these changes happen immediately from October 2013?
No – Universal Credit is being introduced in stages.
All new housing benefit claims made from October 2013 will go through the Universal Credit scheme instead of housing benefit.
But those who already receive housing benefit will be transferred over to Universal Credit in stages from October 2013 – October 2017. So some people will get Universal Credit earlier than others.
Where can I find further information?
For more information on Universal Credit in general, see MyFamilyClub’s guide to Universal Credit.
For more information on how Universal Credit affects housing costs, full and up to date information about Universal Credit is available on the Turn2us website, including a factsheet on the housing costs element of Universal Credit.
If you are worried about Universal Credit, or would like assistance when the time comes to make a claim, the Turn2us website also includes a Find an Adviser tool which helps you find an adviser in your local area.
Karen Holmes is a Welfare Benefits Specialist at the charity Turn2us