DWP Recognises ‘Problem’ with 53 Rent Payment Days

An “extraordinary” exchange of correspondence with the Secretary of State of Work and Pensions, local government and other housing bodies recently published reveals the particular financial consequences, for UC claimants and social landlords, of the way DWP calculates Universal Credit payments and awards.

Commenting on the situation, Rt Hon Frank Field MP, Chair of the Committee, said:

“We’ve spent weeks engaged in this extraordinary correspondence, trying to get to the bottom of why tenants and landlords are finding themselves short-changed. It’s heartening that the Secretary of State might change these rules too, but it’s hard to escape the conclusion that people have been left short on rent simply because the DWP can’t count how many days are in a year.

“All this may seem absurd, but it reveals a very serious issue. The ongoing administrative failures of Universal Credit are biting into incomes already cut, frozen, sanctioned and capped to below basic living costs. DWP must do better.”

DWP initially claimed that there was no problem. But the Secretary of State acknowledged on 28 February that the underlying problem is not a mere problem of “perception” and was taking a welcome second look at the calculation.

The apparent misunderstanding and confusion cover a serious issue for the housing associations and local councils struggling to fulfil legal duties and obligations to their residents.

As one Local Authority officer commented,

“The Department for Work and Pensions’ decision to only provide 52 weeks’ rent payment to claimants is very concerning [..]. We, along with most other local authorities, charge rent on a weekly basis. … As you are well aware, there are 52.143 weeks in a year. For the DWP to claim that they will only pay on the basis of 52 weeks is a rejection of this fact and that will ultimately bring hardship to tenants.”

The Committee has now asked for an update on the “problem with the way Universal Credit converts a weekly rental liability into a monthly entitlement”, more than two months after the Secretary of State said she was “currently” considering it.

Key points on “the problem” - the way DWP converts weekly rent payments to fit into Universal Credit’s default monthly household payment:

• the calculation for converting weekly rents to a monthly figure is: weekly rent multiplied by 52, divided by 12. But 7 x 52 is 364 – so a day or two is lost every year.
• this leaves people who pay their rent weekly (like most social housing tenants) receiving less UC than they’re entitled to. If they paid their rent monthly, DWP would give them their full entitlement.
• the Department argues that, for individual claimants, this isn’t a huge amount of money – though a day or two’s rent a year isn’t inconsiderable, especially in the context of our recent report on the benefit cap, for example.

SFHA has added its voice to the number of concerns expressed about the method of calculation the DWP made in relation to the 53 rent payment days.

In correspondence with Frank Field and the Work and Pension Committee recently, I argued that the DWP needed to take account the annual rent charge for a property and divide that by 12 in order to work out the UC housing cost entitlement.

Indeed that is exactly what the DWP do if a landlord should demand rent payment with other than a monthly frequency. For example, the regulations stipulate that if a landlord should charge quarterly, then the rent payment should be multiplied by 4 and divided by 12 to derive the monthly rate.

In the same way, we have strongly suggested that in making the calculation for a weekly frequency, the DWP multiply by 53 and divide by 12

It is not only in the area of housing costs that the DWP’s methods of calculation have been found to be unfair: in January, the High Court ruled that the way the DWP was calculating individual entitlements of in-work claimants, because they only looked at when the money was paid rather than considering period the wage payment covered.

I am glad to see this is now being reconsidered by the DWP and we look forward to a resolution for tenants and landlords.

First published on the Work and Pensions Committee Website

Read about the #SixAsks campaign at the SFHA Website