Many housing associations have raised the problem with the Universal Credit calculation for people with weekly tenancies in years where there are 53 rent charges.
14 March 2019
Legislation restricts the calculation of Universal Credit to the weekly rent multiplied by a maximum of 52 weeks, and Universal Credit is paid on a monthly cycle. Where a tenant has a weekly rental liability, they will have to make either four or five rent payments in any one month.
This means that tenants are overpaid by Universal Credit in months where they have to make four rental payments and underpaid where they make five. In most years the rent due and the Universal Credit paid will match. But every fifth or sixth year the tenant will be left short over the year by one week’s rent. This is the case even for tenants with rent free weeks.
The DWP has recognised that there is an issue with the way the calculation in the Universal Credit regulations convert a weekly liability into a monthly allowance. The conversion is done by multiplying the weekly rent by 52 and then dividing by 12. This effectively means one day’s rent a year (two days in a leap years) are not covered by Universal Credit. The DWP recently said ‘we are currently considering whether this formulation around weekly rents, and potentially other weekly amounts in the Universal Credit calculation, should be amended.’
How can the problem be rectified?
There are two ways of doing this which have virtually the same results if compared over a reasonable period of time:
- calculate the monthly Universal Credit by multiplying the weekly rent by the number of rent weeks in the year, and divide that figure by 12
- calculate the monthly Universal Credit and multiply the weekly rent by the average number of weeks in a year, which can be taken for this purpose as 52.18.
The effect of this will be that in most years, with 52 rent weeks, the tenant will be slightly overpaid Universal Credit. But this will be offset by the fact that every fifth or sixth year, as in 2019/20, there will be 53 rent weeks and the tenant will be underpaid.
What happens now?
Any change will take some time both for the legislation to pass and for the DWP to implement changes to the Universal Credit system. It is very difficult for housing associations to mitigate the impact of this shortfall in benefit for tenants: we need a change in the legislation and the Federation will keep pressing ministers and MPs on the urgent need for this change.