Universal Credit Mass Migration: Three Critical Effects on Social Housing Providers
Universal Credit was introduced in 2013 and was designed to replace means-tested legacy benefits including housing benefit and tax credits for working age individuals and families. The government stated at the time that the aim of introducing this scheme is to streamline the benefits system, improve work incentives, make it easier for claimants to move in and out of work, address poverty amongst low income families, and reduce the opportunity for fraudulent claims (amongst other things).
We’re now a decade in to UC’s existence and the next step in its development is the mass migration of anyone claiming ‘legacy benefits’ to be ported over to UC. This undertaking actually began in 2019 and the major change resulting from the move to the new system is that as of 2019, it’s not just new claimants who can get Universal Credit; existing ‘legacy’ benefit claimants will be moved onto Universal Credit by the DWP. The migration project is being actioned in tranches, with the third tranche commencing in April this year and the entire project not set to be fully completed until 2028. Of course, a project of this nature and scale will inevitably cause some upheaval to all those it affects, both ‘end users’ (i.e. claimants applying for UC) but also the many and varied stakeholders within the social housing sector who are reliant on those claimants receiving their benefit entitlement in order that they are able to pay their rents promptly and consistently. Here, we explore what we expect to be the three main impacts UC mass migration will have on social housing providers and suggest how they could potentially be mitigated.
Payment Delays Result in Increased Arrears
The shift to UC means that a large number of claimants – both new and those having to reapply having been required to move from legacy benefits – will be faced with potentially a five week wait until they receive payments. This is down to the system put in place by the DWP which decrees a four week window in which to assess a claim and an addition week on top of that to complete the admin associated with it. Even if there are no issues with a claim, the time between an initial claim and eventual payment will be a minimum of five weeks, something that NGOs such as the Trussell Trust say is causing severe financial strain among low-income families and forcing many to use foodbanks. The likely effect of this delay in payment is that tenants facing financial hardship will prioritise other outgoings such as food ahead of paying rent, leading to a slip into arrears. To combat this, social landlords will need to adopt technologies such as Mobysoft’s RentSense that identifies at risk tenants and enables early intervention before the situation escalates further and arrears increase.
Financial Viability Under Threat
A fluctuating cash-flow resulting from a fall rental income and increased arrears (and the additional budget and resource required to collect outstanding rent payments) may threaten the financial viability of some associations. Whereas larger councils and HAs may be better equipped to deal with these increased budgetary pressures, it’s likely that smaller organisations do not have the financial resilience to manage the impact of unstable cash-flow. In order to mitigate however, we’re likely to see an increase in automation amongst income teams meaning that those cases that demand human intervention can actually be actioned by officers who would otherwise be tied up with cases that could easily be resolved with minimal or automated contact.
Increased Focus on Operational Reform
Another likely effect off UC mass migration on social housing providers is that of the need to redesign and streamline operational processes. The potential negative impacts of UC mass migration on the ability of tenants to pay rent will put an onus on organisations to maximise their rental income. This in turn will lead to increased resources being allocated to rent collection activities and the potential scaling down of other service areas as staff are either redeployed elsewhere or funding for staff recruitment and retention is redirected towards the income collection function. This pressing need to make cost savings in order to accommodate this cost and offset the financial impact of higher rent arrears will drive a shift towards a shared services approach within many organisations and the greater utilisation of technologies that enable automated contact resolution, more effective staff scheduling, and the implementation of more relevant KPIs.
As we’ve explored in this feature, it’s evident that the effects of UC migration are far reaching and will inevitably force social landlords to adapt their approaches in several areas in order to continue to deliver their services. The three impact areas we’ve highlighted are just some of the more pertinent challenges to be addressed as the UC migration project progresses but which are all surmountable with a little strategic planning and technological assistance.
If you’d like to learn more about how landlords can best prepare themselves and their customers for the mass migration of Universal Credit then sign up for our exclusive webinar on 27 January.