Deductions from benefits for hostel service charges

Most people staying in homeless hostels have to claim housing benefit for their rent or licence fee. This is usually paid directly to the hostel provider. Residents might also claim other benefits for their day-to-day living costs, such as universal credit.

In some circumstances, the DWP can use its discretion to deduct money from a claimant's other benefits and pay it directly to someone else. These are known as ‘third party deductions’.

Deductions can be an effective way for a resident in a homeless hostel to pay service charges that are ineligible for housing benefit. This can include charges for:

• personal care and support

• meals

• heating and water

• laundry

If residents do not pay these service charges they could be asked to leave the accommodation or might be prevented from securing other accommodation.

The rules about when deductions can be set up are different depending on which benefits the claimant is receiving.

The DWP can pay all or part of a claimant’s universal credit entitlement to another person if it is in the best interests of the claimant and their family to do so.[1]

This can include third party deductions to pay part of the standard allowance of universal credit directly to the claimant's landlord.[2] The DWP can do this when the claimant is:

• in debt for rent payments or service charges which are paid with or as part of their rent

• occupying the accommodation to which the rent applies

• entitled to the housing costs element or in receipt of housing benefit for ‘exempt accommodation’

‘Exempt accommodation’ is defined as accommodation which is provided by a non-metropolitan county council in England, private registered providers of social housing (PRPSH), charity or voluntary organisation where that organisation or someone acting on their behalf provides the claimant with care, support or supervision.[3] Not all homeless hostels come under this definition, such as hostels that are managed by a local authority.

The regulations only allow third party deductions to be set up for rent or service charges when the claimant is in arrears. Deductions cannot be set up for ongoing service charges that are ineligible for housing benefit.

The claimant’s earnings for the previous universal credit monthly assessment period must be below the work allowance which applies to them. If their earnings are equal to, or exceed, the work allowance for three monthly assessment periods, the deductions must stop.

Deductions for service charge arrears must stop when the claimant moves out of their accommodation.[4]

A third party deduction from the standard allowance can be requested by the claimant or by the landlord. The claimant's consent is not required to set up third party deductions for arrears of rent payments or service charges.

Claimants can request the DWP to set up deductions by:

• adding a message to their online universal credit journal

• contacting the universal credit helpline

• asking their work coach

The DWP's Universal Credit and rented housing: guide for landlords explains that landlords can request direct payments of rent or rent arrears by using an online 'Apply for a Direct Rent Payment service'. Social Landlords can also request direct payments via the UC Landlord Portal.[5] The guidance does not state whether landlords can also use this service to request deductions for service charges when the claimant is receiving housing benefit for their housing costs.

The amount of debt

The regulations do not state how much debt the claimant must be in before the DWP can set up third party deductions for rent and service charge arrears.

The DWP's Alternative Payment Arrangements guidance states that the claimant's landlord can request a rent arrears deduction if they have accrued rent arrears to the value of two months’ rent or more.[6] It is not clear whether the same principle applies where the arrears are just for ineligible service charges.

How much is deducted

A deduction for rent or service charge arrears can be for between 10% and 20% of the claimant's standard allowance.[7] How much is deducted depends on what other debts the claimant has.[8] The total amount of deductions from the standard allowance should not exceed 25% unless the DWP considers it to be in the claimant's best interests.[9]

The Universal Credit: Third party payments creditor and supplier handbook explains how the scheme operates.

The DWP can pay all or part of a claimant’s other benefits to another person to protect the interests of the claimant and their family.[10]

When a claimant is receiving housing benefit and claiming one of the following benefits, the DWP can set up third party deductions for ineligible service charges:[11]

• income support

• income-based Jobseeker’s Allowance (JSA)

• income-related Employment and Support Allowance (ESA)

• pension credit

The payments must be for one or more of the following:

• water

• fuel

• meals

• laundry

• cleaning (other than communal areas)

Claimants who are living in a hostel do not need to be in arrears of these charges for deductions to be set up. The deduction will cover the weekly service charge.

Claimants who are living in a hostel and owe more than £100 arrears for service charges can also have deductions paid directly to their landlord to help pay the arrears off.[12] The maximum amount that can be deducted is 5% of the personal allowance.[13]

The claimant or the landlord can ask the DWP to set third party deductions up. The claimant's consent is not usually required.[14]

The DWP has published A guide for landlords – rent arrears and service charges which includes information about how landlords can apply.

Deductions for ongoing service charge or arrears must stop when the claimant moves out of their accommodation.[15]

If a claimant faces hardship because of a third party deduction, or the total level of third party deductions, they can can request that the amount is reduced.[16]

If a claimant requests the DWP to set up a deduction and this is refused, they could request a reconsideration of the decision or submit a complaint using the DWP's online form.

There is no right of appeal about decisions relating to paying part of a claimant's benefit to another person.[17] These decisions can only be challenged by judicial review. Claimants should seek specialist advice if they are considering applying for a judicial review. The Child Poverty Action Group's Judicial Review Project provides advice and resources for welfare rights advisers.

Landlords

There is little that a landlord can do when a request for a third party deduction has been declined. The DWP should notify them of their decision, but guidance states that the DWP cannot tell landlords the reasons why a request has been refused due to data sharing regulations and claimant confidentiality.[18]

A claim for judicial review can only be brought by an individual with 'sufficient interest' and it unlikely that this will apply to a landlord.