How universal credit rules stop hostel residents from moving on

News and developments

Problems with getting deductions from universal credit for service charges impact vulnerable hostel residents and compromise their ability to move on. 

Published August 2022

A pathway to independent living

Camden’s Adult Pathway of hostels and supported housing services is delivered by six commissioned providers and an in-house team. It accommodates over 600 single homeless people with complex needs, many of them rough sleepers who have been on and off the streets for some time. 

Most of the residents arrive at the hostels having experienced trauma in their lives, and so staff need to work in a trauma-informed way. To support them to do this, three psychologists work with residents and staff across Pathway services.

Many of our residents struggle to address their support needs so Pathway services help them access health and care services, build their independent living skills, and embark on a recovery journey. Our objective is to support them to move on from the Pathway and sustain independent accommodation.

When residents are ready to move on, Pathway services provide them with pre-tenancy training. A specialist Council Move-On Team helps them move into settled housing. Around 150-200 residents make a positive move out of the Pathway each year.

But our aims are being frustrated by universal credit regulations for service charges.

Why deductions from benefits are needed

On top of rent, residents must usually pay service charges, including charges for meals, fuel (typically gas and electricity), water, and cleaning. Housing benefit covers rent but not all service charges. Residents need to pay for service charges that are ineligible for housing benefit from their other income.

All our hostel residents claim benefits. Some still claim a legacy benefit for their income, for example employment and support allowance (ESA) or jobseekers’ allowance (JSA), but increasing numbers now claim universal credit.

The DWP can use its discretion to make deductions from any of these benefits and pay them directly to the landlord to cover ineligible service charges.

Many Pathway residents are so unwell that they can’t manage to make regular service charge payments themselves. In these cases, Pathway services often need to apply for deductions on behalf of a resident to support them to effectively manage their service charges. Residents are encouraged to make the application themselves if they’re able.

Service charge arrears can cause long term problems for residents.

Problems with universal credit deductions for service charges

In the experience of our Pathway services, the DWP only allows deductions from universal credit when the resident has service charge arrears of at least £100. In contrast, for people claiming ESA or JSA, staff can request deductions to cover all the service charges as soon as the resident moves in. This ensures that residents do not fall into arrears.

The DWP has advised some of our hostels that deductions from universal credit can only be set up for utility charges, i.e. fuel and water, and that a separate form must be completed for each charge, but this isn’t what the rules say. 

In one Pathway service, the service charge for meals of £19.35 per week has not been included in the deductions. Our residents need regular meals to stay well, so the catered hostels always provide them. But it does mean that residents will fall into significant debt as their arrears accrue. This leaves those in catered hostels at a significant disadvantage.

We cannot see that the universal credit rules exclude meals from deductions, and different hostels are told different things by the DWP. In addition, when a deduction is agreed, it often doesn’t cover the full service charge and fluctuates from month to month. The application of the rules should be consistent.

Problems when deductions are refused

When the DWP refuses a hostel’s request for deductions from universal credit, staff rarely see the decision letters and there is no option to appeal or review. DWP guidance says that information should not be shared with landlords for confidentiality reasons. Without the information, however, hostel staff find it difficult to support a resident to set up deductions.

Where a resident, rather than a landlord, applies for deductions and it is refused, they might be able to challenge this through a judicial review. They should seek legal advice.

In practice, there is no effective remedy to challenge the refusal of deductions.

Hostel managers don’t have access to clear guidance on deductions for service charges from the DWP, so have had to resort to producing their own ‘how to’ guides. These can be no substitute for official guidance.

Residents with service charge arrears can't move on

Around 80% of our Camden Pathway residents have more than eight weeks’ service charge arrears. Increasing numbers of our residents are in arrears on their payments and don’t have an arrangement in place to clear them.

If a resident builds up arrears in the Pathway and does not have a viable plan to reduce them, they can’t be put forward to our Move On Team. Residents who in all other respects are ready to move on are unable to do so. The whole purpose of the Pathway is undermined.

Residents are in the Pathway because they need support to move on to living independently. Our staff want to spend their time supporting people, not chasing payments and having difficult conversations about money.

Resident transfers are blocked

Sometimes Pathway service managers need to move a resident to a different service because of their behaviour, often at short notice. Service managers and commissioners work closely together to facilitate moves. These collaborative arrangements have been made more difficult in recent years. Services run by different providers are increasingly reluctant to take on people with large service charge arrears.

The fear is that residents will be evicted into uncertain housing situations, including rough sleeping, if no solution is found to this problem.

Rough sleepers are blocked from help

Camden has one of the highest levels of rough sleeping in the country, and we need spaces available in our Pathway to help as many people as we can.

When residents are unable to move on from our hostels, much needed bed spaces are not becoming available. Vulnerable single homeless people are unable to leave their precarious housing situation, or, in the case of rough sleepers, come off the streets.

A call for change

The problems with deductions under universal credit are frustrating the government’s aim to end rough sleeping.

It’s important the government recognises these problems.

The regulations should allow deductions from universal credit for the full service charge from the moment a resident enters a hostel, with the resident’s consent.

There should be clear communication between hostels and the DWP so that we can better support our residents to move on to living independently.

Further resources

Shelter Legal

Claiming benefits when staying in a homeless hostel - benefits to pay for a hostel, deductions from benefits for service charges, and charges covered by housing benefit

Gov.uk guidance and forms

DWP guide for landlords – rent arrears and service charges - government guidance on the third party deduction scheme

Applications for 'third party' deductions from Universal Credit - creditors can use these forms to request a third party deduction from universal credit

About the author

Brian Matthews is Camden Council’s Housing Commissioning and Partnerships Manager.