What does the new data on Universal Credit tell us?

Last week the Government started releasing the first sets of data about universal credit (UC) and housing benefit (HB) since the start of the coronavirus pandemic lockdown. The previous data set only covered the period up to and including February 2020. Although some data had already been released about the number of new claims (‘declarations’) for UC we did not know how many of these had resulted in an award. So, what does the new data tell us so far? Sam Lister, CIH policy and practice officer tells all.

Between 13 March and 4 May there have been 2.4 million new starts to UC and during the same period there were 1.9 million UC declarations (new claims). The disparity is due to time lag between a claim being made and the start of a new award (but not all new claims result in an award). Between February and May the number of households on UC rose from 2.6 million to 4.2 million. In the 12 months ending on 31 March the average monthly number of new starts to UC was 195,000. For each of the next two months the number of new starts exceeded this by one million.

But not all these new cases are claims with housing costs (i.e. rent). In fact, between February and May the category with by far the steepest rise was non-rent payers who increased from 934,000 to 1.87 million households (an increase of 100 per cent). This category includes owner occupiers who are only entitled to a repayable DWP loan towards their mortgage interest payments (of which eight out of ten refuse help). The remainder are non-householders such as adult children living with their parents and those without a permanent address (‘sofa surfers’).

During the same period, the number social renters on UC rose by 225,000 to 1.1 million – a 25 per cent increase. The number of private renters rose by 493,000 to 1.24 million – a 66 per cent increase. For the first time the number of private renters on UC now exceeds those on HB. As would be expected over the same period the number of working age HB claimants fell by 59,000 to 1.6 million for social renters and by 44,000 to 609,000 private renters, and in each case some of these will have ‘migrated’ over to UC.

Far more worrying has been the dramatic increase in the total number of UC/HB awards that are affected by the benefit cap. In February, the number of capped UC/HB awards was 80,000 but by May it was 154,000, an increase of 93 per cent. It is not possible to tell from the published figures how many of these were social and private renters, but it seems reasonable to assume that the majority were private renters. The majority of these – but not all – are likely to be new claims. But some longstanding claims will have fallen into the cap for the first time. There are several possible reasons for this: the benefits uprating (the cap remains frozen), the extra £20 per week due to the pandemic, a change of circumstance (e.g. birth of a child, rent increase) and, in the case of private renters, an increase in the housing costs element due to the recalibration of the local housing allowance (LHA) rates back to the 30th percentile rent.

The LHA uplift, changes in the type of household being capped and the way capped households are distributed geographically (heavily in Southern England) are all what we would expect if the majority of the increase was in private rented claims. For example, there has been a fivefold increase in the number of single person households that have been capped. Before the pandemic, the numbers were small: just 3,700 UC cases of which 90 per cent were in London (only a rent in excess of £202 per week in London or £163 per week elsewhere would be capped). By May their number had risen to 18,600, 14,100 of which were in London (albeit a smaller share). And in the South-East and East of England the numbers increased by a factor of 16 from just 240 to 3,860.

Most capped households (pre- and post-lockdown) are lone parents, followed by couples with children. The UC-capped caseload between February and May doubled and tripled in each of these months respectively from 32,000 to 73,000 lone parents and from 11,000 to 32,000 to couples. (The number of couples without children who are capped is tiny). The two-and-three-fold increase is consistent across all countries and regions of Great Britain. But just over half lone parent households and two out of five couples with children that have had their UC capped are in the South East, London, and East of England. Outside of these regions it may be that the number of newly capped households is more evenly distributed between private and social renters or social renters may even be in the majority.

After May (the latest benefit cap figures) the number of new UC claims falls almost as sharply as it rose following the lockdown, so that the July new claims figure is close to the pre-lockdown average. However, another dark cloud looms on the horizon: if most new claimants are jobseekers who have recently finished work then they will usually be exempt for nine months during the ‘grace period’. If these new claimants are unable to find work, then we can expect a further steep rise in the number of capped households during December and January.

The aim of the cap (the government would argue) is to incentivise claimants who could find work to do so. But the pandemic has brought into sharper focus the fact that the reason people claim benefits is not due to any personal or moral failing but due to circumstances outside their control. But even under normal economic conditions a clear majority of those capped have nil or reduced job search requirements so its effect is to unfairly sanction the claimant for failing to comply with an obligation the law doesn’t require them to comply with. This injustice is compounded by the fact that the cap disproportionately impacts women and black and minority ethnic households – something that the government foresaw in its own equality impact assessment.

But the cap isn’t just socially and economically unjust, it also unfairly penalises households for the huge housing market inequalities that exist between the different countries and regions of the UK. A cynic might say it was designed to deflect the blame for the failure of successive governments to ensure that there is an adequate supply of affordable housing that would address these systemic weaknesses.

Unfortunately the government refuses to consider abolishing the cap or even to temporarily suspend it during the pandemic. The Chartered Institute of Housing will continue to press the case for its abolition but until that time arises our proposals for benefit cap reform are designed to address its main injustices as follows:

(a) to restrict its scope to those with full work-related requirements only

(b) to extend the list of exemptions to protect those who are at risk of harm, including those escaping domestic abuse; and

(c) to raise cap levels to reflect differences more fairly between rents in the different countries and regions of the UK.

Urgent action is required if we want to prevent the surge in capped households from being a major new driver of homelessness over the coming months.