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DHPs for UC claimants with APA Managed Payments

A real 'hot topic' at the moment is whether Local Authorities can award a Discretionary Housing Payment (DHP) to a UC claimant when an APA managed payment to their landlord (MPTL) is in place. And we have had a high number of queries from our members on this matter in the last couple of weeks.

We are aware of numerous Local Authorities who are saying that where the claimant has an APA managed payment to their landlord in place, DHP applications will be refused until the applicant can prove that the APA managed payment has been cancelled. 

This does stem from some DWP guidance (see below) - but there also appears to be a lot of misinformation and misunderstanding on this issue, which is spreading, and causing problems for claimants. 

Our stance is that even where an APA managed payment is in place the LA cannot refuse to consider an application for a DHP, if the amount of the APA managed payment does not cover the full monthly eligible rent - we have devised a standard letter (see below) that can be used if a LA is refusing to look at a DHP application in this situation. This letter has already been used successfully. 

So what has caused the DWP to issue such guidance and why is it getting so confused?

Back in September, in preparation for the Benefit Cap limit being reduced in November, the DWP wrote to Local Authorities to highlight the fact that those claimants who were going to be affected by the reduced limit were about to receive a letter. It stated:

"Universal Credit claimants will also be notified of the changes in September 2016. The Universal Credit notifications ask the claimant to speak to their Jobcentre Plus work coach if they have a managed payment to the landlord (MPTL) in place so that the work coach can explain how the benefit cap interacts with the MPTL.  In some cases this discussion may lead to the claimant asking for the MPTL to be stopped by DWP, so that they can apply for a Discretionary Housing Payment. If the claimant chooses to do so, the direct payment to landlord can be reinstated at a later point, though the landlord cannot ask for the MPTL to be reinstated  unless the benefit cap no longer applies."

As far as we are aware this is the only formal guidance from the DWP  that has been given to Local Authorities about DHPs for UC claimants who have an APA managed payment in place. The guidance has been repeated in other places, eg in "HB Direct" - DWP's newsletter.

We are assuming the thought behind this guidance is because Discretionary Housing Payments can be paid where the UC claimant ‘appears to (the) authority to require some further financial assistance….in order to meet housing costs’ (Discretionary Financial Assistance Regulations).  So if an APA managed payment is in place that covers the full eligible rent (ie gross rent less ineligible service charges) then, logically, the claimant may find it difficult to demonstrate that they require further financial help with their rent.

The DWP stated at the time that this guidance will only affect a small number of claimants - we guess this is because where an APA managed payment is covering the full eligible rent it is unlikely that the claimant will be also in receipt of a DHP.

BUT we are seeing claimants being refused a DHP where an APA managed payment is in place even where the Housing Costs Element does not cover their full eligible rent - ie where there is a Bedroom Tax reduction, housing costs contribution (non-dependant deduction), or rent free weeks; or where the UC award is below the value of the Housing Costs Element due to deductions or income. This decision can be challenged - please see Standard Letter UC DHP1
 

Why is this such an issue for claimants affected by the Benefit Cap?

The DWP accept that the Benefit Cap can cause financial hardship - and a way of alleviating this hardship is through the Discretionary Housing Payment system. But because the wording of the Discretionary Financial Assistance regulations has not been changed to take account of the way Universal Credit works - and they way the Benefit Cap is taken off UC - those claimants whose managed payment amount is equal to their full eligible monthly rent fall foul of the regulations - ie they cannot be said to require "further financial assistance with their housing costs".

So the way the DWP has decided to get round this is to allow the managed payment to be cancelled to enable a DHP to be paid.

Any reduction in a UC award due to the Benefit Cap  is taken from the whole UC award before payment is made. 

So if someone's UC award is considerably less than the maximum (eg because of the Benefit Cap) once the managed payment has been taken out there can be very little left for the claimant themselves.

What if as well as the Benefit Cap the claimant has a Bedroom tax reduction, or the APA manged payment is less than the full monthly eligible rent for some other reason?

These claimants can be given a DHP without having their managed payment removed because they do require "further financial assistance with their housing costs".

And as the LA can award a DHP up to the value of the Housing Costs Element, the claimant could be paid a DHP award that is more than just the "shortfall". And see below for our suggestions on the amount of DHP where the managed payment has been removed.

So, what has caused these Local Authorities to say that a DHP can't be awarded until the APA managed payment has been cancelled?

We are not aware of any other formal guidance from the DWP on this matter - although we are aware of commentary - for example on some discussion forums - that could be misread to say that the DWP have issued guidance that no DHP can be given if a UC claimant has an APA managed payment in place.
And unfortunately this  misconception appears to be spreading.

And we have seen a lot of misunderstanding both about both: how Universal Credit works (some stating that where an APA managed payment is in place no Housing Costs Element is included in the UC award (!) and therefore no DHP can be given- which is wrong); and rental liability (stating that where an APA managed payment is in place then the tenant has no rental liability!! - also wrong).

There are several issues to consider and challenge:

1. An outright refusal to consider a DHP application from a UC claimant until any APA managed payment is removed, where the managed payment does not cover the claimant's full eligible rent. This can be challenged using our Standard Letter UC DHP1.

2. Where a claimant, who is affected by the Benefit Cap and has an APA managed payment in place that does cover their full eligible rent, needs to have their APA managed payment ended before they are awarded a DHP*- then if the DHP is awarded at a lower amount than the APA managed payment it replaces, the claimant could easily get into rent arrears, especially if the DHP is paid to the claimant rather than to the landlord.  Standard Letter UC DHP2 requests that the DHP awarded in such cases is at least equal to the amount of the APA managed payent that has been removed. However there is no guarantee that this will be paid.
(*Assuming this is the correct interpretation of the rules - and we can see that it might be). 

3. There is no guarantee that if the claimant ends the APA managed payment that the Local Authority will in fact award a DHP. If the LA decides not to, then the claimant can request that the APA managed payment be re-instated - please see Standard Letter UC DHP3.

4. Where the claimant does need to end the APA managed payment in order to apply for a DHP, timing will be crucial. The best time to ask the DWP to end the arrangement and apply for a DHP will be just after the Universal Credit payment has been made to the claimant. This then gives the LA a two/three week 'window' in which to make their decision on the DHP application - and if it is refused the claimant can then ask the DWP to re-instate the APA managed payments - which could all be done in time for the next monthly payment.