Why is the 53 week rent year and Universal Credit a Hot Topic at the moment?
Because the DWP don't recognise a 53 week rent year. (HB Regs are the same - ie they don't recognise a 53 week rent year when converting monthly to weekly rents - so this is not a new issue but one that has existed in the benefit regulations for decades. It's just that it's never been relevant for social housing providers before.)
There has been a lot of confusion about what this will mean- some commentators are saying that UC claimants will find their UC award one week short this year, whilst others are saying the opposite ie no loss at all.
Our 'take' on it is that a UC claimant who lives in rented accommodation is missing out on about a day’s help with their rent from UC for each year they are on it.
This is because when the DWP convert a weekly rent into a monthly rent they always assume a 52 week rent year - ie covering 364 days (7 x 52), but there aren't exactly 52 weeks in a year so years are either 365 days long or 366 in a leap year. This means that if the claimant doesn't pay that extra day themselves this then 'catches up' with them on their rent account once every 5/6 years - ie whenever there is a 53 rent collection year due to there being 53 Mondays in a financial year.
So there is a week's Housing Costs Element 'missing' which has accumulated over a 5 / 6 year period - so a claimant who has been on UC throughout those 5/6 years receives one week’s less help with their rent than they need.
The trouble is the one week’s 'debt' shows on the rent account - not as a slowly accumulating debt - but as a sudden jump in arrears, becauses the full week’s rent will be debited on the Monday of the 53rd week.
Ideally a landlord would be collecting a day and a bit more rent per year over the 5/6 year period.
But the reality is this hasn't been happening - given that most UC claimants have only gone onto UC in the past 6-12 months...…..so it leaves landlords with a bit of a dilemma!
We're not sure there are any easy answers here...…
We can't see the DWP covering the one week rent 'loss' this year as it isn't really a whole week, would cost them a fortune - money they don't have - and as landlords have known about UC for the past 5+ years we think DWP would suggest that landlords perhaps should have been looking at this and coming up with their own solution to what is a long established principle...…..
Landlords can lobby the DWP to recognise 53 week rent years going forward, but just changing the rules to say that on a 53 week rent year a claimant's monthly rent is their weekly rent x 53 and divided by 53 (or slightly different if there are rent free week) isn't fair on those UC claimants who have been on UC in the years running up to the 53 week rent year, who then aren't on UC anymore when there is a 53 week rent year (as they have been 'losing' a day a year rent).
Ideally - if looking for a long term solution that's fair to all UC claimants - then the DWP should be working out the rental liability over a 5 year period ie weekly rent x 261 (4 x 52 + 1 x 53) / 5 / 12. Not too sure we'll be able to convince them of that!
One option would be for landlords to suggest that UC claimants pay the little extra a month to get their rent account 'ahead' for when the 53 week rent year hits.....but as that is this year, it means they will be paying off the debt rather than preparing for it. And what if they come off UC before they have reaped the rewards of paying extra early??
What we don't see as an option is for a landlord not to charge / collect the 53 week rent...….....or to credit back a week’s rent. This is because any landlord doing this would have to do this across all their stock. Otherwise there is a risk that the landlord could be seen as 'taking advantage' of the HB system by charging HB claimants more rent than UC claimants. And self-funders - particularly if they have been on UC in the past and therefore 'missed out' in the past - are likely to see the 'refund' as unfair. It would therefore have a huge financial impact as well as setting a precedent for future years.
Could the claimant apply for a DHP for that week's rent? Well as it is not really a week's rent that is 'missing' - and the LA would struggle financially to cover this for all claimants affected - and DHP's are about preventing hardship / homelessness not helping out landlords in a 53 week rent year..…. we can't see LAs doing that!
One thing we are sure of, is that rent collection statistics will take a 'hit' just before year end - so income managers will need to be able to explain why the arrears collection figures aren't showing a true reflection of the hard work put in by their teams!
How do you explain to tenants on Universal Credit that they need to start paying an extra days rent a year?
This is the best explanation we could come up with:
Your landlord charges your rent weekly, but Universal Credit is assessed and paid monthly.
Because of this, Universal Credit only pays 364 days in a year, even though there are always 365 days in a year (and 366 every leap year).
So your Universal Credit it always going to be one day short each year (or two in a leap year).
Why is this?
The DWP work out your monthly rent by multiplying a week’s rent by 52 and dividing by 12. This would be fine if there were exactly 52 weeks rent in a year but there aren’t. There’s always an extra day in the year- or 2 in a leap year.
(For the mathematically minded, it’s because 52 times 7 is only 364).
You won’t normally notice this but every few years when the extra day falls on a Monday* it will show on your rent account as a full week’s debt.
*As this is the day your rent week starts.
Unfortunately 2019 is one of these years.
The DWP have said they won’t pay any extra Universal Credit to cover this.
Will this affect me?
If you are clearing your rent account every week or month – reducing the balance to zero - then this won’t be a problem.
But where you pay your rent every month by using the same system as the DWP (ie your weekly rent times 52 and divided by 12) then you’ll be a day short every year (two in a leap year) and will have to make up that extra.
If you think you are going to be affected by this please contact us.