Universal Credit housing costs: how it works for renters

If you rent your home and receive Universal Credit (UC), the housing costs element of your UC payment is designed to help with your rent. Here is how the housing costs element works, how it is calculated, and what to do if it does not cover your full rent.

What is the housing costs element?

The housing costs element (HCE) is the part of Universal Credit that covers rent. It has largely replaced Housing Benefit for working-age people, though Housing Benefit continues for some groups including pension-age claimants and some social housing tenants in certain circumstances.

The housing costs element is not paid directly to your landlord by default, it is included in your monthly UC payment and it is your responsibility to pay your landlord. However, you can request that it is paid directly to your landlord (called a "managed payment") in certain circumstances.

How is the amount calculated?

The amount of the housing costs element you receive depends on:

Whether you are a private or social tenant:

• Private tenants: the housing costs element is limited to the Local Housing Allowance (LHA) rate for your area and household size. LHA is based on the lower end of market rents in your Broad Rental Market Area (BRMA). If your actual rent is higher than the LHA, you must make up the difference.

• Social tenants (council or housing association): the housing costs element is based on your actual rent, minus certain deductions. The main deduction is the bedroom tax (formally the spare room subsidy), if your home has more bedrooms than the government says you need, a percentage (14% for one spare bedroom, 25% for two or more) is deducted from the housing costs element.

Your income: Universal Credit tapers as your earnings increase. As you earn more, your UC payment (including the housing costs element) reduces.

Your household composition: the LHA rate for private tenants depends on the number of bedrooms your household needs.

What if the housing costs element does not cover my rent?

This is common, particularly in high-rent areas. Options include:

• Applying to the council for a Discretionary Housing Payment (DHP) to help cover the shortfall, particularly if you have recently moved, have a disability, or have other exceptional circumstances
• Asking the Valuation Office Agency (VOA) to review your LHA rate if you believe it has been calculated incorrectly
• Looking for alternative accommodation at a lower rent that the LHA would cover more fully

When is housing costs paid directly to the landlord?

You can request a managed payment (alternative payment arrangement) directly to your landlord if:

• You have difficulty managing money
• You are in rent arrears
• There are welfare or vulnerability reasons why it would benefit you

Your landlord can also request a managed payment if you are 2 or more months in arrears.

Does housing disrepair affect my UC housing costs?

Not directly. The disrepair in your home does not reduce your obligation to pay rent, nor does it reduce your UC housing costs element. However:

• If you win a disrepair claim, the compensation you receive may affect your means-tested benefits depending on how much you receive and how it is paid, seek advice on this if it applies
• If you have been withholding rent (rent strike) because of disrepair, this may affect your UC housing costs element and could lead to arrears proceedings, this is a risk to consider carefully before taking this approach

When should I contact Support for Tenants?

If your home has disrepair your landlord will not fix, regardless of whether you receive Universal Credit, call us on 0800 030 4669.

No upfront cost. You only pay if you win, and the fee comes out of the compensation. If you don't win, you pay nothing.

Sources

• Welfare Reform Act 2012 (legislation.gov.uk)
• Universal Credit (GOV.UK)