Universal Credit Scottish choices: evaluation - qualitative research - annex b

3. Decision making around Scottish choices

Key findings

Reasons for taking up Scottish choices

• A desire to reduce stress by ensuring rent was always paid was a key driver for taking up the Direct Payments to Landlord choice. This was particularly true for groups who were not used to paying rent, those who were in poor mental or physical health, and those who were experiencing crisis.
• More frequent payments were viewed as having the potential to help with money management by making it easier to spread direct debits or other payments across the month, and by providing claimants with the security of knowing more money would be coming in sooner, should they spend their income too quickly or experience an unexpected outgoing.
• Claimants who were used to budgeting on a more frequent schedule were particularly likely to cite these as reasons for choosing this option, including those who had previously received income fortnightly from legacy benefits and those who used pre-payment meters for their gas and electricity.

Reasons for not taking up Scottish choices

• Claimants who chose not to have their rent paid direct to their landlord were typically already used to paying their own rent (including those currently or recently in work) and saw no need to change how they managed this. Those whose housing element did not cover their full rent or those whose Universal Credit payments fluctuated month on month also felt that this option would not benefit them, since they would still have to pay an element of rent themselves.
• Other reasons for not taking up the Direct Payment to Landlords option included: wanting to retain control over their income and outgoings (linked, in part, to being able to withhold rent if their landlord failed to maintain their property); awareness of issues other people had experienced with 'technical arrears' arising from the system for paying landlords; not wanting people to know they were on benefits; and wanting or needing their housing allowance for other outgoings.
• Reasons for not opting to receive more frequent payments included: being used to managing with a monthly income; concerns about managing on an initial half payment after having stretched out a monthly payment prior to this; being put off by the fact the second payment date was not completely fixed; and uncertainty about how this option would interact with any deductions or sanctions.

Landlord roles in encouraging or discouraging take-up of Scottish choices

• Findings from the survey of landlords indicated a significant difference in attitudes between social and private landlords. Most private landlords stated they would be very or fairly likely to encourage tenants to take up the Direct Payments option, while social landlords were much more divided in whether they would encourage it.
• For both social and private landlords, the guarantee that landlords would receive their rent payment was the main reason for encouraging tenants to take up the option.
• Social landlords who had discouraged some or all tenants from taking up direct payments explained this primarily with reference to issues with the payment system and the impact this had (for both them and their tenants) in creating 'technical arrears'.
• Landlords were generally more neutral in their opinions of More Frequent Payments. However, some concerns were raised about whether it could make it difficult for people to retain enough money (across the two payments) for rent.

This chapter explores how Universal Credit claimants came to make decisions about whether or not to take up Direct Payments to Landlords or More Frequent Payments. It addresses the following research questions:

• If people chose to receive their Universal Credit award twice-monthly, why did they make this choice?
• If people chose to have the housing costs in their Universal Credit award paid directly to their landlord, why did they make this choice?
• If people were aware of Scottish choices, but chose to receive their Universal Credit in the standard fashion, what was the reason for this and are they open to the possibility of making a different choice later?
• Do landlords make their tenant(s) aware of Universal Credit Scottish choices?
• Do landlords encourage or discourage their tenant(s), who are eligible to choose direct payments of housing costs to landlords and do not already have Alternative Payment Arrangements in place, to take up this option? Why?

Decision making around Direct Payments to Landlords

Reasons for opting for Direct Payments to Landlords

Universal Credit claimants cited a desire to reduce stress as a key driver for taking up the Direct Payments to Landlord option: having their rent paid directly would give them "peace of mind" that it was covered. Paying rent was seen as a top financial priority, and the responsibility of keeping on top of their rent on a low income caused people worry, even if they had not previously experienced issues with arrears:

"I would rather it be paid straight to the landlord and then that's it paid and out the way, I don't have to worry about it, it's enough managing your own bills and your kids and things, so definitely it's [another] worry to think about."

(Interviewee 14, Female 30-44, on DPL)

This was particularly true for those who were not used to paying rent, such as those who had experience of legacy benefits like Jobseeker's Allowance (JSA) or the Employment Support Allowance (ESA), as they were used to having rent paid directly to their landlord under the Housing Benefit system. Other groups who either themselves mentioned these motivations for signing up for direct payments, or were mentioned by key informants or landlords as particularly likely to benefit from this option, included:

• Young people who were living away from home for the first time and had no previous experience of paying rent
• Those in poor mental or physical health, or people in crisis, who wanted to avoid the added stress of managing rent payments
• People with addiction issues, and
• People with previous (or current) rent arrears.

People in these latter two groups in particular (those with addiction issues and those in arrears) wanted their rent paid directly to their landlord to avoid the temptation of spending their housing allowance on something else:

"The last thing I wanted was rent cheques coming in my name, and possibly ending up in the pub. It wasn't an option... So, it made perfect sense for it to just go straight to the [Housing Association]."

(Interviewee 27, Male 45-64, on both DPL and MFP)

Some reported that they had accrued arrears in the past because they were struggling to manage with a very low income on Universal Credit and had needed to supplement their living costs with their rent money to buy essentials. They saw having their rent paid direct to their landlord as a means of avoiding this happening again in the future.

"A lot of people really worry about their rent, so they would rather [have a DPL]… some really, really, vulnerable families have been honest with us and said, 'I would rather my landlord had the full amount and I just don't have that worry, I will manage to survive on what I need to survive on', which is really sad."

(Key informant 12)

Other motivations for opting for Direct Payments to Landlords included:

• Discomfort with or inability to set up direct debits for rent payments - both claimants and key informants mentioned this, with the Scottish choices option seen as a more straightforward alternative for those who lacked digital literacy or were not comfortable with online banking
• Avoiding negative interactions with landlords - a key informant, who worked predominantly with Universal Credit claimants renting in the private sector, felt that where tenants had difficult relationships with their private landlord, having their rent paid directly allowed claimants to avoid potentially negative interactions with them.

Interviewees who went onto this option were asked whether they had any concerns or reservations about the Direct Payments to Landlord option before signing up for it. At the time, participants who had taken this up had no concerns about their choice. Where concerns were raised by claimants, these tended to be the result of issues encountered subsequently (rather than reflecting reservations they had before opting for it), as discussed in the next chapter (Chapter 4).

Reasons for not taking up Direct Payment to Landlords

In general, claimants who chose not to take up the Direct Payments to Landlord option did so because they were used to or preferred paying their own rent - claimants in this group did not feel that paying their rent was stressful, so saw no need to change how they managed this. Some preferred other ways of paying rent, such as using pay points at shops or direct debits (there was a view amongst these claimants that opting for direct payments to their landlord was no different in practice to setting up a direct debit). Groups who typically preferred to pay their own rent included:

• Those who had previously been working or were working, and were used to paying rent from their salary
• Those who were new to Universal Credit or benefits, and did not have any experience of having their rent paid directly previously (i.e. through Housing Benefit)
• Those who had become used to paying their own rent on Universal Credit, including those who had done so during their first assessment period, and those who had not heard about the Direct Payments to Landlord option until they had been on Universal Credit for a number of months (by which point they were used to paying their rent themselves)
• Those whose housing element did not cover their full rent or whose Universal Credit payments fluctuated month on month (for example, those with varying income from self-employment), who tended to view direct payments as unsuitable since they would have to make additional payments to their landlords anyway. The Direct Payments to Landlord option was seen as causing added complications for people in these situations.

Claimants also reported wanting to retain control over their own income and outgoings. Interviewees referred to a desire not to have their money controlled by someone else in principle and to the reassurance of paying rent yourself and knowing it has definitely been done. Another element of retaining control related to giving people a lever if they had issues with their landlord or letting agent - people wanted the ability to withhold rent payments if their landlord failed to maintain their property to an adequate standard, for example.

"We have got some really head-strong tenants who say, 'I am not losing that control, because I wouldn't then have the flexibility to withhold my rent if he doesn't do repairs.'"

(Key informant 12)

Other reasons people gave for not taking up Direct Payments to Landlords included:

• Not wanting people to know they received benefits, and
• An awareness that the payment system could create issues with technical arrears. Landlords and key informants also mentioned this as a barrier to take-up (see discussion below).

Key informants and landlords also suggested that some people decided not to take up this option because they wanted or needed to spend the extra money, and this was a higher priority than avoiding rent arrears.

Claimants who had not taken up the Direct Payments to Landlord option were generally content with continuing to pay rent themselves. However, two circumstances in which they might consider signing up to this option in the future were mentioned:

• If claimants could be confident that rent would be paid on time (for those who had heard about payment system issues) and have 'trust in the system'
• If claimants were in a more positive situation with their landlord, which meant they did not feel the need to retain tight control over their rent payments.

Landlord attitudes to tenants taking up Direct Payments

One factor that might influence decision-making around Direct Payments to Landlords (particularly as they are a potential source of awareness about the option in the first place, as noted in Chapter 1) is whether landlords encourage or discourage tenants from taking up this option. Findings from the survey of landlords showed a large difference in attitudes between social and private landlords. 84% of private landlords stated they would be very or fairly likely to encourage tenants to take up the Direct Payment option, while social landlords were much more divided - 50% were likely to encourage tenants to take it up, but 42% said they would be unlikely to do so (Figure 3.1).

Base: Private landlords = 174 Social landlords = 78

Question wording: "If you knew that a tenant was receiving Universal Credit, how likely or unlikely would you be to encourage them to apply for Scottish choices so that their Universal Credit housing element was paid directly to you?"

Qualitative interviews also identified a range of positions - particularly among social landlords - as to whether they would encourage or discourage some or all tenants from taking up the Direct Payment option. Indeed, social landlords varied in whether they said they made all tenants aware of this as an option, or whether they only mentioned it to those for whom they felt it was more likely to be useful or necessary to guarantee rent payments.

For both social and private landlords, the guarantee that landlords would receive their rent payment was a key reason for encouraging tenants to take up the option. Indeed, one private landlord said that she "insists" that new tenants on Universal Credit agree to sign up to this option, to better protect her income (something which goes against the idea of Scottish choices being optional for tenants). This protection of landlord income, and guarantee that rent would be paid, was not just seen as a benefit for landlords themselves, but also for tenants, who would be better safeguarded against rent arrears and eviction, by ensuring that rent was paid. Social and private landlords felt this was particularly true for claimants who were potentially vulnerable or had difficulties managing money.

Social landlords who had discouraged some or all tenants from opting for direct payments explained this position primarily with reference to issues with the payment system (see Chapter 2, Box 2) and the impact this had in creating 'technical arrears', but also with reference to the fact that tenants had to pay their rent themselves at the start of their claim anyway. An interviewee from a Housing Association described how they worked with tenants to get Direct Debits set up during the first assessment period instead):

"[As a result of delays tenants] are running with a two-month arrear of rent before that first payment would come direct to us. So, that's why we then said, 'no, let's start working with our tenants and getting them to take the responsibility for paying their rent and set their direct debit up [instead of Direct Payments to Landlords]'… they are [not] maintaining their rent account a month in advance, which is what their tenancy agreement says… but they have paid [a month's rent] before the next monthly rent goes on."

(Landlord 10, Housing Association)

Social landlords also reported discouraging their tenants from opting for a Direct Payment to Landlord arrangement when they felt it was unclear how it would work for the tenant, for example because of fluctuating incomes or because their housing allowance did not cover the full rental payment. Echoing the views of people on Universal Credit in these situations, social landlords felt the DWP did not communicate clearly how Scottish choices would work in these circumstances, leading to situations in which tenants did not know their rent was not being covered in full until arrears had begun to accrue.

One social landlord also felt that direct payments went against the ethos of Universal Credit, which was to encourage claimants to manage their money themselves. While they said they might recommend the option if it helped a tenant who was struggling to manage their income, or if the tenant had a history of arrears, they felt that wherever possible, it was better if tenants paid their rent themselves.

Finally, there was an importance placed on the choice element of the Scottish choices amongst social landlords - some landlords felt that their role was to support tenants to make the right decision for themselves as individuals, rather than to encourage or discourage any particular option.

"I would encourage them based on their personal choice of their own circumstances… [it's] not about securing our income as a landlord, although ultimately we need to do that… but it does have to be personal choice I believe, unless somebody is in a position where that decision needs to be taken out of their hands because their tenancy is at risk or their personal circumstances put that tenancy at risk."

(Landlord 4, Local Authority)

Decision making around More Frequent Payments

Reasons for taking up More Frequent Payments

People on Universal Credit who had taken up the More Frequent Payments option described it as helpful when managing a low income. Specifically, people described opting for it because:

• They were used to budgeting and managing their bills on a more frequent schedule - this applied particularly to those who had previously been on legacy benefits and had received fortnightly payments.
• They thought it would be easier to spread direct debits or other payments across the month when receiving more frequent payments
• Receiving two payments a month provided the security of knowing more money would be coming in sooner, should they spend their income too quickly or should an unexpected outgoing arise
• It might help mitigate difficulties managing deductions for advanced payments - one participant said that their Work Coach had suggested Scottish choices More Frequent Payments to them when they had asked for help managing with £60 monthly deductions to repay a Universal Credit advance. More frequent payments were suggested as a potential way of helping to budget for these deductions, since deductions would come off in two smaller amounts each month.

Key informants, particularly those working in money advice and debt management services, suggested that more frequent payments might be particularly useful for families, who often had regular and unexpected costs, such as school uniforms or trips. One key informant also felt that receiving Universal Credit in two payments a month was helpful for people who were not computer literate, and who were less able to monitor their journal to help them budget around a monthly payment.

A potentially more problematic motivation for signing up for this option was mentioned by a key informant who was aware of a case where a client had borrowed money off family members to tide her over until her first Universal Credit payment, and her family members then asked her to sign up to receive more frequent payments, so she could repay the debt in quicker and more regular instalments.

Reasons for not taking up More Frequent Payments

Claimants who were aware of More Frequent Payments as an option, but had actively chosen not to take it up, tended to report that this was because they were used to managing a monthly income. For some claimants, this was because they had been paid monthly when they had been working. For others, as More Frequent Payments only became an option after their first assessment period, they had become used to managing a single monthly payment by the time More Frequent Payments was available to them and saw no need to change.

Such claimants explained how changing to receive more frequent payments at this point could cause unnecessary disruption, since, for example, all their direct debits had already been set up to come out once a month. Claimants added that they found managing a monthly budget easier, as it meant buying unexpected or higher value items, or paying rent, was easier than it would be if they had to save money from two smaller payments. Others explained that, as they had multiple sources of income, either from other benefits (such as Personal Independence Payments) or employment, they saw more frequent payments as unnecessary, since their income payments were already staggered throughout the month.

Claimants also expressed concerns around how elements of the More Frequent Payments option operate in practice. Specifically:

• Some claimants were deterred from opting for more frequent payments by the fact they would only receive a half payment at the start, having stretched their previous Universal Credit over a full month.
• Claimants were also put off by the fact that payment dates varied slightly each month (contrasted with both monthly Universal Credit payments and fortnightly payments received under legacy benefits). Claimants felt this variation would make it harder to keep on top of budgeting.

"I just wouldn't be able to cope with that. I would rather be paid on a set day every month, which is the 23rd of every month I get paid. I would rather have it on a set day, that way I know I get paid on that day or if it falls on a weekend you get paid a couple of days earlier knowing that, because I always check it every month, you know, to make sure if the 23rd is on a Sunday, right, I will get paid on the 21st, I will do this, that and the next thing. So, I know exactly when I'm getting paid."

(Interviewee 4, Female 30-44, on DPL only)

• Claimants also raised concerns about what would happen with deductions and sanctions if they moved onto the More Frequent Payments option; there was clear confusion around whether deductions would get taken off at the full amount twice a month, in effect meaning that claimants would pay back any monies owed twice as quickly.

Another claimant was put off from applying to receive more frequent payments due to the issues he had experienced with the Direct Payments to Landlord option. This had left him apprehensive that engaging with the Scottish choices might disrupt his ability to manage his income again.

Given the reasons they gave for not taking up the More Frequent Payments option, few claimants who were aware of this choice, but decided against it, were currently open to the possibility of taking it up at a later point.

Landlord attitudes to tenants taking up More Frequent Payments.

In general, landlords had far less to say about the option of More Frequent Payments, which they saw as less relevant to them than Direct Payments to Landlords. However, social landlords did generally report discussing it as an option with their tenants. As with Direct Payments, they varied as to whether they said they mentioned it to all tenants, or only to particular groups they thought might benefit, such as those transitioning from legacy benefits who were used to fortnightly payments, or those who were struggling with money management. There were no examples in our sample where private landlords said they had discussed the More Frequent Payments option with their tenants.

Social landlords generally described encouraging tenants to take up More Frequent Payments where they felt it might help the tenant - there was little perceived benefit to landlords themselves. Others said that unless a tenant was particularly struggling, they tended to discourage More Frequent Payments for three main reasons:

• They were concerned about disruption to rental payments - one view was that if a tenant was considering More Frequent Payments, the landlord would strongly encourage them to take up the Direct Payments to Landlord option too, so that their rental income was guaranteed (because of concern about tenants having to save for rent from two half payments).
• They felt it could be more difficult for tenants to manage their money on the More Frequent Payments option - Social landlords were aware that tenants would not receive each payment on exactly the same date and felt that this made money management more difficult
• They also felt that in principle, it was usually better to get used to budgeting monthly, and easier to support people to do so (because of the issues noted above, around standing orders and being clear how long your money needs to last). One landlord summarised the way they frame the More Frequent Payments option in discussions with tenants:

"If you've managed on monthly, why are you now taking a choice that means DWP holds on to half your money for a fortnight extra?"

(Landlord 16, Local Authority)