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owner occupiers
I’ve been blundering around in the owner-occupier regs for UC, which are not my usual thing.
Can any one who is a bit more familiar with this area tell me:
1) Has the 2 year limit for job seeker’s disappeared?
2) What has happened to ground rent?
3) What has happened to insurance?
The Dec 2012 draft regs Schedule 5 on owner-occupiers has dropped the 2-year limit which was in there before.
btw the ceiling is £200,000 and the qualifying period is 3 months.
I searched the pdf for ground rent and it is only mentioned once at SCHEDULE 1 … Meaning of payments in respect of accommodation …Payments excluded from being rent payments
3. The following are excluded from being “rent payments”—
(a) payments of ground rent ...
So it seems to have been omitted for owner-occupiers. Don’t know about any changes to insurance.
Thanks for that Robbie. Any further comments from anyone would be appreciated. To miss out ground rent and insurance seems to be unfair to say the least.
Hello
I’m needing a bit of help with Schedule 5 of the UC Regs as well.
There doesn’t seem to be any distinction in terms of what is a ‘qualifying loan’ as there is under SMI claims. Para 5 of Schedule 1 states -:?Loan interest payments? means payments of interest on a loan which is secured on the accommodation in respect of which the claimant meets the occupation condition. So, there no longer seems to be a requirement that the loan was taken out for the purpose of house purchase (as opposed to for example, secured loans for non-essential improvements or remortgages for debt consolidation purposes). This suggests that interest payments on all mortgages/secured loans are covered (albeit at the standard rate of interest) as long as they are under the loan capital cap of ?200k.
Is this the case - seems a bit good to be true?!
I think you’re being a bit optimistic.
We know what their policy intention is/was (and I don’t think it’s changed to a more generous one, except possibly around eligibility of loans.).
From the DWP ‘Explanatory Memorandum for the Social Security Advisory Committee’ last year:
“Owner Occupiers
...
82. There is to be a “zero earnings rule” in Universal Credit for owner occupiers. This means that a Universal Credit claimant who is an owner occupier and who is receiving help with housing costs will not receive help with their housing costs if they are doing any paid work. This replicates how housing costs for owner occupiers operate in practice for most groups in the legacy benefits, and recognises the different characteristics and work incentives facing owner occupiers compared to other out of work claimants.
83. Owner occupiers who claim income-related benefits will previously have obtained and sustained mortgages and, usually, they have done this while they are in full-time work. The Government believes that most owner occupiers should be aiming to move from short-term help with their housing costs into full time work to support their housing tenure or they should take other steps, such as selling their homes and downsizing, if they are unable to sustain their mortgages. Moreover should they attempt some part-time work the removal of SMI will in part be compensated by the operation of the full disregard.
Waiting Period Before Housing Costs Become Payable
...
Eligible Loans
85. Eligible loans for housing costs are loans that were taken out to purchase the dwelling occupied as the home and other loans secured on the property.
...
Limit on Payment of Housing Costs
91. There is to be a time-limit of two years on payment of housing costs to claimants in the full conditionality group of Universal Credit. When such a claimant has received help with housing costs for a period of two years these payments will stop and will not be reinstated until a claimant has had a break in claim and has served a further waiting period. This is underpinned by the principle of providing short-term help through the benefits system and because it is not considered appropriate that this help is provided indefinitely. This is intended to focus the help that is given through the benefits system on those on low income when they need it most.”
I wonder whether they are preparing new regs taking account of the Support for mortgage interest – call for evidence that ran last year. (http://www.dwp.gov.uk/consultations/2011/support-for-mortgage-interest.shtml).
In that they proposed that, for older or disabled people who would fall outside the two year limit, amounts of SMI paid would be recovered after the sale of the property or the death of the claimant.
The government said, in the consultation, that
“Our strategic vision for support for mortgage interest in the future is that it should provide short-term help to people at a time of personal crisis such as loss of employment or relationship breakdown and incentivise work.”
For longer term needs,
“… for example, where a claimant is disabled or takes a mortgage into retirement, the Government believes that taxpayers should not in effect be helping people to acquire personal assets through any potential long-term rises in house prices. We are therefore seeking views on an option to put a charge on property in return for long-term payment of support for mortgage interest.”
They propose that claimants would repay the sum they received by way of SMI, plus interest to cover costs to government, from the equity in their property. In the examples in the paper they use a 2% surcharge over the SMI rate to cover costs and interest. The charge and repayment would begin after two years in receipt of SMI as part of long term benefits.
That intention has been repeated since the consultation by ministers and officials.
In their response to the consultation, Ford, Munro, Smith, Wallace and Sprigings (who are the leading researchers in this area) suggested that instead of a two year limit for working age people, the SMI recovery should be extended instead so that interest would continue but be recovered later.
If the DWP had taken that idea on then pulling the limit out of the UC regs in preparation for a general set of recovery regs might make sense.
Thanks for that Robbie. Any further comments from anyone would be appreciated. To miss out ground rent and insurance seems to be unfair to say the least.
Just on the ground rent point there’s this .
(from the “Universal Credit and related regulations: Response to SSAC technical comments and policy points”)
“27. Payments which are not Rent Payments (Schedule 1, para 3): this means that leaseholders will have to meet a demand for ground rent from their own resources.”
DWP Respond: “Provision for ground rent is excluded from support within Universal Credit. Amounts for such liabilities are generally low and it is not considered appropriate to include them within a simplified system.”
Is there nothing to stop a loan taken out whilst on UC being taken into account? I can’t find an equivalent to the rules about loans taken out in the ‘relevant period’ which curently exist for IS/JSA/ESA.
Just trying to work out the ramifications of this. Is there any reason why a claimant struggling with bedroom tax or LHA couldn’t go and buy a nice big house for £200,000 on an interest only mortgage with the money transferred directly into a non transferable bond (so it would never become assessable capital). Then the DWP pay the interest on the loan and the claimant gets a nice place to live. On maturity the claimant uses the bond money to pay off the mortgage. Can anyone find a problem with my wheeze?
I suppose DWP could try using the contrived liability provision at Schedule 2 para 10 (reg 25(3)(b)) ?
Not sure how far they’d get with that though.
That seems a possibility. I note they have used the term “contrived” in the schedule rather than “created to take advantage of” as in the current reg 9. Presumably the case law from reg 9 will be relevant for interpreting it. Could there be a difference with the case I set out, of a person whose aim is to get a home and another possibility: a person who uses the housing costs provisions to engage in a form of interest rate arbitrage?
Say for example someone who is occupying a property with no debt on it who enters into a mortgage with the money again going into a non transferable bond. The money from UC housing costs effectively reduces the interest paid out on the loan thereby allows for a profit to be made form the difference in interest received from the bond.
Is the first person argueably not abusing the scheme because he is securing accomodation whereas the second person is just trying to make a few quid?
Sorry my examples don’t make sense – I should get my thinking straight before posting. The first person, struggling to pay the rent through UC would obviously have no money to put in a bond etc. They would just be getting an interest only mortgage as an alternative to renting. This is a risky strategy since house prices may fall – in fact I think all the housing cost ‘generosity’ in UC and also in the current provision is due to the governments fear of a proper house price crash.
New post on dormant thread. Have I understood correctly that the nine-month ‘waiting’ period restarts *every time* an owner-occupier has any earnings? Is there no linking rule like for legacy benefits (DRHandbook p195)? I have looked up UC Regs 2013 at http://www.legislation.gov.uk/uksi/2013/376/schedule/5/paragraph/5 and can’t see any linking rule. This seems harsh (which is to be expected of UC) and counter to the Make Work Pay policy (which is odd).
That is correct Robbie - one hour of work and you can lose 10 months of SMI!