It doesn’t seem so long ago that universal credit (UC) was first introduced in pilot schemes around the country but we’re now just over halfway to full implementation, according to a House of Commons blog. The progressive UC roll-out to specific groups and geographic areas means that although an increasing proportion of claimants now receive UC, as a housing provider or local authority you may be just starting to develop your strategy in terms of how this may affect your organisation.
It seems a good time to reflect on the potential impact of UC on housing providers, and how they can adjust how arrears are managed to both protect their income as well to protect the interests of their tenants in light of the new arrangements.
Set up an early warning system
Universal credit replaces a number of means-tested social security benefits and tax credits, including child and working tax credits, income support and housing benefit, to name just a few.
This means that, if eligible, your tenants are paid their housing allowance as part of a single larger benefits payment and have the freedom (and responsibility) of managing their budget accordingly. But what happens when tenants misjudge a month, perhaps because they have an unexpectedly large bill to cover?
Most housing providers would normally only know that one of their tenants was in difficulty after a rent payment had been missed, with the crucial setback that this represents in terms of the tenant having already braced themselves to miss a payment. It’s well established that it’s far better to be able to offer the tenant the opportunity to make a smaller contribution for that month, rather than break the cycle of regular payments. But how does the housing officer know to offer this before the rent collection day?
The technology exists for income teams to see early if a tenant is facing an increase in financial stress. With links between your housing management database and the scoring system used by credit reference agencies, you can predict and be presented with a ‘propensity to pay’ score. This is automatically adjusted according to the very latest information, such as whether any loans, including those from sub-prime lenders, have recently been taken out or any credit payments missed.
This form of predictive analytics can unlock the potential of proactive arrears management so you can determine the best course of action to mitigate the risk of arrears while supporting the tenant through the difficult period.
If you can see the tenant is experiencing a temporary blip following a large bill, you may be able to mitigate their situation with a reduced rent payment for that month, followed by a manageable payment plan while things get back to normal. If the indicators are that the tenant is in more serious difficulty, perhaps if several loans have been taken out recently, you can intervene with the provision of support, such as referring them to a debt counselling service.
Protect homes by curbing sub-letting
The same technology, with the link to third-party agencies, can also help you ensure that your tenants are those people most in need of a home. It’s estimated that as many as one in 10 rental homes are illegally sub-let. This figure includes private rentals too, but the government estimates that at least 100,000 social housing properties are the subject of housing fraud.
Residency checks via credit reference agencies can alert you if the named tenant isn’t actually based at the address, either because they’re mostly using a different address for services, or perhaps if they’re party to a mortgage. In this way, you know much more quickly that the situation needs investigating, ultimately freeing up any illegally sub-let properties sooner to provide a home for the next eligible individual or family.
Identify the highest-priority cases
For those times when tenants do miss a payment, you can increase your level of collection with an understanding of where to focus efforts first. Again, technology exists which automatically prioritises arrears cases immediately after the rent roll, so you have the full picture of tenants’ financial hardship and can first follow up those most able to pay, as well as those tenants with increasing amounts of arrears.
With automated, tailored arrears progressions, housing staff can start taking follow-up action straight away, because they’re free to focus immediately on the collection of arrears following the rent roll, rather than having to crunch their way through large amounts of data before they can take action.
And, of course, with staff able to respond so quickly, they can minimise the risk of the payment being forgotten and the tenant ultimately feeling less committed to pay.
Understand your audience
Being able to communicate with tenants in the way they prefer, and in a way which is sympathetic to their needs, offers a much better chance of being able to resolve the non-payment of rent quickly, while minimising the stress placed on the tenant.
Technology can group or ‘segment’ tenants to help you communicate with them more successfully, whether it’s sending an SMS reminder to a 20-year old student, a phonecall to a 40-year old mum, or a letter to an older resident. You can choose for these actions to be automated within the arrears progression rules to make the process even faster. Visual alerts on-screen tell you whether the adult has particular needs and might need to receive their reminder in a different way in order to protect the tenant from possible distress, an important factor for all, but particularly so for vulnerable adults.
Prevention is better than cure
Ultimately, although you need to be able to prioritise arrears cases quickly, the main aim will always be to prevent arrears happening in the first place. Predictive analytics and reporting open up opportunities for housing providers to offer this early help before tenants reach crisis point, with the link to the credit reference agencies helping tenants to build up a stronger credit score with each regular rent payment they make.
Anticipating tough times ahead for your tenants and supporting them through this not only ensures a steady flow of income for your organisation as you minimise your arrears profile, but helps encourage those living in social housing to remain in control of their finances, contributing to a better quality of life overall.
Glenn Allan is the Housing InSight product manager for Capita Software Services.