Carrying on from our article on universal credit in March 2013, Housing Technology is taking another look at how housing providers and their suppliers are addressing the introduction of universal credit.
Introducing UC for housing providers
The introduction of universal credit to housing providers’ tenants is almost certain to increase both the total financial volume of rent arrears and the number of tenants in arrears; those people who were already regularly in arrears will be augmented by additional tenants, despite having little or no history of arrears prior the introduction of universal credit, who will struggle to balance their finances and make provisions for paying their rent. Most housing providers are therefore doing everything they can to educate tenants about universal credit and financial planning as well as introducing digital inclusion schemes to address the ‘digital by default’ nature of universal credit.
Richard Merrick, responsible for business development at Visualmetrics, said, “Housing associations are likely to see a dramatic rise in their arrears levels, which will cause significant issues regarding servicing debt and problems maintaining a healthy financial position. Understanding trends in arrears by segmenting neighbourhoods and/or having a more integrated view of their property portfolios will allow housing providers to mitigate some of these issues and tackle the universal credit problems more effectively.”
Continuing the theme of dealing with increased arrears, Karl Maple, the communications director for ClearArrears, said, “If 70 per cent of your rental income is covered by payments from housing benefit, it means that you are effectively only responsible for collecting the remaining 30 per cent at present. Housing providers will need to ensure that systems are in place that allow them to profile the payment trends of their tenants as well as providing officers with early notifications of missed payments.”
John Sant, managing director of Footprint Solutions, said, “We agree with the theory of simplifying the benefits system and ensuring that work always pays but while we’ve seen some improvements in communications with the DWP, we remain worried about the collection of rent payments from tenants.”
Dealing with the DWP
There is also some concern about the amount of information that the DWP is making available to housing providers, thereby limiting their ability to pre-empt problems with the most vulnerable tenants or those most prone to arrears. Eamon McGoldrick, managing director of the National Federation of ALMOs (NFA), said, “There should be a more realistic timetable for the introduction of universal credit to help local delivery partners support tenants through this change. More information should be shared between the DWP and its partners so that housing providers are aware of changes to their tenants’ circumstances to prevent them falling into arrears.”
Gareth Morgan, the managing director of Ferret Information Systems, added, “There will be one point of contact for most benefit queries but our experience says that the DWP is harder to contact than most housing providers.”
Advantages of universal credit
Aside from the government’s underlying aim of changing the benefits system to reduce chronic dependency on it and ensuring that work always pays, universal credit will help to improve digital inclusion and could give housing providers better information about their tenants.
Annette King, innovation manager for Digital Birmingham, Birmingham City Council, said, “We want to give people digital skills and the confidence to undertake other transactions using online channels, such as accessing other local and national government services, shopping, and applying for jobs. For example, our Digital Log Book gives each tenant their own online portal that can help them to gain access to budgeting skills, employment opportunities and education.
ClearArrears’ Maple said, “Universal credit should give housing providers an opportunity for greater interaction with tenants and, if managed properly, will promote an ‘advanced payment’ culture among them, moving away from the habit of payments made in arrears. It will also be easier to profile tenant arrears without the four-week peaks and troughs of the current housing benefit cycle.”
Impact on tenants
A survey by Ipsos Mori showed that 70 per cent of tenants likely to be affected by universal credit currently plan their budget over a very short period of time and of those who budget fortnightly (or more frequently), 68 per cent said that they would not be confident planning their finances on a monthly basis. Significantly, 92 per cent of tenants said that they would prefer their housing benefit to be paid directly to their housing provider.
Gareth Morgan from Ferret Information Systems cautioned, “Tenants will be expected to take more responsibility for connecting with the DWP. Monthly payments in arrears may not keep in step with changes in income or needs. However, they will keep more of any increases in earnings, especially from part-time work.”
Chris Shepherd, neighbourhoods’ manager, Shropshire Towns & Rural Housing, said, “Tenants should be less financially excluded and be able to access more affordable credit. However, for those used to the old system, the rapid pace of change could leave many susceptible to falling into arrears.”
IT integration with the government
While the government is developing its technology platform for universal credit (and despite substantial delays and implementation concerns), most housing providers will want some form of linkage or integration between their own finance and housing management systems and the government’s infrastructure. Thus far, there appears to be no facility for doing so.
Karl Maple from ClearArrears said, “Any integration with a national technology platform is dependent on two factors; a robust universal system and solid internal housing management systems. There is still no guarantee of a robust universal system, with the national UC roll out being thwart with difficulties, and many housing providers have a history of misusing their internal housing management systems.”
This view was shared by Annette King from Birmingham City Council who said, “Currently, the universal credit platform that the government is using will not be able to be integrated with external systems. This is going to be an issue because unless the tenant informs their housing provider that that they are receiving housing benefit, the landlord will not know.” Ferret’s Morgan added, “No APIs have yet been released although government policy is for more links in future. It would help tenants if changes of circumstance could be channelled via third parties such as housing providers.”
Alternative views were put forward by Footprint Solutions and the NFA. Footprint’s Sant said, “While it is early days for universal credit, it should be relatively straightforward to integrate with the universal credit platform for activities such as central payment tracking. However, the recording and subsequent tracking of when payments are due to be made to tenants needs a lot more work.” And the NFA’s McGoldrick said, “As the focus is primarily on the tenant dealing directly with the DWP to manage their own finances, housing providers should not have to deal with the government’s technology platform.”
How to beat arrears with technology
Education and information are the most important ways for housing providers to keep their arrears in check. For most tenants, their monthly income from government benefits won’t change, so it is a question of housing providers doing what they can to help their tenants budget efficiently and effectively.
ClearArrears’ Maple said, “Given the potential difficulties posed by the introduction of universal credit, it is important that housing providers support their collection teams with intelligent systems that allow them to prioritise their workloads. At ClearArrears, we adopt a priority matrix based on a series of rules, such as missed payments, changes in circumstances and diversity profiling, banding tenants into those who can’t pay and those that won’t pay, while identifying the cases most likely to return maximum income.”
Housing Technology would like to thank Annette King (Birmingham City Council), Karl Maple (ClearArrears), John Sant (Footprint Solutions), Gareth Morgan (Ferret Information Systems), Eamon McGoldrick (National Federation of ALMOs), Chris Shepherd (Shropshire Towns & Rural Housing) and Richard Merrick (Visualmetrics).