Whatever the outcome of the 2015 general election (this was written at the end of April), it is likely that politicians of all persuasions will have little choice but to continue the squeeze on welfare spending. The knock on effect of this will be more tenants at risk of falling into rent arrears, and the risk of a consequent increase in bad debts for the social housing sector.
Traditionally, the response from IT suppliers in the housing sector has been to provide ‘automated arrears’ modules which operate on the principle of escalation, so that when the escalation is run for each period, it will provide the user with a list of cases where a suggested action should be taken. As we all know from bitter experience, many of the letters generated by this process will not even be opened, let alone trigger action on behalf of the tenant concerned.
The key impact of the welfare reform changes will be the payment of benefit direct to the tenant; they must then employ certain skills to ensure that their money is not all spent at once, and they must also perform an often difficult balancing act in prioritising their outgoings and debts. The creditors with the most aggressive collection methods will, unfortunately, often win.
A new approach
So the realisation has arrived within the sector that the ‘old’ way of managing arrears is no longer suitable. Sending out thousands of letters every week, despite being very expensive, is also ineffective. Instead, investing more time and resources in helping tenants to pay their rent in a timely and sustainable manner is the obvious way forward. Which makes it sound very easy, doesn’t it?
Sadly, it is not always that simple. The starting point, as the retail sector has realised over the last 25 years, is to know your customers and their habits. Only then can your staff begin to understand what effect their behaviour is having on the overall arrears picture, which has traditionally been seen as one huge number with a pound sign in front of it. Behind that figure are thousands of real world reasons why those people are in arrears. And unless you can see the patterns of behaviour that have contributed to that situation, how do your staff stand a chance of addressing them, let alone helping those tenants get out of arrears?
Gaining control and knowledge
Aareon, suppliers of the QL integrated housing management system, has over 115 customers in the UK operating within the social housing sector. Within our user community, we are seeing significant improvements in the income management process facilitated by the adoption of new technologies, some of which are detailed below:
Without customer knowledge, you cannot begin to understand the root causes of arrears. For example, Aareon QL offers the ability to capture and store detailed and user extendable profiling data on every tenant. This can be in the form of both individual fields, some specific to welfare reform, some calculated fields such as the number of broken agreements, and some more general, and also structured questionnaires that can be linked to the client and tenancy records within the system; these can then be used either for reporting purposes, both on screen and using reporting tools, and also to trigger workflows (for example; if the question is ‘Do you have a bank account’ and the tenant answers ‘no’, this may trigger a workflow task to the financial inclusion team). This data can be gathered by a variety of means, including mobile working and email/SMS surveys. By analysing this kind of data, it is possible to spot potential ‘at risk’ cases, even though they may not currently be in arrears, and intervene and offer support before problems arise.
Predictive arrears reporting
We have already discussed the concept of analysing behaviour to help see through the ‘fog’ that is the overall arrears figure. Added to this is the increasing importance of being able to predict future outcomes, so that early interventions can be made, ideally even when the tenant is not yet in arrears, in which case the effort becomes preventative.
By employing existing data, such as previous charge and payment histories, we can analyse the effect of this behaviour on future outcomes, helping staff to understand not only the problem now, but the likely problem cases in the future. This information can then be used in the drive to change long-term behaviour regarding when rent is paid. Detailed breakdowns of the current case load, such as those cases increasing their arrears, those who are static, those who are decreasing in line with expectations and those who are decreasing but not fast enough, help to direct effort at the cases where intervention is likely to produce results.
One of the key enablers in the streamlining of income management is making staff agile; able to target visits to tenants in need of support, and then giving them the tools to view, record and update information while in the tenant’s home in real time, with the option of taking payments via chip and pin technology as well as adding arrears actions, notes, direct debit requests, budgeting plans and requesting documents and rent statements.
All of that information is then updated back to the core system automatically, meaning that the office-based role is transformed into a highly agile, focused field-based one with the potential for far greater efficiencies.
Increasingly, tenant self-service portals, automated SMS, email and social media channels can now be used for arrears management. Examples of this include automatic SMS notifications of balances sent every period to subscribing tenants, self-service rent statements via portals, email or SMS; and rent payment reminders sent to vulnerable groups to remind them to make a payment, potentially based on the date of their universal credit payment. All of these options include the ability to append messages such as “for help with your rent, reply ‘help’”; an option which can generate a workflow task for the relevant officer to follow up.
Direct debits by default
The holy grail for surviving welfare reform is to get as many tenants as possible into the culture of paying by direct debit. Having an integrated direct debit module, or integration with a third party tool, will enable this; the ability to offer discounts to tenants paying by direct debit is also a powerful incentive.
Foster a ‘knowledge’ culture
Perhaps the most difficult goal to achieve is to successfully introduce and maintain a culture in your organisation which places key emphasis on the collection, maintenance and usage of good and up-to-date tenant data. We all know that ownership of data in the housing sector has traditionally not been a strong point, but to use a well-used cliché, knowledge is power when dealing with the new reality of welfare reform.
Every member of staff must be empowered to collect and update data, by any relevant means, and they must also be made aware of the importance of the value of the data assets to the organisation in general. In this area of your business, the difference between successfully implementing this ‘knowledge culture’ and not could be measured in the loss of a significant proportion of your organisation’s cash flow, so there is no room for complacency.
Paul O’Reilly is a senior consultant for Aareon.