With universal credit high on everyone’s agenda and as a continuation of the article in the September issue, Housing Technology interviewed representatives from MET, Montal Computer Services, Netcall, Online Centres Foundation, Paragon Community Housing Group and Sovereign Business Integration Group to find out their views on how welfare reform will affect housing providers.
Preparing for universal credit
With the introduction of universal credit getting closer and closer, the over-riding impression is that housing providers simply don’t know what to expect. Will tenants beat expectations and embrace their new financial responsibilities or will arrears become even worse than predicted? Most housing providers seem to be concentrating, correctly in our view, on educating their tenants on how welfare reform will affect them, and in parallel preparing frontline staff and income teams for a deluge of enquiries from tenants during the introduction of universal credit.
Helen Milner, chief executive of the Online Centres Foundation, said, “The two main things to concentrate on are training for your staff and information for tenants. There is a great deal of uncertainty around welfare reform, so be clear about your timetable for change, who it affects, and what support you will be offering to tenants, while making sure that your front-line staff in particular are well trained and ready to answer questions from your tenants.”
Continuing the theme of preparing for the unexpected, Jacqui Stoggall, director of consultancy at Sovereign Business Integration Group, added, “As a minimum, housing providers should try to do as much tenant profiling as possible so that when universal credit comes into effect, they have a good understanding of their tenants’ likely payment methods and indeed whether or not they have a bank account which can be used for direct debits. And from an internal perspective, housing providers should be talking to the suppliers of their housing and financial management systems to find out how they expect to develop their income management functionality to manage universal credit and housing benefit during the transition period.”
Financial concerns are a priority for all housing providers, with variable payment cycles, additional payment channels and an almost certain increase in arrears. Thurle Phillips, applications manager at Paragon Community Housing Group, said, “We are preparing for an income shortfall and are providing multiple payment channels for tenants, such as daily direct debits, online, phone, app and at the Post Office. Paragon is also reviewing its arrears policy so that we will be able to deal with tenants quicker when they fall into arrears. We will also be offering training to tenants on how to get online, helping them to apply for universal credit online and assistance with budgeting.”
As well as the uncertainty about arrears and payment methods, universal credit will result, at least at first, in a massive increase in tenant enquiries, whether over the phone, online, via email or social media. Richard Farrell, chief technical officer of Netcall, said, “The introduction of universal credit will increase the number of customer interactions for all housing providers. They should therefore establish some broad ideas about how they will cope with the increased workload, with the emphasis on using their existing housing and tenant data more intelligently to ensure more resolutions at the first point of contact.”
Effects on business operations
Few people underestimate the scale of the changes resulting from welfare reform, but there are widely varying views on what is likely to happen in terms of arrears and tenant interactions with their housing providers. Colin Sales, managing director of Montal Computer Services, said, “Based on feedback from around 200 welfare advisors at a briefing on universal credit in January 2013, fewer than 5 per cent of frontline staff feel positive about universal credit and the overwhelming majority saw it as the greatest challenge to welfare reform. Although most of them agreed that tenants should be expected to manage payment of their rent and that the single monthly payment would eventually streamline and improve the benefits system, 92 per cent expected that it would increase rent arrears.”
Even though the universal credit pilot projects seem to suggest that fears of large scale arrears may be unfounded, Paragon’s Phillips said, “84 per cent of housing providers expect arrears to increase by an average of 51 per cent. Not only will this have an immediate effect on income teams as more staff will need to cover smaller patches, but increased arrears may affect housing providers’ credit rating [as recently reported by Moodys] and their ability to meet loan covenants and other financial obligations.”
Supporting the earlier comment about dealing with many more tenant enquiries, Kelvin McGlynn, business development manager at MET, said, “Universal credit will lead to more tenant interactions taking place outside normal business hours, so one of the key things housing providers should consider is how they service that requirement, whether it’s via online services or extended hours for contact centre services, but that doesn’t necessarily mean simply adding extra capacity to their frontline team; creative use of technology can take some of the burden away from staff.”
Stoggall summed up Sovereign’s view on the effect of universal credit on housing providers’ business operations, saying, “It means less regular and reliable rental income, more resources needed for income management and financial uncertainty.”
Impact on tenants
As mentioned earlier, a core part of most housing providers’ strategies for dealing with universal credit is educating and informing their tenants about the welfare changes and improving their online skills and knowledge, not only to help the tenants themselves, but also to reduce the housing providers’ own headaches when universal credit comes into effect.
Montal’s Sales said, “A Policis report found that 86 per cent of tenants believed ‘strongly’ that it was better for housing benefit to be paid direct to their housing providers, and DWP research found that 45 per cent of respondents said that they would need help to access and manage their benefits online. Furthermore, because social housing tenants in general tend to have a much smaller than average proportion of disposable income and often little or no savings, there is no cushion in the system; if a financial challenge comes, rent will often be diverted and then the arrears cycle begins.”
Stoggall from Sovereign added, “Many tenants are going to have problems with budgeting and prioritising their finances, if only because they haven’t had to do so before, and they will have to deal direct with their housing provider or local authority as well as the DWP.”
However, if the government and housing providers want tenants to take more responsibility for budgeting and paying rent on time, tenants may expect that their financial responsibility should be accompanied by the right to better services. MET’s McGlynn said, “While universal credit will be a concern for some tenants, and housing providers certainly need to support the most vulnerable, we expect that the majority of tenants will feel more in control and this will therefore lead to higher expectations of the services they receive from their housing provider.”
Welfare reform naturally affects housing providers’ IT infrastructures, and in particular their housing and finance management systems. The key functionalities that they need are the ability to support multiple payment methods and the accounting tools to deal with rent payments that could arrive on any day of the month. Sovereign’s Stoggall said, “The key things will be accommodating different payment cycles and mixed payment channels to collect rent payments from a range of sources and at varying times, and developing the right functionality to support the early detection and collection of arrears.”
Phillips from Paragon explained, “We need to make sure that our housing management system is configured to support us through this change because more information will need to be recorded and monitored. More of our staff will be given tablet devices for mobile working so that they can visit tenants more, and then record their findings and take payments; as part of this plan, we are considering the implementation of a ‘bring your own device’ policy so that our staff can use their own smartphones and tablets.”
The adoption of new payment channels and having to deal with tenants’ financial and banking details will mean the adoption of tighter data protection and security policies, including PCI compliance in the case of card payments over the phone. MET’s McGlynn said, “With the deployment of more online services, housing providers will need to boost their information security and take data protection much more seriously. However, with the right approach the impact on IT infrastructures does not have to be massive, and there are technology solutions and services in other industry sectors that can easily be adopted with minimal effort.”
Farrell from Netcall added, “Our housing customers are expecting a significant increase in benefit and bedroom tax enquiries as well as an inevitable rise in revenue collection workload, so access to the right services must be easily achievable from the initial point of contact. The availability of historical data in a single view will become more important than ever, fuelling a growing demand to move away from ‘siloed’ working practices, better application integration and flexible arrangements for remote working.
Immediate and long-term effects
The transition from housing benefit to universal credit is probably easier than a ‘big bang’ approach. Sovereign’s Stoggall said, “During the transition period, housing providers will have to manage rental income from both housing benefit and universal credit at the same time. Although this phased approach will be complicated in the short term, it will give housing providers time to get to grips with universal credit and learn how to maximise their chances of securing rental income.”
Referring to the earlier need to do as much preparation as possible, Montal’s Sales said, “There is a real concern that many housing providers don’t know their residents as well as they perhaps think they do which will make preparations difficult. However, a recent policy briefing note suggests that the DWP is likely to take a strong line on direct payments to landlords. The DWP note says that the payment of universal credit ‘should mimic work and receipt of a salary’ and ‘the government wishes to place responsibility for household budgeting with the household’.”
The long-term effects of welfare reform may mean that many housing providers make considerable changes to how they operate, how they engage with their tenants, and how they develop additional revenue streams. Paragon’s Phillips said, “At the moment, our fear is not knowing what will happen, apart from an increase in arrears. Although tenants will move to universal credit gradually, the way that housing providers are gearing up for the reforms indicates that there has already been a strong impact. Looking further ahead, we can envisage a completely different approach to tenants and the way we work. For example, housing providers may be forced to adopt stronger tactics for tackling arrears, and possibly develop more properties for shared ownership and private sale to recoup losses and generate alternative revenue streams.”
Milner from the Online Centres Foundation said, “In the long term, universal credit and welfare reform should help housing providers to become digital businesses, as long as there is a strong safety net to help those tenants who need that bit more support to become ‘digital citizens’.”
Housing Technology would like to thank Richard Farrell (Netcall), Kelvin McGlynn (MET), Helen Milner (Online Centres Foundation), Thurle Phillips (Paragon Community Housing Group), Colin Sales (Montal Computer Services), Jacqui Stoggall (Sovereign Business Integration Group) for contributing to this article.