With just over a year until universal credit and its associated welfare reforms are expected to be introduced, Housing Technology gauged the housing sector’s opinion on the likely results of this massive change to finance in social housing and its IT impacts.
The planned introduction of universal credit will have a very direct impact on almost every housing provider in the UK. With rent payments, as well as other benefits, paid direct to tenants, housing providers not only face higher arrears but also greater complexity and cost as they will be receiving payments at widely-varying frequencies and via multiple payment methods.
Impact on housing and financial management systems
There seems to be general agreement that universal credit will, unsurprisingly, have the greatest impact on housing providers’ finance systems and less effect on their housing management systems. Within financial operations, the issues broadly split into rental collections and arrears, and then correctly processing the resulting income.
David Berrill, an ICT housing systems analyst at GreenSquare Group, one of the government’s pilot sites for universal credit, said, “The most obvious impact is on financial systems – universal credit being paid direct to claimants will ultimately mean that our finance team will have to shift from processing large batches of housing benefit payments from local authorities to processing a much larger number of individual payments.
“These payments could come in at any time each month in a variety of means, encompassing payment cards, credit and debit cards, direct debits, standing orders and even cash. That said, we already have the systems in place to deal with numerous payment methods, so the early challenges are likely to be around getting staff familiar with those systems as we receive more payments direct from residents.”
Berrill also pointed out that there is likely to be a transition period after October 2013 while some tenants continue to receive housing benefit (pending their re-assessment) and others receive universal credit, meaning that current systems and procedures for managing income from housing benefit may need to be maintained after October 2013.
Maureen Hopcroft, a senior consultant at Sovereign Business Integration Group, said, “The most significant impact will be on income collection and arrears management. Most housing providers will therefore be aiming to get as many tenants as possible to pay by direct debit so that payments can be effectively managed and minimising the risk of arrears. It’s also worth noting that a small proportion of tenants don’t have a bank account so housing providers might consider setting up relationships with credit unions so that those tenants have a way of paying via direct debit.”
The importance of proper planning for the change to universal credit shouldn’t be underestimated, particularly in the case of housing providers who are expecting their existing software providers to deliver the necessary changes.
David Loudon, the founder of DtL Creative, said, “The most important element is to work out, between the housing and finance systems, which system does what. If you spend the requisite amount of time preparing your processes and plan it out ready for the changes then the risk should be lessened.
“However, if you think your software suppliers will perform some kind of magic, then think again. This is a two-way process – the systems will provide the tools but they won’t automatically make you ready for universal credit and the consequent changes to your business processes, which must come first.”
Commenting on the readiness of IT suppliers for universal credit, Peter Davis, head of IT services at Sentinel Housing, said, “Is there really anything in the current crop of housing and finance systems that would indicate the software houses have the ability, desire, understanding or agility to meet the demands of housing management in the era of universal credit?
“We will have many more tenancy types and agreements, debit periods that don’t match payment periods, a huge increase in both voluntary and court arrangements, the need to incentivise our preferred payment methods, and income management teams that will need to identify trends linked with customer demographics. These requirements may well result in the adoption of more agile software solutions and certainly an increased reliance on CRM systems.”
Effects on IT infrastructure
Aside from its effect on housing and finance systems, universal credit is unlikely to have a direct impact on housing providers’ wider IT infrastructure. However, universal credit is likely to lead to more mobile services and apps to make it easier for tenants to pay their rent and for housing officers to collect it. This is likely to happen in parallel with a greater focus by housing providers on digital inclusion and moving tenants online so that more tenants have access to online payment channels.
Berrill said, “Forward-thinking housing providers are likely to get more involved in supporting digital inclusion in order to avoid it becoming a barrier to residents being able to pay their rent and manage their finances. For example, GreenSquare is currently considering the feasibility of introducing wireless hotspots into some of our sheltered housing schemes in order to improve access to digital services for our older residents, helping them to combat social isolation, as well as managing their finances online.”
Hopcroft added, “Tenant communications are likely become more important as housing providers find ways to maintain good relations through regular multi-channel communications so that tenants are aware when their payments are due and also to stop them falling into or further into arrears. By using text reminders and alerts and online portals to view balances, due dates and other information, housing providers can provide complete visibility to their tenants and give them every opportunity to keep up-to-date with their payments.”
Asset management systems are also likely to be affected by the move to universal credit. Tony Smith, the ex-MD of a leading HMS provider and now an independent housing IT consultant at Acutance Consulting, said, “Some changes, including new rules on under-occupation, will also draw attention to how asset management is used. Where there is poor or minimal integration, housing providers will struggle to report properly and apply new rules in this area. Many will need to invest in new surveys to collect or confirm this information as well as family sizes and composition. More flexible mobile survey software, beyond just asset surveys, will also be an advantage.”
The costs of universal credit
The initial costs of adopting universal credit are generally thought to be quite low, especially when compared with the costs of other large business change projects, although the cost and implications of higher arrears (see below) are likely to be more troublesome.
Berrill from GreenSquare said, “At this early stage, it’s impossible to even suggest a potential cost in IT terms. Initially the cost will be low, but if we introduce more technology in future then that may well change. At the same time, the capital cost of some of the mobile technology could end up being easily offset by the benefits and increased income generated by staff being able to work more actively with residents in the field using mobile working.”
Hopcroft from Sovereign added, “There is a need to understand current costs incurred by housing associations initially in the management of clients, collections and arrears management to truly assess the impact of UC. It could be the case that better infrastructure is needed to manage arrears – whether this is in the form of improved IT systems, larger teams or a mixture of both.”
To give some perspective on the likely costs, Smith thought that for a medium-size housing provider, the cost of supporting universal credit would need to include the cost of a couple of FTEs (full-time equivalents) in the IT team alone to support, report and provide new or enhanced services and systems.
Dealing with increasing arrears
For the majority of housing providers, the greatest concern about universal credit is rent collections and the likely increase in arrears, as tenants will have to take direct responsibility for paying their rent rather than relying on their local council to pay it direct through housing benefit. Under universal credit, it is very hard to imagine a situation in which arrears decline; it is fairly safe to predict that every housing provider will have increased arrears so it’s a question of how they mitigate the risk and minimise the arrears and the consequent impact on their cash flows.
Taking a clear stance on arrears, independent consultant Tony Smith said, “I believe many housing providers will really struggle. These measures, which are ill-thought through and rushed in, have the capacity to undermine the financial base of organisations, ultimately undermining neighbourhoods and communities too.”
As with the aforementioned changes to finance and housing systems, preparation is vital. DtL’s Loudon said, “There is only one way to deal with arrears, and that is to be proactive. If you sit there and just wait to see what happens then you are likely to get caught out. Although a lot of housing providers are working internally on their strategies, I doubt that they are working enough with the software providers for the solutions, particularly around the workflows found in most housing and finance systems.”
Berrill said, “For our current pilot project we have three dedicated arrears officers, working on smaller patches than normal, dealing exclusively with all of our residents involved in the DWP Direct Payment pilot. We hope that this will pre-empt and prevent the predicted increased arrears as much as to react to them if and when they do occur.
“GreenSquare also has a tenancy sustainment team and financial inclusion officers who can support vulnerable residents for whom managing their own finances and budgeting in this way may be very new and potentially very scary.”
Hopcroft added, “The main issue housing providers will face will be dealing with a sudden increase in arrears when universal credit comes into force, on top of their existing arrears. Recognising arrears sooner will be a key requirement, as well as having the most stringent processes in place to deal with them when they arise.
“Furthermore, housing providers must plan for and ultimately avoid allowing arrears to reach unmanageable levels and thereby affecting the entire financial viability of the organisation. This type of situation, if not effectively managed, could make or break some housing providers.”
New technologies for rent collections
With universal credit almost certain to result in higher arrears, housing providers will need to make it as easy as possible for tenants to pay their rents, with online and mobile both likely to be important channels, alongside technologies to encourage the use of direct debits.
GreenSquare’s Berrill said, “We want to give tenants as many channels as possible through which they can pay their rent. We are exploring options such as online self-service portals and payment apps, with the latter being of particular interest as smartphones become more ubiquitous and mobile data costs fall.
“In terms of technology for GreenSquare’s staff, our use of Citrix Receivers on smartphones and tablets provides almost unlimited scope to what a rent officer could do while out on visits. With a tablet or similar device they would have full access to our housing and finance systems while on the move or in a tenant’s home.”
Sentinel’s Davis expected companies to move away from a ‘one system does all’ model and choose loosely-integrated, best-of-breed solutions, and added, “Better customer communications will be a fundamental requirement and systems will need to be able to automate that choice of communication to ensure effective rent collection. A zero-admin, fully-flexible direct debit system will underpin the rent collection effort alongside cards, cash, standing order, smart phone apps, web, phone and ‘wallet’ cards.”
The next 12 months will be very interesting as the pilot sites complete their projects and report back to the government, at the same as the rest of the UK’s housing providers ready themselves for substantial changes. So, if you’ve begun your preparation for universal credit or are developing systems to support it, please get in touch for inclusion in a follow-on article.
Our thanks to David Berrill (GreenSquare Group), Peter Davis (Sentinel Housing), Maureen Hopcroft (Sovereign Business Integration Group), David Loudon (DtL Creative) and Tony Smith (independent housing IT consultant) for their contributions to this article.