Direct payment projects warn of creeping arrears
Published by 24publishing for 24dash.com in Housing and also in Central Government, Universal Credit
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The creeping of arrears in the Government’s direct payment demonstration projects is further evidence landlords will need to provide a range of payment options for tenants and systems that can quickly recover outstanding rent, writes allpay's Nick Peplow.
The findings from the first four months of the direct payment demonstration projects will be unsurprising to most - 8% of rent uncollected, a creeping of underpayments and a lack of understanding about financial products. However, any learning at this stage is very much welcomed.
Aside from the headlines – 92% of rent collected from £7.7m due, with more than 300 of the 6,200 participating tenants seeing benefit payments switched back to the landlord – there are snippets of real learning among the six projects.
Range of payment options
Most of those involved warned of the increase in resources associated with supporting tenants and collecting rent under direct payments. Despite this, the arrears percentage recorded in the first four months is likely to be one landlords would find hard to support in the longer term.
What is clear is that a range of payment options are going to be needed for tenants – whether it be cash, phone/internet payments or direct debits – and systems in place to recover outstanding rent to minimise arrears.
For instance, Dunedin Canmore Housing Association – the Scottish-based project – said that the majority of its tenants prefer to pay in cash. However, in both the Wakefield District Housing and GreenSquare Housing Group project, more felt comfortable using automated bill payments. On both of those projects, 50% of those involved are paying by direct debit.
Oxford City Council, which has 1,600 tenants involved in the project, said of the 907 tenants selected for the first “phase” of payment, the majority supplied both bank details for housing benefit to pay them and had signed up for a direct debit.
There were also some interesting points to observe about attitudes to paying rent. For example, Oxford City Council revealed that “encouragingly the trend for each phase of people who move into the project is for arrears to steadily reduce after the initial payment.”
Others, however, had seen tenants start off paying, but then payments trail off through significant underpayments.
Unsurprisingly, the London borough of Southwark warned that tenants had a lack of understanding over financial products e.g. the difference between a direct debit and debit card. More worryingly, however, is that it found that despite being offered support before starting direct payment, some tenants were not taking advantage of this even when their circumstances seemed to warrant it.
Observations from the Bron Afon Community Housing Limited (BACHL) project in Wales revealed more concerns around payment delays and resources. “Payments are taking longer to arrive and the trend we are seeing in arrears is an adverse upward one,” it said. “This is a concern as with one member of staff to every 160 tenants in the project our collection costs have risen significantly.”
It said 59 tenants had been switched back to payments to the landlord. “Almost all of these cases have been switched back because of repeated underpayment (i.e. the 15% shortfall over 12 week trigger) rather than hitting the 8 weeks rent owed trigger,” it said.
The direct payment of housing benefit to tenants as part of Universal Credit is a massive cultural shift and it will take time for both tenants and landlords to get used to it.
These findings are further evidence that landlords will need to provide a range of payment options for tenants that suit their particular circumstances. While some will be comfortable with a direct debit, others will prefer to pay in cash or with a debit card because they feel they have more control.
Nick Peplow is the business development director at allpay
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