Monday, 02 March 2015

Universal credit landlord concerned by rising debt

The housing association at the heart of the first universal credit pathfinder has expressed concern about rising levels of tenant debt.

New Charter Housing Trust Group, which manages homes within the Ashton-under-Lyne pathfinder, said it has seen a 29 per cent rise in people contacting its financial support team in the last year, and a 19 per cent rise in the total amount of debt referred.

On average tenants referred to the Moneycare service have £8,400 of debt.

The figures date from before the start of the universal credit pilot last month, but New Charter chief executive Ian Munro said he is worried about rising levels of tenant debt as a result of the government’s welfare reforms.

He said: ‘These figures show very real hardship across our communities and, whilst we will continue to support our residents in every single way that we can, we need government support to continue to make a difference.

‘The bedroom tax could cost tenants an extra £88 a month but other reforms will make it more difficult for them to manage their money overall.

‘We should be helping people who are in debt, not making money matters more confusing or difficult to manage.’

Under the bedroom tax, working age social tenants receiving housing benefit have their payments cut if they have spare rooms. Housing associations contacted by Inside Housing have said they are already seeing arrears mount up following the introduction of the penalty at the start of April, with some reporting around 50 per cent of affected tenants are failing to cover the shortfall in their rent payments.

Universal credit, which is due to be rolled out across the UK from October, will combine a range of benefits including housing benefit into a single monthly payment that goes direct to the tenant. At present some benefits are paid weekly, with housing benefit often going straight to the landlord.

Readers' comments (11)

  • Describing this as "tenant debt" and expressing concern about "rising levels caused by government welfare reform" is mis-leading. It implies debts are housing-related. An average debt of £8,400 amongst social housing tenants shows yet again how irresponsible lending was during the credit boom which preceded the crash. It also shows that banks and credit card companies have still not confessed to the true extent of their poor lending decisions and consequent bad debts. At 15% average interest, the cost to a tenant to just service the interest on a debt of £8,500 is £100 per month, with repayments another £141 per month over 5 years. No wonder the economy is not recovering. If these debts were written off, as they should be, the lives of tens of thousands of low income families would be transformed. They should be written off and the individuals prevented from borrowing again for 5 years and only then if they can actually afford it. Welfare reforms are peanuts alongside this terrrible legacy of debt. The banks and others need to come clean or be made to do so. RSLs could do much to bring about a wiping of the slate for their tenants and it would be in their interests to do so.

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  • Colin Mcculloch


    I sympathise with your call for a debt amnesty but as the entire financial model of the western capitalist economy is built on debt, your measure would very likely bring down the house of cards.

    A more practical model would be for tenants to gain access to cheaper credit union loans to consolidate their debts, and have payments to the new debt taken directly from their gross income. I would support your proposals for much stricter controls on personal borrowing, but across the whole of society.

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  • Actually, I'm probably doing many of the banks etc a partial disservice. I think a detailed analysis of a sample of these tenants debts would show that the banks etc have already sold these debts to debt management companies (often for as little as 10-20p in the pound). The DMCs are now trying to recover as much of the debts as they can. As long as they get back more than they paid, they make a profit and free up their capital to buy more distressed debt. What it needs is for someone to take control of tenant debts and make a concerted, focused effort on their behalf to negotiate an exit, which can often be done for substantially less than the amount owing. This is not an easy exit for borrowers; there are consequences for a number of years but then most of them should not be borrowing anyway. And - better a horrible end than a horror without end. It's why I suggest that the RSLs should look at the business case for taking control. Bringing in a reputable Insolvency Practitioner to work on freeing tenants of this terrible burden, who otherwise lack the knowledge and skills to do this for themselves. The longer this is delayed, the longer misery will go on with little prospect of ever being free of debt and the greater the pressure or temptation to use doorstep and payday lenders to bridge the gap. All that does is continue the cycle. Is there not an RSL out there willing to do the sample analysis and have a go?

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  • shakermistyeyed:-

    Are you certain that the debts referred to in the article are to banks alone, I have grave concerns that a portion of the amount referred to in the article may be to loan sharks, and companies that lend at extortionate rates of interest without completing a full and proper credit check.
    The availability of easy money can and will lead those finding life a little difficult maybe to take the wrong road in addressing their financial hardships. The easy thing is to borrow more, the harder task is to examine their spending and to spend only what they need to live.

    The only other comment I have is God help us all when the UC kicks in live and is fully implemented throughout.

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  • Alpha One

    UC is a good idea, but like so many other things will be badly implemented.

    HA's need to accept it's happening and devote some time now to working out who will have problems and engaging them. Discussing how they will budget, how they will ensure bills are paid on time etc, not just bleating about how the world will end.

    The HB cut for people with spare rooms was a good idea, badly implemented again. It should never have affected those who cannot move, just those who refuse to downsize when they are able to.

    As for the debts, there is an element of self control involved, if you don't have the money this month, what makes you think you'll have it next month?

    That said pay day lenders, short-term lenders and all those thousand percent lenders need kerbing, I mean seriously having their wings clipped. Personally I'd outlaw them demanding high street lenders make it easier to borrow, to extend overdrafts etc through them. Utilities should be forced into negotiating terms with those who cannot pay their exhorbitant bills and be required to ensure no one goes without unless they simply won't pay. Utilities should be required, by law, to share details of those who are not paying with local authorities and, where in social housing, with the offenders landlords. Steps could then be taken to work out the problem. Those that engage with their landlords, with the local authority and with the utilities will be entitled to more lenient terms, those that don't will be forced to pay or be cut off.

    Debt amnestys won't work, but as the pay day loans funding comes from within their businesses, we coudl easily outlaw them and write off all debts and the only people who lose their money are the fat cats that thought legalised loan sharking was an excellent way to make money - what's next legalised kidnapping for ransom?

    The rest of the debt, I'm afraid that can't be written off. However, we could have better insolvency rules to allow people time to pay of debts, to come to an arrangement which will be imposed on creditors (unlike IVA's which creditors have to agree to) with no affect on the borrower. Our insolvency laws are too skewed in favour of the creditor, in my view, there needs to be a rebalance, afterall that's what lending is, calculated gamble.

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  • One incidental and completely unintended result of the so-called welfare reforms is that it is focussing public attention on the desperate plight of poor households: the BBC in particular has picked up on this issue - much to the annoyance of the Coalition Govt. Welfare reform is by definition designed to take money away from those previously in receipt of benefits; to introduce such policies in the deepest recession since the 1930s is hardly the time to restore incentives to find a job when the availability of jobs is at its lowest for over 50 years. So the policy is doomed not just by poor implementation but by abysmal reading of the economic conditions.

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  • Swivel-eyed loons seem to have taken over the HA's ..................

    Concern about arrears..........

    Increase in administration ..........

    This was all predicted 18 months ago - the train left the station 18 months ago at least.

    This was never going to work so why did HA's go along with it ?

    Lobbying isn't about sitting in a room asking questions ... lobbying = persuasion.

    HA's are powerful organisations run by weak people.

    Replace those people with hard-nosed individuals who will persuade and get a change in policy - this is an easy fix if the 'right' people are doing the talking.

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  • Jimmy Cricket

    Don Smith - oh for utopia. Sorry for being so "weak"

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  • Don't apologise - do something..................

    Council of Mortgage Lenders gave evidence at Committee stage and negotiated ...... homeowners will have SMI payments paid to lenders...

    Tenants can be more vulnerable than homeowners but rent wil go to tenants and not the H.A. !!!

    What's the difference between H.A.'s and C.M.L. ????? ......... CML won't take no for an answer !

    Call Nick Wood in CML, maybe he can point you all to a good lobbyist.

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  • Bed room tax and community charge will now be adding to that debt so councils and Government are doing nothing about it. Except by sending out a summons at an initial cost of £10 a turn to cash strapped and in debt tenants. Who then might have to consider other costs of going to court.

    Debtors prisons will be on their way back, I know it sounds Dickensian but its so true. We have travelled back in time to 1860. Roll on the sharers to take on our darkened box rooms and rabbit hutches. Where is Dr who when you need him to save us?

    Are the Tories and Lib Dems real people because I am struggling with the concept inhumans are occupying positions of power in parliament and councils?

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