Rent arrears have nothing to do with tenants’ misspending

These factors tip the scales against people on a low income – even more so when the negative effects of financial stress on mental health are considered. According to the Money and Mental Health Policy Institute, “34% of people struggling with housing payments are experiencing mental health problems, and people experiencing mental health problems are one-and-a-half times as likely to report problems paying for housing”.

This can have a terrible snowball effect. Mental health problems, whether caused by financial difficulty or not, can be a major reason why a housing association struggles to engage with a customer, so they don’t receive the help on offer. People can fall further and further into debt and become at risk of losing their home, worsening the stress and anxiety, and creating a vicious cycle. Add in the stigma these individuals feel and their road to mental well-being, and financial stability becomes steeper and longer.

Like all other housing associations, Hyde’s priority is to help customers in rent arrears.

Understanding the reasons people fall into debt is vital if we’re going to be able to help people get back on their feet financially, and to help them stay in their homes. That’s why we worked with Demos, an independent educational charity, to investigate the lives of social housing tenants, and to understand the daily challenges they face.

“People can fall further and further into debt and become at risk of losing their home, worsening the stress and anxiety, and creating a vicious cycle. Add in the stigma these individuals feel and their road to mental well-being and financial stability becomes steeper and longer”

The Bottom Line: An investigation of rent arrears in social housing was based on small tenant focus groups, supported by tenants keeping thorough spending diaries. It found that many low-income families stay afloat with sophisticated and complex borrowing strategies. People rely on sub-prime loans and borrowing from friends and family, because their poor credit rating doesn’t allow them to borrow from mainstream lenders like credit unions or banks.

The report makes several key recommendations for government, mental health support services and housing associations. These range from ways to tackle rent arrears, to preventative measures that can help lower the risk of tenants falling into arrears in the first place.

Offer flexible rent payment schemes

The report highlights payment flexibility as a tool to help customers manage their finances.

Like many housing associations, Hyde’s message to its customers is to get in touch as soon as they think they’re getting into financial difficulty. Our main concern is to ensure that the customers have access to our full range of support.

We have dedicated teams that can set up bespoke and affordable repayment plans. We also have specialist staff who can help with benefit applications and provide support to deal with all types of debts, not just rent arrears.

We’re also exploring innovations like FlexMy Rent, which gives customers the flexibility to pay more rent in some months and less in others, depending on their personal circumstances.

Engage in proactive outreach and build online tools

It’s essential that housing associations proactively engage with tenants, and regularly communicate in ways that build trust. So, while emphasising that paying rent is a priority, and regularly not doing so has serious consequences, we must also be seen as a ‘helping hand’.

We want our customers to talk to us when they’re in financial difficulty, and to let us help them. Customers must be confident that when they ask for help, we’ll respond empathetically. It’s vital that housing associations do more to ensure that those who need the most help feel able to reach out to them at the earliest opportunity.

It’s also important to provide easy access to information and support. So, while recognising that some customers won’t have access to the internet (or don’t have the skills to do so), providing digital tools to allow people to manage their rent account themselves, as well as online resources, is essential.

We know applying for UC can be complex and overwhelming. That’s why we developed the UC Helper, a free online tool to help people when applying for UC for the first time. The mobile-friendly UC Helper takes users through every step of an application, from creating an online UC account to making a claim, and what to expect when attending an interview.

Build financial resilience

Online resources and budgeting tools like our UC Helper empower customers so they can build confidence in themselves, and gain an understanding of how to manage finances and navigate the benefits system.

But financial resilience is not just about solving immediate money problems, it’s about supporting people, and building strong, safe and secure communities in which they live.

“‘Buy now, pay later’ schemes for certain goods, while very appealing, lock people in to high-interest debt for many years”

We’re also looking into bolstering our jobs and training offer, so that our customers hear directly from us about any new opportunities in their area, working in paid employment for our suppliers.

Advocate for credit unions

Short-term, high-interest payday loans are readily available to most. These lenders often use aggressive marketing tactics and take a very hard line when it comes to recovering the loan. It’s important that we advocate for alternative loan options, like credit unions, that are more affordable, lower interest and longer term.

We must also spread awareness about the dangers of these short-term, high-interest loans, which include illegal loan sharks that target low-income families. Likewise, ‘buy now, pay later’ schemes for certain goods, while very appealing, lock people in to high-interest debt for many years.

“Stigmatising and isolating social housing families will only add even more stress and anxiety and will tip the scales against them. People shouldn’t be made to feel ashamed about their financial situation”

Final thought

Rent arrears among social tenants is a growing issue, and the stigma is undeserved. The cost of living crisis is, of course, exacerbating the problem on a national scale and financially vulnerable families are going to be hit the hardest.

However, stigmatising and isolating social housing families will only add even more stress and anxiety and will tip the scales against them. People shouldn’t be made to feel ashamed about their financial situation, and shouldn’t feel embarrassed about reaching out for help. Housing associations have a huge part to play, whether that’s partnering with credit unions, maximising outreach or investing in services and resources that can help their customers.

If we can stop the stigma, understand the root cause of these problems, and advocate for the right path forward, we can really make a difference.

Kerry Starling, director of communities and social impact, Hyde