Rent arrears are a problem for everyone, but a few changes to working practices can dramatically increase the amount you collect. The Audit Commission's Rita Patel reports on what RSLs are doing to get what they deserve
Rent collection is at the heart of housing associations' work – rent makes up some 93% of registered social landlords' revenue. Every year, English associations raise more than £5bn in rent but collection rates have deteriorated over recent years – arrears reached £231m in 2002, up £21m on the previous year (see graph, left).

The Audit Commission has studied 12 housing associations to explore the scale of this problem and highlight the good practice that is combating rising arrears.

The commission's research shows that housing associations do worse than local authorities on rent collection, collecting 93.6% of the rent they are due compared with the 97.1% that councils get. But housing associations' performance cannot be easily compared with that of councils because of differences in the payment of housing benefit. Benefit is paid for council tenants a week in advance, but housing association tenants have theirs paid four weeks in arrears. Therefore it will always appear as though associations are worse at rent collection, for reasons beyond their control. Also, many associations are unable to tell the true extent of their arrears because they cannot distinguish between outstanding housing benefit, which will be paid eventually, and money owed by the tenant.

Collection rates at associations ranged from 82% to 103.5% last year – collecting arrears from the previous year can take the total over 100%. Of course, each RSL has different circumstances to contend with. Rent collection performance can be closely dependent on local circumstances, as shown by the variations in the graph overleaf.

Associations in the south of England collect the most rent but those in London collect the least. RSLs dealing with councils with struggling housing benefits departments will face greater difficulties, and there is also a correlation between the size of the RSL and collection rates. Large-scale voluntary transfer associations tend to do better than their traditional counterparts, partly because most of their properties are in one local authority area. This reduces the administrative burden because the RSL has an established relationship with a single housing benefit department and only deals with one set of forms.

Once arrears build up, core services suffer because there is less money to fund them. Tenants may be hit too: possession orders rose from about 16,000 in 1996 to 31,000 in 2001, and evictions increased 36% to 6800 between 1998 and 2000. Overdue housing benefit payment also often results in expensive legal action. Clearly, better communication between housing associations and councils would benefit everybody by saving court costs.

How to put arrears behind you
It's important to differentiate between different types of arrears (see "We have the technology", left). RSLs should avoid taking court action where arrears are caused by delays in housing benefit payment, and should work closely with the housing benefit service to ensure that applicants get good advice and their claims are processed as quickly as possible.

But where tenants themselves have defaulted on rent, there is much associations can do to prevent debts from escalating.

A heavy-handed, punitive approach is unlikely to have a huge impact. Many housing association tenants are on low incomes and the proportion of tenants who are really poor is growing. For many, it's a case not of "won't pay", but "can't pay". Help with benefit applications, awareness of early warning signals and the offer of debt counselling can work wonders. Reward schemes for tenants with clear accounts may also help.

Small RSLs can use their size to their advantage. For example, Westway, a small landlord based in west London, takes an imaginative, friendly approach to the problem of arrears, getting to know its tenants personally and trying to anticipate the problems they may encounter. Another innovative method has been adopted at Solon South West in Bristol: housing officers review their caseloads on a fortnightly rotation system, looking at the bigger debts one week and the smaller ones the next. This is because they are aware that big debts start off as small ones and see tackling them as key to the preventive approach.

Housing associations collect a very high proportion of the rent they are due. But small changes in working practice like these can boost revenue even further, and more money means better services for tenants.

We have the technology

Muir Housing Association
Chester-based Muir Group Housing Association manages more than 4000 properties. About seven out of 10 of its tenants receive housing benefit. Last year, Muir developed an IT system that integrated a reporting process with its housing management database, producing reports that differentiated between debts that were tenants’ fault and debt caused by problems with housing benefit. Individual cases were flagged according to certain criteria such as payment frequency, the extent of previous action taken and housing benefit status, so the system only produced reports on cases that required action. The system now provides weekly reports on tenants who have not paid what is expected: for full housing benefit cases checking the amount of benefit against rent outstanding and for partial housing benefit cases checking payment of the residual amount. A similar system operates for those tenants where a repayment agreement or suspended possession order is in place. The reports summarise key information and preclude the necessity to investigate individual accounts to determine a course of action. All this was achieved using existing IT applications.

Tips for getting what’s yours

  • Provide comprehensive pre-tenancy information and advice. This should cover the terms of the tenancy, the importance of making regular rent payments, the importance of submitting a housing benefit claim form as soon as possible, and where to go for help.
  • Help tenants to submit properly completed benefit forms promptly.
  • Make early contact with tenants to reinforce their responsibility to pay rent on time. Make sure information, independent advice and support is available to help them manage their finances.
  • Have flexible payment options.
  • Issue regular rent statements, at least every quarter.
  • Write letters and rent statements in plain English and with translations provided where necessary. They should make clear what is due directly from the tenant and what is due from the local authority.
  • Before starting legal action, make personal contact with tenants who are in arrears to encourage them to seek independent debt advice.
  • Monitor compliance with recovery policies, and the impact of arrears on the number of possession orders, evictions and abandonments.

Bring in an expert

ASRA Greater London
Having properties in more than one local authority area can pose a challenge when it comes to liaising with housing benefit departments. ASRA Greater London operates in 25 council areas and has 2000 tenants, 70% of whom are on some form of benefit. Since 1999, ASRA has employed a member of staff to deal solely with housing benefits issues. As well as advising tenants on the welfare system, the benefits officer deals with the housing benefit backlog, overpayment cases and benefit fraud units. Moat housing associations will have income officers of neighbourhood officers who include these things in their role, but ASRA opted for a dedicated officer because of the spread of its stock. ASRA’s benefits officer is also responsible for building relationships with staff in housing benefit administration teams, and attends monthly meetings with councils to discuss complex cases.

Right first time saves time

Home Housing Association
Of the 1600 tenants served by Home Housing Association’s office in Wigton, Cumbria, 60% are on some form of housing benefit. By tracking problems with Post Office payments in August 2002, Home realised that many of its tenants paid the wrong amount of rent. Home redesigned its rent receipts, so tenants are clear about the precise amount of rent due and know that if they pay after the due date, their account will show in arrears the following week. As part of the same review, the association tracked housing benefit claims. It found that a staggering nine out of 10 of the forms were “dirty” – in other words, not properly completed and with all the necessary supporting documents. Although “clean” forms were processed in an average of 16 days, for all these “dirty” claims, the average increased to 83 days, with some taking up to 580 days to process. To tackle this, Home has put more emphasis on front-end support, to help tenants get their claims right first time. Now the average waiting time, overall, has reduced to just 40 days.

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Housing Today

Postscript

  • Rita Patel is a researcher at the Audit Commission
  • Housing Association Rent Income: Rent Collection and Arrears Management by Housing Associations in England was published yesterday by the Audit Commission. A report out later in the summer will cover the same territory for councils.