Supporting Older

People Conference

PC1: Welfare benefit reform – a practical guide to

meeting the challenge

Speakers: Julie VickersDirector of Business Support, New Charter Housing

Martin FrostDeputy Chief Executive, New Charter Housing

Jahanara HussainFinancial Inclusion Manager, The Hyde Group

Chair: Sue RamsdenPolicy Leader, National Housing Federation

NHF FINANCE CONFERENCE

WELFARE BENEFIT REFORM

A PRACTICAL GUIDE TO MEETING THE CHALLENGE

21st March 2012

Martin Frost – Deputy Chief Executive

Julie Vickers – Director of Business Support

TODAY WE’LL COVER

• Knowing the impact on the business

• Knowing the impact on the customer

• Knowing where the problems are

• How we can meet the challenge?

A FIRST THOUGHT

ADDRESSING WELFARE BENEFIT REFORM

Mutually exclusive or complementary?

BUSINESS VIABILITY CUSTOMER SUPPORT

REMINDER

The DIRECT issues:

• Increase in Non-dependant deductions 2011

• Property Size HB reduction April 2013

• Universal Credit - Benefit Direct October 2013

THE BUSINESS IMPACT - UNDER-OCCUPANCY

Underoccupied by No. % of Stock

1 Room 1,255 6.8%

2 Rooms 695 3.8%

3 Rooms 76 0.4%

4 Rooms 17 0.1%

5+ Rooms 0 0.0%

2,043 11.1%

UNDER-OCCUPANCY SUMMARY

THE BUSINESS IMPACT - BENEFIT REDUCTIONS

Average Rent (October 2011) £80.13

1 bedroom reduction per week - 14% £11.22

2 bedroom or above reduction per week - 25% £20.03

THE BUSINESS IMPACT - BENEFIT REDUCTIONS

2011.12 2012.13 2013.14

Non-Dependant Deductions £286,185 £652,262 £1,048,510

Size Restrictions £0 £0 £846,709

TOTAL £286,185 £652,262 £1,895,219

THE BUSINESS IMPACT – DIRECT PAYMENTS

• 62% of income received “automatically” will now have to be recovered, (£43m)

• At best, cash flow will be compromised

• More likely, arrears will rise (eg 3% = £1.3m)

• Even if the “8 week rule applies” the Business Plan potentially compromised

THE BUSINESS IMPACT – RECOVERY COSTS

• Currently benefit receipts have a negligible collection cost

• Payment direct will potentially mean:

• Increased cashiering costs (£ 20k) Increased number of arrears/support staff (£197k)

• Increased Court costs }

} (£325k)

• Increased eviction and void costs }

BUSINESS PLAN – FUNDING PROFILENON RECOVERY

0

50

100

150

200

250

300

350

400

2011.12 2016.17 2021.22 2026.27 2031.32 2036.37

Base (98% collection)

0

50

100

150

200

250

300

350

400

2011.12 2016.17 2021.22 2026.27 2031.32 2036.37

Base (98% collection)

95% Collection

THE BUSINESS IMPACT – WHAT IT MEANS

SERVICE DELIVERY– AN EXAMPLE

• A collection rate of 95% will demand savings of £1.6m pa to ensure Business Plan compliance

• This would mean:

• 14 less new build units pa, or

• 640 less new heating systems , or

• 10% staff reductions; or .............

Source: Save the Children Fund

£1,2889% of disposable income

THE CUSTOMER IMPACT – STARTING FROM

CLOSER TO HOME ... TENANTS IN THE TAMESIDE AREA

33% use an

overdraft

27% have loans /

long term debt

20% use licensed doorstep lenders 4% use

loan sharks

48% have money worries

19% haven’t enough

to manage

52% have no HCI

21% don’t know where

advice is

68% have no

savings

57% don’t know

what a CU is

WELFARE REFORM – A HUGE IMPACT

TENANTS

Reduced Income

Money Management problems

Average tenant debt -£7,500

BUSINESS

62% of rent comes from benefit

Business Plan potentially compromised

Additional costs

WE’REDOOMED

ONE WAY OF LOOKING AT THINGS

..... AND ANOTHER

BUT WE SHOULD TREAT IT ASA CHALLENGE .... AND AN OPPORTUNITY

OUR ORGANISATIONAL BELIEF

SUSTAINABLE COMMUNITY

&

VIABLE BUSINESS

Customer Needs

Financial Viability

CREATIVELY ADDRESSING

WELFARE REFORM

WHAT DOESN’T WORK

• TENANCY

• ARREARS

• ACTION

• EVICTION

• VOID

Transient unsustained

tenancies

High Void rates

Increased repairs costs

Moving problems on

Fragmented communities

ADDRESSING RENT ARREARS

AND CUSTOMER NEEDS ISSUES REACTIVELY..

........

....NOT PROACTIVELY

WHAT DOES WORK

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

2004.05 2006.07 2008.09 2010.11

ARREARS AS % OF DEBIT

99.2%

99.6%

100.0%

100.4%

100.8%

101.2%

2004.05 2006.07 2008.09 2010.11

ANNUAL COLLECTION PERFORMANCE

OUR STRATEGY

A

B

C

D

E

ADVICE

BASIC BANK ACCOUNTS

CREDIT (Access to affordable credit)

DEPOSITS (Savings)

EDUCATION

•Door to Door Collection

•Payment Facilities

•Home Contents Ins.

•Hardship Fund

•Leaseholders

•Payment Arrangements

•Eviction Reduction

•Regular Statements

•Post Court Support

• Personal Acc. Mngr

•Pre – Tenancy Support

•Welfare Benefits Advice

•Debt Advice

•Money Advice

•MiNT

•Policies & Procedures

Corporate Debt Policy

Creditors & Payments

Housing Benefit Admin

Rent Control

FINANCIAL INCLUSION

DELIVERING VIABILITY AND

SUSTAINABILITY

ENH

AN

CIN

G A

CC

ESS

TO S

ERV

ICES

FAC

ILIT

ATI

NG

TEN

AN

CY

MA

NA

GEM

ENT

SYSTEMS BASED APPROACH

BUSINESS

FRAMEWORK

FINANCIAL ADVICE AND

SUPPORT

TENANCY

SUPPORT

PERSONAL

SERVICES

Source: Save the Children Fund

Catastrophe Cover; weekly payment through rent

Insulation; efficient systems; education

Free cashing service; cash-loaded cards

Great Opportunities programme; HCIS

White Goods scheme; training

MEETING THE WELFARE REFORM CHALLENGE

• Build on what works for you now – continually improve

• Recognise that the customer / business relationship is fundamental

• Think creatively

thinking BIGBenefits and Income Generation

MOVING FORWARD

• A positive approach demands organisation wide thinking – this is not just “credit control”

© New Charter Housing Trust Group

TAMESIDEBENEFIT INCIDENCE

60% 61% 62%

Ashton

Audenshaw

Denton

Droylsden

Dukinfield

Hyde

Longdendale

Mossley

Stalybridge

TENANTS CURRENT ON HB

DO YOU KNOW WHERE HB RELATED ISSUES WILL OCCUR

A “one size fits all” approach may not be appropriate

Resources to address the challenge may be limited – be prepared to target these to key areas

Be prepared to think “out of the box” – a huge challenge demands an innovative approach

• How is your stock distributed

• Levels of HB incidence by location / town

• Underlying issues with tenants on Benefit

BENEFIT INCIDENCE

ASHTON under LYNE

IDENTIFYING THE ISSUES – LOOKING MORE SPECIFICALLY

• 26% of the total stock

• 62% of tenants on HB

• 23% of tenants on benefit already have arrears

• 85% of tenants pay their rent by cash

• Arrears levels are 6% lower than the rest of the stock ...........

This and any other profiling information will inform a targetted approach which addresses both tenant needs and business efficiency

• Pre-application affordability checks

• Matching HB and allocations criteria

• Lodgers and legal sub-letting

• “Sharing” pilot schemes

thinking BIG ........ ALLOCATIONS

• Enhanced Welfare Benefit advice

• Enhanced Debt advice

• Enhanced Hardship Fund

• Mandatory pre-tenancy support “Key to the

Door”

• Credit Union enhancement

thinking BIG ........ TENANT

SUPPORT

• “Access all areas”

• “Wiser working”

• “Money In ... Evictions Out”

• “I’ve got the power”

thinking BIG ........ WORKING

PRACTICES

• Financial Inclusion Survey

• New tenancy analysis – identifying barriers

to sustainability

• End of tenancy data

• Enhanced profiling

thinking BIG ........ IDENTIFYING

ISSUES

• Innovation and creativity

• Organisation wide issue demands

organisation wide “buy in”

• Support from Boards downwards

• Investment

thinking BIG ........ CULTURE CHANGE

SUMMARY

• Reform is happening – its not going away

• Identify the impact .... on your business and your customers

• Build on what works now

• Be creative in developing new solutions

• Get organisation wide “buy in”

• And treat it as .....

A CHALLENGE .... AND AN OPPORTUNITY

For any further information please contact:

martin.frost@newcharter.co.uk 0161 331 2127

julie.vickers@newcharter.co.uk 0161 331 2020

Does Debt Advice Pay:

A Business Case for Social

Landlords

21 March 2012

Background

• Partnership relationships

• Previous work-Money Guidance Evaluation

• Need to demonstrate value for money in changing economic

climate

• Sustainable services for customers

• Funding opportunity

Partners:

Internal needs and external pressures

• Welfare Reform-looming implications on landlords and

residents

• A fifth of working age adults in the lowest income group are in

arrears with one or more bills – three times the rate for those

on average incomes.

• „Rental arrears‟ and „bad debts‟ are financial downturn key

risks.

• 84% social landlords experienced a rising demand for

counselling and debt advice amongst tenants and residents.

• The level of rent arrears reflects effective rent collection and

management process not just the amount owed.

• The CAB dealt with over 73,000 rent arrears cases (2010).

› 36,500 were housing association tenants

› 36,600 were local authority / ALMO tenants

• Driver: So how do we address this as a sector?

Why social landlords?

Of the poorest 10% of UK householders, over half live in social rented housing

41

61% of social households have no-one working

81% have no savings account

91% have no insurance cover

20% have used doorstep lenders

83% fail to plan for their financial future

94% make poor financial product choices

Twice as many social rented tenants use Citizens Advice

SH tenants earn on average half as much as private renters with a median annual income of £10,900

Existing arrangements across partnership

• What debt advice provisions worked best? Contracts,

signposting, telephone or in-house

• How to find make an objective assessment

• Key driver was to provide a business case to our own

organisations to continue or change our FI services

• FIC commissioned to evaluate the effectiveness of debt and

money advices provided by seven lead housing associations

and provides a business case for investment in debt advice

services.

Debt Advice Intervention Models

• Telephone advice

• Outsourced F2F advice

• In-house Advice

• Control Group-ad-hoc signposting to local agencies or no

referrals

• Qualitative evaluation like this had never been done to

understand business benefits before-off-setting debt advice

costs against income recovery cost.

• Business Model - Arrear Action Cost Calculator can be

applied by all SHPS of all sizes, locations and structures to

assess whether they should be investing in debt advice.

Key Findings andOutputs

• Early intervention

• Timely and effective debt and money advice can help reduce

rent arrears and evictions.

• It sets out financial benefits for social landlords of investing in

effective debt advice and offers practical steps to

commissioning and delivering it.

• Every £100 invested in debt advice interventions brings

financial return of £122 (a return of 22%) in the form of

reduced arrears and associated costs.

• Not providing debt advice to indebted customers will see a

rise in arrears by around 8% over the next 12 months.

• There is a strong rationale for social landlords to intervene

when arrears levels reach £600 or more given the cost-

benefit trade-off.

Gains for residents

• Rent arrears fell by 37% for tenants following referral to

debt advice.

• 71% of tenants who used the service claimed that their

rent arrears had reduced following debt advice

• 36% of those said that their arrears levels are „a lot lower‟.

• Nearly 50% surveyed service customers said that debt

advice helped them to avoid eviction and a similar

proportion was helped to avoid court proceedings.

• An average of £240 is gained for every indebted tenant

supported by debt advice.

• In-house debt advice is the most effective method of

reducing arrears.

• Outsourced debt advice is the most effective way to

reduce overall arrears and associated costs.

• Early debt advice and intervention brings the greatest

benefits.

Impact

•Chart 1: 2 year trend analysis

• Chart 1 shows the average levels of arrears for the debt advice

group fell much further over the period compared to control

group. The green line is the important indicator as it shows the

relative performance of debt advice group. When the line falls

below 100, it means that debt advice is performing better.

Analysis-to current (September 2011)

• Chart 2 shows that the debt advice group performed

significantly better than the control group over the period from

September 2010 to now. This is shown by the trend in the

green line.

Teaser findings – Impact to rent arrears

• average levels of arrears for the debt advice group fell much further over the period

compared to control group.

• The green line is the important indicator as it shows the relative performance of debt

advice group

• When the line falls below 100, it means that debt advice is performing better.

The social gains-Residents perspectives

• “So useful, we wouldn't have got through without the advice we were

given.”

• “It's very good that the landlord has this in place now.”

• “I think the service should be a more positive, pre-emptory measure

rather than reactionary.”

Report findings:

• Simply signposting residents in the direction of support has a no

additional benefit to either party

• Early intervention is key: two thirds of surveyed residents believe they

would have benefited more by earlier access to debt advice

• 79% of supported resident‟s rate housing association debt advice

„good‟ or above

• 71% of supported resident‟s claim rent arrears dropped after receiving

debt advice

• Over 12 months a rent arrears reduction of up to £550 per resident

Next Steps

• Spreading the message

• Costs calculator- a real tool to assess gains

• Business case-for all social landlords

• Early and effective intervention

• Organisational ethos embrace FI principles to get real value for

money and make a difference

• Questions?

Contact:

Jahanara Hussain

Financial Inclusion Programme Manager

Hyde Plus

Hollingsworth House

181 Lewisham High Street

London

SE13 6AA

Tel: 020 8297 7587

Email: jahanara.hussain@hyde-housing.co.uk

www.hyde-housing.co.uk

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