Income Management Strategy for Rent Collection by Social Landlords

A 'Rent First' Policy

This article is intended as a helpful guide for social housing professionals in the UK and elsewhere in managing, developing, and improving rent collection services. It is written by a housing professional working in the UK local authority sector.

The collection of rent has never been a more pressing issue as it has increasingly become the most important source of financing of services and funding for investment in future improvements in local services and new developments.

Therefore, faster and more efficient procedures are at the forefront of the minds of local policy-makers in running an ever-tighter ship in social housing matters. A significant element of the overall picture is an income management strategy that provides optimum results and ensuring consistency and healthy balances.

Here we will examine six basic themes relevant to an efficient and effective income management strategy. These are:

1. Building strong foundations
2. Outsourcing of auxiliary services
3. The housing officer role
4. Welfare benefit administration
5. External review and feedback
6. IT systems and support

With regards to rent collection, an imperative for housing officers is to ensure that payments and other service charges are made on time. If not, then they should first intervene in a supportive fashion to make sure that tenants have assistance in dealing with their debt.

As a housing officer, you will have to provide or access the information, advice, and support that tenants need, including and especially, from independent organizations.

Thereafter, if problems persist, you need to adopt an assertive role concurrent with a supportive approach to impress upon tenants the importance of paying rent. Ultimately, sooner or later, your job will certainly involve taking your tenants to court and, as a last resort, arranging for their eviction.

But the short-term and long-term goals are the payment of any arrears and the maintenance of regular payments. Throughout the process of rent collection, your motivation should be to prevent tenants ending up in court and to avoid evictions as much as possible.

But first things first. How should an organization set up its stall and start things on the right foot?

1. Building Strong Foundations

To begin with, a comprehensive income management strategy is required for efficient rent collection with the development and establishment of a well-coordinated approach. Setting out a defined vision for service delivery, promoting financial inclusion but also establishing a clear escalation policy are the prerequisites for a modern housing system.

Promoting financial inclusion means informing and actively helping tenants with income maximization and debt relief. This could be through checking that they are receiving all the benefits to which they are entitled or giving them advice about better managing their household budget.

Tenants will often have several competing bills and debt payments but it is incumbent on housing officers to assert the 'Rent First' message with all other payments taking secondary position. Other obligations can usually be negotiated, other creditors temporarily put on hold, but rent must be the priority above all else. An arrangement of debt repayments by installments is always possible but non-payment of rent and arrears is not an option.

Financial inclusion also means alerting tenants to local community services that can offer free financial advice, help with debt matters, negotiation with the landlord and even representation in court. The Citizens Advice Bureau is an obvious example but there may be others in each locality.

These services should be free and independent and housing officers must not only make tenants aware that they are available but encourage and assist tenants to use them. Even to the extent of making the referrals and setting up the appointments themselves on behalf of the tenant.

Social housing landlords should also install a programme of periodic and regular review of income management. This should include the arrears procedures to ensure that they are up-to-date and are operating satisfactorily. In particular, that they are following policies and procedures, exercising good time-management, respecting tenants' rights, and adhering to the landlord's legal obligations.

2. Outsourcing of Services

If resources are limited, then social housing landlords should seriously consider outsourcing some of their services. This would allow staff to concentrate on priority areas of their work. For example, as well as rents, there are voids work, allocations, and estate management to also consider.

Of course, this is not to forget the multiple and miscellaneous tasks that befall housing officers where no day is the same and any issues can land on their desk.

A lack of resources has become a constant challenge for local authorities in the UK. For example, between 2011 and 2015 the UK Government cut funding to councils by 26 percent, leading to increased pressures on services. Consequently, there was a need for more efficiencies and higher productivity in housing management services.

Community and regeneration projects had to be reduced or completely removed and there became a need to maximize the resources available from existing funds.

Therefore, there is now an increased need for improvements on rent collection processes. Less grant, higher rents, and use of the landlord’s own financial resources are the main sources to cover the expense of providing sub-market housing.

For local councils, this has meant outsourcing housing-related services such as community care-at-home, home repairs, road improvements, garden maintenance, waste management, and many more.

In fact, it is estimated that in the UK around 75 percent of council repair and maintenance jobs have been put into the hands of private contractors, especially concerning larger-scale planned work.

There has also been a corresponding increase in public scrutiny and accountability of council spending with a greater emphasis on value for money in housing investment.

Potential savings by outsourcing services can range from 15-20 percent of the landlord's maintenance budget. However, this is assuming that private contractors can provide a quality service and are not just a cheap, cost-cutting option. If they don't do a good job then any savings could prove to be a false economy and cause increasing difficulties with tenant relations and more complaints.

3. Jack of all trades or master of one?

With this greater attention on the issue of rent collection as part of the income stream, landlords have to consider whether it is better to employ generic or specialized housing officers.

This varies among different organizations, with some preferring to maintain specialist rent officers for example whilst others have chosen to open up the role.

Therefore, with the latter, rent collection and dealing with arrears become just one part of the housing officer's duties along with voids, allocation of new tenancies, and estate management.

On average, rent collection is considered as taking up at least 20 percent of the time of the duties of a housing officer. With allocations and estate management together accounting for another 30 percent, that's over half of the workload.

Furthermore, in deprived areas, the scale of arrears collection can be even higher and on top of that, around 20 percent of time the challenging issue of anti-social behavior is thrown into the mix. Therefore, it's not difficult to appreciate the pressures on a generic position.

Something has to give and often the generic housing officer is forced to make unwanted prioritization of equally important tasks. Normally, it's the face-to-face contact with tenants and the fieldwork of walking their patch that suffers from lack of available time.

Unfortunately, this goes against the grain of current thinking from local authorities, associations, and tenants who both, quite rightly, want more customer-facing work. As quoted by a professional in the sector "The local housing officer should be like the old local postie or milkman— well-known figure in the community.”

On the other hand, specialist roles can lead to fragmented working within the team and a narrowing of focus for the housing officer. It can lead to a lack of cohesion and joined-up working especially if internal communications are not well-integrated and easily break down.

It can restrict the skills base and professional development of specialist housing officers. At an individual level, this can hamper prospects of promotion or alternative employment where a variety of experience and abilities may be sought by future employers.

4. Benefit Administration in Managing Rent Collection

An even greater challenge for housing officers can be found in the most socially deprived areas of the UK. With high levels of unemployment, the number of tenants living on benefits can be huge. In some urban districts, as much as 80-90 percent relying on housing benefit or the housing cost element of universal credit to pay their rent.

Therefore, in maximizing the income stream, it is vital that social landlords exercise effective benefit administration. This can be done directly if they have dedicated revenue and benefits teams and indirectly when the housing officer will liaise with both tenants and the Department for Work and Pensions to prevent problems arising and to pursue existing claims.

If landlords provide a support service to tenants on benefits they should ensure that staff:

• Recognize the importance of good benefit administration in managing rent collection. Normally, it's ill-advised to fill out forms for tenants as it's time-consuming. However, there may be exceptions. For example, the time spent completing a housing benefit form at the sign-up stage may prevent future problems. It can mean less work for the housing officer who won't need to chase up claims, deal with arrears, and prepare court action because the benefit is not in place. A little time saves a lot of bother.
• Routinely check entitlement to benefits and encourage timely applications. Being pro-active and nipping things in the bud can help you manage your time and your caseload. For example, doing pre-winter benefit checks with senior citizens and disabled clients.
• Request that while benefit claims are being considered, tenants make a reasonable contribution to rent payments. Should their application be rejected or a lower level of benefit than expected be granted then arrears will not have built up excessively. It will also help their case if they are taken to court as it will show a willingness to pay.

5. Fresh Perspectives

Of course, in this hopefully enlightened era, the opinions of customers and fellow professionals can help analyze systems and processes in a different way.

For example, customer journey maps look at the service through the eyes of tenants with the aim of ironing out problems and doing things in better ways.

The Wheatley Group report 'Frontline Futures' in 2014 exemplified the positive and negative experiences fed back from tenants in the UK to Local authorities and housing associations.

On the downside, you have a dissatisfied tenant saying “We don’t seem to have much involvement in them. It’s as if it’s their way only. Transparency is not always around. Not sure if they like being asked too many questions.” This kind of tenants' experience about a landlord's approach to customer service seems more akin to the 1960s or 70s, rather than the supposedly customer-friendly atmosphere of the 21st century.

Peer review or specialized consultants can provide an external critical challenge to the existing procedures. Best practice examples from real case studies can be illuminating. All these inputs may produce important and beneficial improvements to the systems in place.

Nowadays, comments like “Easily accessible and tenants can contribute to how services are provided,” from Frontline Futures reflect more of how a social landlord should be performing and the type of relationship they have with customers.

6. IT Systems and Support

Any process will always be enhanced with the support of good IT Systems. Does your system help or hinder arrears management? According to UK government figures, around £340m could be saved by social housing providers with improved use of technology.

At the local level Councils and Housing Associations should ensure that the IT systems can:

• Be optimized to the full in managing rent collection. Computer generated warning letters and call centre 'out-of-hours' contact can be invaluable.
• Produce customer-friendly statements and letters in plain English especially taking into account non-native speakers and people with learning disabilities. For example, for over four million people living in the UK, English is their second language.
• Automated digital systems can bring savings. If you include time and labor, it costs around £12 to deliver letters through the post but a mere 5p to send them online.
• Enable staff to identify the emergence of arrears at an early stage. This can be a particular problem for generic housing officers who have competing priorities and time pressures. By focusing on tenants with serious arrears, they may neglect others with smaller arrears. The problem is that the latter can quickly escalate if not monitored and checked with early intervention.
• Send automated prompts about the next action to be taken in day-to-day operations. Your IT system should clearly display the action needed but in addition, it should be set-up that a response is required and logged. In that way, arrears problems are less likely to be missed.
• Record all action taken against prompts and identify anyone who fails to consider their prompts on any given week. Team leaders have the responsibility to routinely check that their staff is keeping on top of things. This is especially important if there is likely to be court action. It will ensure that statutory protocols have been stringently followed. Otherwise, the landlord's legal case against a tenant may be badly weakened.

Conclusion

Although the scale of social housing has been shrinking since the 1980s, mainly due to the 'Right to Buy' scheme, there are currently still over nine million residents of local authority and Housing Associations in the UK.

With the ending of 'Right to Buy' in Scotland in 2016, plus central government promises of large-scale house-building programmes and also the financial deterrents faced by prospective owners looking to take out a mortgage, this decline may slow down or even reverse.

Therefore a well-designed and smoothly operating income management strategy can be an invaluable resource to meet the challenges on an already hard-pressed area of the public sector in the UK. A change to 'lean thinking' or 'process re-engineering', whichever way you wish to label it, can contribute in many ways to increase your income stream, motivate your staff, help your tenants, and improve your overall service.