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Local government<br />

Wales<br />

<strong>Hous<strong>in</strong>g</strong><br />

National report<br />

<strong>Rent</strong> <strong>arrears</strong><br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social<br />

rented sector


The <strong>Audit</strong> <strong>Commission</strong> is <strong>the</strong> <strong>in</strong>dependent body responsible<br />

for regulat<strong>in</strong>g <strong>the</strong> audit of local government <strong>and</strong> <strong>the</strong> NHS <strong>in</strong><br />

Wales. Public audit is an essential element <strong>in</strong> <strong>the</strong> process of<br />

accountability for public money. It provides assurance that<br />

public money is be<strong>in</strong>g properly safeguarded <strong>and</strong> accounted<br />

for, that public bus<strong>in</strong>ess is conducted <strong>in</strong> accordance with<br />

proper st<strong>and</strong>ards <strong>and</strong> that public money is used<br />

economically, efficiently <strong>and</strong> effectively.<br />

The <strong>Audit</strong> <strong>Commission</strong> carries out national research on<br />

public sector service delivery. It also participates <strong>in</strong> jo<strong>in</strong>t<br />

<strong>in</strong>spections with <strong>the</strong> Social Services Inspectorate for Wales<br />

<strong>and</strong> Estyn, <strong>and</strong> is responsible for Best Value <strong>in</strong>spection of<br />

hous<strong>in</strong>g <strong>and</strong> o<strong>the</strong>r local government services not covered by<br />

o<strong>the</strong>r statutory <strong>in</strong>spectorates. It is responsible for<br />

appo<strong>in</strong>t<strong>in</strong>g external auditors to audit f<strong>in</strong>ancial statements<br />

<strong>and</strong> to carry out reviews of governance arrangements <strong>and</strong><br />

performance <strong>in</strong> all local authorities, health authorities, trusts<br />

<strong>and</strong> local health groups, police <strong>and</strong> fire authorities <strong>and</strong><br />

national parks authorities <strong>in</strong> Wales.<br />

If you would like to know more about <strong>the</strong> work of <strong>the</strong> <strong>Audit</strong><br />

<strong>Commission</strong> <strong>in</strong> relation to hous<strong>in</strong>g services please contact<br />

Anne Delaney, <strong>Audit</strong> <strong>Commission</strong> <strong>in</strong> Wales, Deri House, 2-4<br />

Park Grove, Cardiff CF10 3ZZ or telephone on 029 20371022.<br />

Website: www.audit-commission.gov.uk/wales


<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Contents 1<br />

Preface 2<br />

1 <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales 5<br />

Key po<strong>in</strong>ts 5<br />

The overall picture 6<br />

Change over time 8<br />

Comparisons between sectors 10<br />

Local variations 11<br />

Comparisons with Engl<strong>and</strong> <strong>and</strong> Scotl<strong>and</strong> 13<br />

Causes of <strong>arrears</strong> 13<br />

2 The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> 15<br />

Key po<strong>in</strong>ts 15<br />

Payment of HB direct to hous<strong>in</strong>g associations four weeks <strong>in</strong> <strong>arrears</strong> 16<br />

Recovery of HB over-payments 17<br />

HB shortfalls 18<br />

Delays <strong>in</strong> process<strong>in</strong>g HB claims 18<br />

The national HB system 19<br />

Local management <strong>and</strong> context 22<br />

3 How social l<strong>and</strong>lords are respond<strong>in</strong>g 23<br />

Key po<strong>in</strong>ts 23<br />

Overall performance 24<br />

Key weaknesses 29<br />

Driv<strong>in</strong>g improvement 33<br />

4 Conclusions <strong>and</strong> recommendations 35<br />

Conclusions 35<br />

Key recommendations 39<br />

Appendix 1: acknowledgements 41<br />

Appendix 2: references 42<br />

© <strong>Audit</strong> <strong>Commission</strong> 2002<br />

First published <strong>in</strong> November 2002 by <strong>the</strong> <strong>Audit</strong> <strong>Commission</strong> for local authorities <strong>and</strong><br />

<strong>the</strong> National Health Service <strong>in</strong> Engl<strong>and</strong> & Wales, 1 V<strong>in</strong>cent Square, London SW1P 2PN<br />

Typeset by M<strong>in</strong>istry of Design, Bath www.m<strong>in</strong>istryofdesign.co.uk<br />

Pr<strong>in</strong>ted <strong>in</strong> <strong>the</strong> UK for <strong>the</strong> <strong>Audit</strong> <strong>Commission</strong> by XXX<br />

ISBN<br />

Photographs:


I Average cost of repairs (<strong>in</strong>clud<strong>in</strong>g<br />

responsive, programmed <strong>and</strong> cyclical<br />

repairs) <strong>in</strong> 2000/01 was £705 per council<br />

property (WHO4 statistics, <strong>Welsh</strong><br />

Assembly Government). 1 per cent of<br />

collectable rent <strong>in</strong> 2000/01 was<br />

£4,034,355 (estimate based on average<br />

rents <strong>and</strong> number of occupied properties).<br />

2<br />

Preface<br />

1 For most social l<strong>and</strong>lords, rent <strong>arrears</strong> are a significant <strong>and</strong> grow<strong>in</strong>g problem. This has<br />

serious implications for both l<strong>and</strong>lords <strong>and</strong> tenants. A decl<strong>in</strong>e <strong>in</strong> <strong>the</strong> rental <strong>in</strong>come of<br />

councils <strong>and</strong> hous<strong>in</strong>g associations can impact on:<br />

• rent levels;<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Preface<br />

• <strong>the</strong> level <strong>and</strong> quality of hous<strong>in</strong>g services;<br />

• <strong>the</strong> ability of councils <strong>and</strong> hous<strong>in</strong>g associations to ma<strong>in</strong>ta<strong>in</strong> <strong>the</strong>ir hous<strong>in</strong>g stock;<br />

• <strong>the</strong> ability of hous<strong>in</strong>g associations to repay <strong>the</strong>ir loans; <strong>and</strong><br />

• <strong>the</strong> extent to which councils <strong>and</strong> hous<strong>in</strong>g associations meet <strong>the</strong> performance<br />

expectations of central government, regulatory bodies <strong>and</strong> lenders.<br />

2 A relatively small decl<strong>in</strong>e <strong>in</strong> <strong>the</strong> proportion of rent collected can have a significant<br />

impact on service delivery. For example, a 1 per cent decl<strong>in</strong>e <strong>in</strong> <strong>the</strong> rent collection rate<br />

<strong>in</strong> <strong>the</strong> council sector <strong>in</strong> Wales <strong>in</strong> 2000/01 was equivalent to <strong>the</strong> cost of ma<strong>in</strong>ta<strong>in</strong><strong>in</strong>g<br />

5,722 homes for a year, 260 <strong>in</strong> each local authority area. I<br />

3 In extreme cases, high <strong>arrears</strong> levels can threaten <strong>the</strong> f<strong>in</strong>ancial viability of<br />

organisations, <strong>in</strong> particular small hous<strong>in</strong>g associations or associations that have a<br />

high proportion of specialist accommodation with high charges.<br />

4 For tenants, escalat<strong>in</strong>g rent <strong>arrears</strong> generate anxiety <strong>and</strong> stress, <strong>and</strong> can ultimately<br />

lead to <strong>the</strong> loss of <strong>the</strong> home <strong>and</strong> homelessness.<br />

5 The importance of effectively tackl<strong>in</strong>g rent <strong>arrears</strong> has been given added impetus <strong>in</strong><br />

recent years:<br />

• Best Value (<strong>and</strong> its successor for councils, <strong>the</strong> Wales Programme for<br />

Improvement) has thrown a spotlight on how effectively councils <strong>and</strong> hous<strong>in</strong>g<br />

associations are manag<strong>in</strong>g <strong>the</strong>ir hous<strong>in</strong>g services, <strong>in</strong>clud<strong>in</strong>g rent/<strong>arrears</strong><br />

collection.<br />

• The ability of hous<strong>in</strong>g associations to fund development is <strong>in</strong>creas<strong>in</strong>gly<br />

dependent on <strong>the</strong> attraction of private capital <strong>in</strong>vestment, <strong>and</strong> <strong>in</strong> order to achieve<br />

this <strong>the</strong>y need <strong>the</strong> support <strong>and</strong> confidence of lend<strong>in</strong>g <strong>in</strong>stitutions. Evidence of bad<br />

debt, <strong>and</strong> <strong>the</strong> failure to collect <strong>the</strong> revenues necessary to repay loans, may<br />

underm<strong>in</strong>e that confidence.<br />

6 Although <strong>the</strong>re is a considerable amount of published advice <strong>and</strong> guidance on<br />

rent/<strong>arrears</strong> collection, practice often lags some way beh<strong>in</strong>d:<br />

• Best Value <strong>in</strong>spections carried out to date have highlighted serious service<br />

weaknesses. All 11 <strong>in</strong>spections of rent collection services <strong>in</strong> Engl<strong>and</strong> <strong>and</strong> Wales<br />

have rated services as poor or, at best, fair – <strong>and</strong> most have been judged to have<br />

only limited prospects for improvement.


I See, for example, I Cole, P Hickman, K<br />

Reeve, On <strong>the</strong> Spot <strong>Hous<strong>in</strong>g</strong><br />

Management: An Evaluation of Social<br />

L<strong>and</strong>lords’ Policies <strong>and</strong> Practices,<br />

Sheffield, Sheffield Hallam University<br />

Centre for Regional, Economic <strong>and</strong> Social<br />

Research, 2001.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Preface 3<br />

• Research has shown that, across all hous<strong>in</strong>g management services, <strong>the</strong> greatest<br />

gap between established good practice <strong>and</strong> actual practice is <strong>in</strong> relation to<br />

rent/<strong>arrears</strong> collection. I<br />

7 Whilst social l<strong>and</strong>lords are under ever <strong>in</strong>creas<strong>in</strong>g pressure to show that <strong>the</strong>y are<br />

maximis<strong>in</strong>g <strong>the</strong>ir rental <strong>in</strong>come, <strong>the</strong>y also need to recognise that rent <strong>arrears</strong> is a<br />

sensitive issue. Although tenants <strong>in</strong> <strong>arrears</strong> are sometimes portrayed as feckless, <strong>the</strong>ir<br />

failure to pay rent is often due to wider problems of poverty, debt <strong>and</strong> budgetary<br />

mismanagement. The <strong>in</strong>crease <strong>in</strong> rent <strong>arrears</strong> should also be viewed with<strong>in</strong> <strong>the</strong><br />

broader context of grow<strong>in</strong>g personal <strong>in</strong>debtedness.<br />

8 Social l<strong>and</strong>lords need to ensure that <strong>the</strong>y achieve an acceptable balance between<br />

mak<strong>in</strong>g it convenient for tenants to pay <strong>the</strong>ir rent, as far as possible prevent<strong>in</strong>g <strong>arrears</strong><br />

occurr<strong>in</strong>g, <strong>and</strong> tak<strong>in</strong>g prompt action to recover any debts that do accrue. Ultimately,<br />

prevent<strong>in</strong>g <strong>arrears</strong> from reach<strong>in</strong>g unmanageable levels is <strong>in</strong> <strong>the</strong> <strong>in</strong>terest of tenants as<br />

well as l<strong>and</strong>lords.<br />

9 This report is one of two on rent <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> published by <strong>the</strong> <strong>Audit</strong><br />

<strong>Commission</strong> <strong>in</strong> Wales <strong>in</strong> partnership with Cardiff University. This report focuses on <strong>the</strong><br />

national picture <strong>in</strong> Wales, describ<strong>in</strong>g <strong>the</strong> scale <strong>and</strong> nature of <strong>the</strong> problem, <strong>the</strong> impact<br />

of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> adm<strong>in</strong>istration <strong>and</strong> what social l<strong>and</strong>lords are do<strong>in</strong>g to m<strong>in</strong>imise<br />

<strong>arrears</strong>. It <strong>in</strong>cludes a range of recommendations aimed at <strong>the</strong> <strong>Welsh</strong> Assembly<br />

Government, local government <strong>and</strong> hous<strong>in</strong>g associations.<br />

10 The second report, Clos<strong>in</strong>g <strong>the</strong> Gap, is a practical guide for councils <strong>and</strong> hous<strong>in</strong>g<br />

associations on how to prevent <strong>and</strong> manage rent <strong>arrears</strong>, <strong>in</strong>clud<strong>in</strong>g how to work more<br />

closely with <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> services.<br />

11 The study on which both reports are based, has been jo<strong>in</strong>tly funded by <strong>the</strong> <strong>Welsh</strong><br />

Assembly Government <strong>and</strong> <strong>the</strong> <strong>Audit</strong> <strong>Commission</strong> <strong>in</strong> Wales. It covers both councils<br />

<strong>and</strong> hous<strong>in</strong>g associations s<strong>in</strong>ce <strong>the</strong> rent/<strong>arrears</strong> collection function is broadly <strong>the</strong><br />

same <strong>in</strong> both sectors <strong>and</strong> <strong>the</strong>re are considerable opportunities for <strong>the</strong> crossfertilisation<br />

of ideas <strong>and</strong> practice.<br />

12 The study <strong>in</strong>volved Wales-wide surveys of councils <strong>and</strong> hous<strong>in</strong>g associations, six<br />

organisational case studies (that <strong>in</strong>cluded <strong>in</strong>terviews <strong>and</strong> discussion groups with staff,<br />

tenants <strong>and</strong> stakeholders) <strong>and</strong> a review of key <strong>in</strong>formation sources, <strong>in</strong>clud<strong>in</strong>g<br />

published reports <strong>and</strong> articles, Best Value <strong>in</strong>spection reports, good practice websites<br />

<strong>and</strong> trend <strong>and</strong> performance data.<br />

13 The study team consisted of Angela Evans, Robert Smith, Paul<strong>in</strong>e Card <strong>and</strong> Tams<strong>in</strong><br />

Stirl<strong>in</strong>g. The reports have been written by Angela Evans (<strong>Audit</strong> <strong>Commission</strong> <strong>in</strong> Wales)<br />

<strong>and</strong> Robert Smith (Cardiff University).


4<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Preface<br />

I Under S.55 <strong>and</strong> Schedule 3 of <strong>the</strong><br />

<strong>Hous<strong>in</strong>g</strong> Act 1996, <strong>and</strong> S.40 of <strong>the</strong> <strong>Audit</strong><br />

<strong>Commission</strong> Act 1998.<br />

14 The <strong>Commission</strong> is grateful to all those who have contributed to <strong>the</strong> study <strong>and</strong> report,<br />

<strong>in</strong> particular <strong>the</strong> councils <strong>and</strong> hous<strong>in</strong>g associations that participated <strong>in</strong> <strong>the</strong> study, <strong>the</strong><br />

<strong>Welsh</strong> Assembly Government for support<strong>in</strong>g <strong>the</strong> study <strong>and</strong> <strong>the</strong> external Advisory<br />

Group for its helpful suggestions <strong>and</strong> comments (members of <strong>the</strong> Advisory Group,<br />

toge<strong>the</strong>r with o<strong>the</strong>r acknowledgements, are listed <strong>in</strong> Appendix 1). However,<br />

responsibility for <strong>the</strong> report’s conclusions rests with <strong>the</strong> <strong>Commission</strong> alone.<br />

15 The <strong>Audit</strong> <strong>Commission</strong> is due to publish two o<strong>the</strong>r reports on rent/<strong>arrears</strong> collection <strong>in</strong><br />

early 2003. One, on <strong>in</strong>come collection <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector <strong>in</strong> Engl<strong>and</strong>,<br />

has been funded by <strong>the</strong> <strong>Hous<strong>in</strong>g</strong> Corporation. I The o<strong>the</strong>r will be <strong>in</strong> <strong>the</strong> Learn<strong>in</strong>g from<br />

<strong>Audit</strong>, Inspection <strong>and</strong> Research series <strong>and</strong> will be based on local authority practice <strong>in</strong><br />

Engl<strong>and</strong> <strong>and</strong> Wales.


1<br />

<strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong><br />

Wales<br />

Key po<strong>in</strong>ts<br />

• In March 2002, total (former <strong>and</strong> current) rent <strong>arrears</strong> <strong>in</strong> <strong>the</strong> social<br />

rented sector <strong>in</strong> Wales amounted to some £34 million, <strong>the</strong><br />

equivalent of £151 for every tenancy.<br />

• For hous<strong>in</strong>g associations, <strong>the</strong> debt represented a third of <strong>the</strong><br />

total spend on hous<strong>in</strong>g management <strong>in</strong> <strong>the</strong> previous year. For<br />

councils it was equivalent to two-fifths.<br />

• Total <strong>arrears</strong> <strong>in</strong> <strong>the</strong> social rented sector have <strong>in</strong>creased by a<br />

quarter between 1999 <strong>and</strong> 2002, from £27 million to £34 million.<br />

• Arrears <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector levelled off <strong>in</strong> 2001/02,<br />

but council <strong>arrears</strong> cont<strong>in</strong>ued to <strong>in</strong>crease, although at a slightly<br />

reduced rate.<br />

• Delays <strong>in</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> (HB) adm<strong>in</strong>istration are a major<br />

contributory factor – especially <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector.<br />

• The proportion of council tenants <strong>in</strong> <strong>arrears</strong> has stayed fairly<br />

constant over recent years, whilst <strong>the</strong> proportion of hous<strong>in</strong>g<br />

association tenants <strong>in</strong> <strong>arrears</strong> has cont<strong>in</strong>ued to grow.<br />

• Although <strong>arrears</strong> levels are proportionally higher <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g<br />

association sector, when unpaid HB direct payments are taken<br />

<strong>in</strong>to account, <strong>arrears</strong> are less than those <strong>in</strong> <strong>the</strong> council sector.<br />

• Arrears levels vary significantly between <strong>in</strong>dividual councils <strong>and</strong><br />

hous<strong>in</strong>g associations.<br />

• Current <strong>arrears</strong> levels are lower <strong>in</strong> Wales than <strong>in</strong> Engl<strong>and</strong> <strong>and</strong><br />

Scotl<strong>and</strong>.<br />

• Low <strong>in</strong>come, exacerbated by a change <strong>in</strong> circumstance (such as<br />

<strong>the</strong> loss of a job or a relationship breakdown) is <strong>the</strong> most<br />

common underly<strong>in</strong>g cause of rent <strong>arrears</strong>. O<strong>the</strong>r external factors<br />

<strong>in</strong>clude <strong>the</strong> chang<strong>in</strong>g socio-economic mix, greater physical<br />

mobility of social tenants <strong>and</strong> chang<strong>in</strong>g attitudes to debt.<br />

• Data on rent <strong>arrears</strong> <strong>in</strong> <strong>the</strong> council sector <strong>in</strong> Wales is patchy <strong>and</strong><br />

often unreliable.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales 5


6<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales<br />

16 In this chapter we look at <strong>the</strong> scale, nature <strong>and</strong> causes of rent <strong>arrears</strong> <strong>in</strong> <strong>the</strong> social<br />

rented sector <strong>in</strong> Wales, <strong>in</strong>clud<strong>in</strong>g changes over time <strong>and</strong> key differences between <strong>and</strong><br />

with<strong>in</strong> hous<strong>in</strong>g sectors.<br />

17 In contrast to <strong>the</strong> hous<strong>in</strong>g association sector, where national performance <strong>in</strong>dicators<br />

provide a comprehensive picture of <strong>arrears</strong> across Wales, data for <strong>the</strong> local authority<br />

sector is patchy <strong>and</strong> sometimes unreliable. There is no accurate, nationally held<br />

<strong>in</strong>formation on <strong>the</strong> value of <strong>arrears</strong>. National performance <strong>in</strong>dicators (PIs) have been<br />

revised over <strong>the</strong> years, <strong>and</strong> only one <strong>in</strong>dicator (rent collected as a proportion of rent<br />

due) has been collected on an ongo<strong>in</strong>g basis, although <strong>the</strong> <strong>Welsh</strong> Assembly<br />

Government’s <strong>in</strong>tention is to delete this <strong>in</strong>dicator from 2002/03. Although CIPFA data<br />

<strong>in</strong>cludes <strong>the</strong> value of <strong>arrears</strong>, <strong>the</strong> low response rate (typically two-thirds <strong>in</strong> Wales<br />

compared with 80 per cent <strong>in</strong> Engl<strong>and</strong>) makes it difficult to extrapolate national totals.<br />

18 In order to build up as comprehensive a picture as possible, we have drawn on a<br />

variety of <strong>in</strong>formation sources, some unpublished. We have calculated <strong>the</strong> value of<br />

council <strong>arrears</strong> at national level by referr<strong>in</strong>g to <strong>in</strong>dividual local authority accounts <strong>and</strong><br />

<strong>Hous<strong>in</strong>g</strong> Revenue Account Subsidy (HRAS) data made available by <strong>the</strong> <strong>Welsh</strong><br />

Assembly Government. A fur<strong>the</strong>r limitation is that some local authority data for<br />

2001/02 was not available at <strong>the</strong> time of report<strong>in</strong>g. We have sought to provide as upto-date<br />

a picture as possible <strong>and</strong> so have <strong>in</strong>cluded 2001/02 data where it is available,<br />

but <strong>in</strong> places have had to fall back on 2000/01 data. Reference figures <strong>in</strong> brackets<br />

<strong>in</strong>dicate data sources, which are listed <strong>in</strong> Appendix 2.<br />

19 The difficulties we have experienced <strong>in</strong> compil<strong>in</strong>g an up-to-date picture of <strong>arrears</strong> <strong>in</strong><br />

<strong>the</strong> local authority sector highlights <strong>the</strong> need to review <strong>in</strong>formation collected on a<br />

national basis, with a view to harmonis<strong>in</strong>g <strong>the</strong> data available to councils <strong>and</strong> hous<strong>in</strong>g<br />

associations. This would make it easier to monitor <strong>the</strong> <strong>arrears</strong> situation at national<br />

level, <strong>and</strong> would also facilitate more mean<strong>in</strong>gful cross-tenure comparisons.<br />

20 We have also uncovered many variations <strong>in</strong> how performance <strong>in</strong>dicators are def<strong>in</strong>ed<br />

<strong>and</strong> compiled. Given <strong>the</strong> importance of councils <strong>and</strong> hous<strong>in</strong>g associations be<strong>in</strong>g able<br />

to measure <strong>the</strong>ir own performance accurately <strong>and</strong> compare it with o<strong>the</strong>rs’, it is<br />

important that <strong>the</strong>se differences are m<strong>in</strong>imised through clearer def<strong>in</strong>itions <strong>and</strong><br />

guidance.<br />

The overall picture<br />

21 In March 2002, former <strong>and</strong> current rent <strong>arrears</strong> <strong>in</strong> Wales amounted to some £34<br />

million, <strong>the</strong> equivalent of £151 for every tenancy (Table 1).


I In 2000/01, <strong>Welsh</strong> councils spent £132<br />

million (an average of £705 per property)<br />

on repairs <strong>and</strong> ma<strong>in</strong>tenance, <strong>in</strong>clud<strong>in</strong>g<br />

responsive, programmed <strong>and</strong> cyclical<br />

repairs (WHO4 statistics, <strong>Welsh</strong> Assembly<br />

Government).<br />

II In 2001/02, <strong>Welsh</strong> councils spent £87<br />

million (an average of £500 per property <strong>in</strong><br />

management) on hous<strong>in</strong>g management,<br />

exclud<strong>in</strong>g repairs (<strong>Welsh</strong> Assembly<br />

Government Performance Indicators, unaudited<br />

at <strong>the</strong> time of report<strong>in</strong>g).<br />

III In 2001/02, <strong>Welsh</strong> hous<strong>in</strong>g associations<br />

spent £22 million (an average of £418 per<br />

property <strong>in</strong> management) on hous<strong>in</strong>g<br />

management, exclud<strong>in</strong>g repairs<br />

(Registered Social L<strong>and</strong>lord Performance<br />

Indicators 2001/02, <strong>Welsh</strong> Assembly<br />

Government).<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales 7<br />

Table 1<br />

The national picture (31 March 2002)<br />

Former <strong>and</strong> current rent <strong>arrears</strong> <strong>in</strong> Wales amounted to £34 million.<br />

Councils <strong>Hous<strong>in</strong>g</strong> associations Total<br />

Total current <strong>arrears</strong> £12.7m (1) £5.9m (5) £18.6m<br />

Total former tenant <strong>arrears</strong> £12.3m (1) £3.4m (5) £15.7m<br />

Total rent <strong>arrears</strong> £25.0m (1) £9.2m (5) £34.3m<br />

Gross annual rent roll (2001/02) – £146.1m (5) –<br />

Former tenant <strong>arrears</strong> written off <strong>in</strong><br />

previous year<br />

£2.9m (1) £1.9 (5) £4.8m<br />

Total tenancies 173,848* 53,645 (5) 227,493<br />

Average <strong>arrears</strong> per tenancy £144 £172 (5) £151<br />

Number of councils/associations 22 30 55<br />

Figures <strong>in</strong> brackets relate to data sources, listed on page 42.<br />

* There is no <strong>in</strong>formation available for total tenancies. The <strong>Welsh</strong> Assembly Government uses a figure for<br />

total occupied stock as an approximation, calculated as total stock m<strong>in</strong>us vacants. The figure for 2002 has<br />

been calculated by reduc<strong>in</strong>g <strong>the</strong> 2001 figure (<strong>the</strong> most recent available) by 3 per cent (<strong>the</strong> annual rate of<br />

decrease <strong>in</strong> <strong>the</strong> total occupied stock over <strong>the</strong> previous two years).<br />

- Information not available<br />

22 The £25 million owed to <strong>Welsh</strong> councils was equivalent to:<br />

• a fifth of <strong>the</strong> total spent on repairs <strong>in</strong> 2000/01 (<strong>the</strong> most recent year for which we<br />

have figures); I <strong>and</strong><br />

• over a quarter (29 per cent) of <strong>the</strong> total spend on hous<strong>in</strong>g management (exclud<strong>in</strong>g<br />

repairs) <strong>in</strong> 2001/02. II<br />

23 The £9.2 million owed to <strong>Welsh</strong> hous<strong>in</strong>g associations was equivalent to over one-third<br />

(35 per cent) of <strong>the</strong> total spend on hous<strong>in</strong>g management (exclud<strong>in</strong>g repairs) <strong>in</strong><br />

2001/02. III<br />

24 When former tenant <strong>arrears</strong> written off <strong>in</strong> <strong>the</strong> previous year are <strong>in</strong>cluded, <strong>the</strong> total<br />

hous<strong>in</strong>g debt <strong>in</strong> March 2002 rises to £39 million.


8<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales<br />

I The earliest year that figures are available.<br />

Councils<br />

<strong>Hous<strong>in</strong>g</strong> associations<br />

Total<br />

Change over time<br />

25 Total (current <strong>and</strong> former tenant) rent <strong>arrears</strong> <strong>in</strong>creased by a quarter <strong>in</strong> <strong>the</strong> three year<br />

period 1999 to 2002, from £27 million to £34 million [Exhibit 1]. There was a<br />

proportionately larger <strong>in</strong>crease <strong>in</strong> hous<strong>in</strong>g association than council <strong>arrears</strong> – hous<strong>in</strong>g<br />

association <strong>arrears</strong> <strong>in</strong>creased by more than a third (35 per cent), from £6.8 million to<br />

£9.2 million, whilst council <strong>arrears</strong> grew by almost a quarter (23 per cent), from<br />

£20.3 million to £25 million. However, we shall see below that a significant proportion<br />

of hous<strong>in</strong>g association <strong>arrears</strong> are due to <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> (HB).<br />

26 Although hous<strong>in</strong>g association <strong>arrears</strong> have experienced <strong>the</strong> sharpest <strong>in</strong>crease over<br />

recent years, <strong>the</strong>y levelled off <strong>in</strong> 2001/02 at around £9 million. In contrast, <strong>arrears</strong> <strong>in</strong><br />

<strong>the</strong> council sector have cont<strong>in</strong>ued to <strong>in</strong>crease, although at a slightly reduced rate of<br />

6 per cent <strong>in</strong> 2001/02.<br />

27 The proportion of council tenants <strong>in</strong> <strong>arrears</strong> has rema<strong>in</strong>ed more or less constant, at<br />

around a third s<strong>in</strong>ce 1996/97 (Ref. 4). In <strong>the</strong> hous<strong>in</strong>g association sector, however, <strong>the</strong><br />

proportion of tenants <strong>in</strong> <strong>arrears</strong> has cont<strong>in</strong>ued to climb over recent years, from 43 per<br />

cent <strong>in</strong> 1998 I to 52 per cent <strong>in</strong> March 2002. Aga<strong>in</strong>, HB is an important reason for<br />

differences between <strong>the</strong> sectors. In both sectors, average debts have <strong>in</strong>creased:<br />

• average current <strong>arrears</strong> of council tenants (<strong>in</strong> <strong>arrears</strong>) <strong>in</strong>creased by more than threequarters<br />

over <strong>the</strong> four year period, March 1997 to March 2001 (<strong>the</strong> most recent year<br />

for which we have figures), from £108 (Ref. 6) to £194 (Refs. 2 <strong>and</strong> 4); <strong>and</strong><br />

Exhibit 1<br />

Changes <strong>in</strong> total <strong>arrears</strong> (current <strong>and</strong> former) over time<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>in</strong>creased by a quarter between 1999 <strong>and</strong> 2002.<br />

£ million<br />

40<br />

35<br />

30<br />

25<br />

20<br />

15<br />

10<br />

5<br />

0<br />

1999 2000 2001 2002


Sources: Refs 1, 6, 5<br />

Current tenant <strong>arrears</strong><br />

Former tenant <strong>arrears</strong><br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales 9<br />

• average current <strong>arrears</strong> of hous<strong>in</strong>g association tenants (<strong>in</strong> <strong>arrears</strong>) <strong>in</strong>creased by a<br />

tenth over <strong>the</strong> three year period, March 1999 (<strong>the</strong> earliest year for which we have<br />

figures) to March 2002, from £190 to £211 (Ref. 5).<br />

28 Former tenant <strong>arrears</strong> have <strong>in</strong>creased as a proportion of total <strong>arrears</strong> [Exhibit 2]. In<br />

<strong>the</strong> council sector <strong>the</strong>y accounted for 49 per cent of total <strong>arrears</strong> <strong>in</strong> March 2002<br />

(Ref. 1), compared with 36 per cent <strong>in</strong> 1997 (Ref. 6). Between 1999 (<strong>the</strong> earliest year<br />

for which we have figures) <strong>and</strong> 2002, <strong>the</strong> proportion of former tenant <strong>arrears</strong> <strong>in</strong> <strong>the</strong><br />

hous<strong>in</strong>g association sector <strong>in</strong>creased from 31 per cent to 37 per cent (Ref. 5).<br />

29 These figures exclude <strong>the</strong> amounts that social l<strong>and</strong>lords write off as unrecoverable,<br />

which have <strong>in</strong>creased substantially over recent years. In 2001/02, councils wrote off<br />

debts valued at £3.1 million compared with £0.9 million <strong>in</strong> 1996/97 (Refs. 1 <strong>and</strong> 6). In<br />

2001/02 hous<strong>in</strong>g associations wrote off £1.9 million of former tenant <strong>arrears</strong>, compared<br />

with £670,000 <strong>in</strong> 1998/99 (Ref. 5). However, <strong>the</strong>re is wide variation <strong>in</strong> practice between<br />

<strong>in</strong>dividual councils <strong>and</strong> hous<strong>in</strong>g associations. For example, <strong>in</strong> 2001/02 <strong>the</strong> average<br />

write-off of former tenant <strong>arrears</strong> as a proportion of rent roll was 0.53 per cent <strong>in</strong> <strong>the</strong><br />

council sector, but <strong>the</strong> range was 0 per cent to 1.33 per cent (Ref. 9). Write-off levels<br />

were higher <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector (1.3 per cent of rent roll on average), <strong>and</strong><br />

<strong>the</strong> range was greater, from 0 per cent to 4.8 per cent (Ref. 5).<br />

Exhibit 2<br />

Changes <strong>in</strong> <strong>the</strong> breakdown of current/former <strong>arrears</strong><br />

Former tenant <strong>arrears</strong> account for a grow<strong>in</strong>g proportion of <strong>arrears</strong><br />

£million<br />

30<br />

25<br />

20<br />

15<br />

10<br />

5<br />

0<br />

1997 2002 1999 2002<br />

Councils <strong>Hous<strong>in</strong>g</strong> associations


10<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales<br />

Comparisons between sectors<br />

30 Table 2 presents comparative data for councils <strong>and</strong> hous<strong>in</strong>g associations. There is<br />

limited council data available for 2001/02, <strong>and</strong> so <strong>the</strong> table <strong>in</strong>cludes comparisons for<br />

both 2000/01 <strong>and</strong> 2001/02. Although council <strong>arrears</strong> account for <strong>the</strong> bulk (68 per cent)<br />

of current <strong>arrears</strong>, reflect<strong>in</strong>g <strong>the</strong> larger size of <strong>the</strong> sector, hous<strong>in</strong>g association tenants<br />

are more likely to be <strong>in</strong> <strong>arrears</strong>. As of March 2001, a half of all hous<strong>in</strong>g association<br />

tenants were <strong>in</strong> <strong>arrears</strong> compared with a third of council tenants (Refs. 4 <strong>and</strong> 5).<br />

Average <strong>arrears</strong> levels are also slightly higher amongst hous<strong>in</strong>g association tenants –<br />

£219 for each tenant <strong>in</strong> <strong>arrears</strong> <strong>in</strong> March 2001 compared with £194 <strong>in</strong> <strong>the</strong> council<br />

sector (Refs. 2 <strong>and</strong> 5).<br />

Table 2<br />

Council <strong>and</strong> hous<strong>in</strong>g association comparisons<br />

In March 2001 a half of hous<strong>in</strong>g association tenants were <strong>in</strong> <strong>arrears</strong>,<br />

compared with a third of council tenants.<br />

Councils <strong>Hous<strong>in</strong>g</strong> associations Total<br />

As of 31 March 2001<br />

Number of tenants <strong>in</strong> <strong>arrears</strong> 61,875 (4) 26,544 (5) 88,419<br />

Percentage of tenants <strong>in</strong> <strong>arrears</strong> 35% (4) 50% (5) 38%<br />

Average current <strong>arrears</strong> (for tenants <strong>in</strong><br />

<strong>arrears</strong>, <strong>in</strong>clud<strong>in</strong>g unpaid direct HB<br />

payments)<br />

£194 (2, 4) £219 (5) £202<br />

Average current <strong>arrears</strong> (for tenants <strong>in</strong> – £138 (5) –<br />

<strong>arrears</strong>, net of unpaid HB direct payments)<br />

Percentage of tenants (<strong>in</strong> <strong>arrears</strong>) with<br />

<strong>arrears</strong> of 13+ weeks<br />

As of 31 March 2002<br />

18% (4) 8% (5)<br />

15%<br />

Current <strong>arrears</strong> as a percentage of rent<br />

due (<strong>in</strong>clud<strong>in</strong>g unpaid direct HB<br />

payments)<br />

2.9% (9) 4% (5) –<br />

Current <strong>arrears</strong> as percentage of rent<br />

due (net of unpaid direct HB payments)<br />

Average current <strong>arrears</strong> (for tenants <strong>in</strong><br />

<strong>arrears</strong>, <strong>in</strong>clud<strong>in</strong>g unpaid direct HB<br />

payments)<br />

Figures <strong>in</strong> brackets relate to data sources, listed on page 42.<br />

– 2.4% (5) –<br />

- £211 (5) –<br />

Average current <strong>arrears</strong> (for tenants <strong>in</strong><br />

<strong>arrears</strong>, net of unpaid HB direct payments<br />

– £127 (5) –


I In some cases hous<strong>in</strong>g associations<br />

<strong>in</strong>clude only payments made four weeks <strong>in</strong><br />

<strong>arrears</strong>, whilst o<strong>the</strong>r associations also<br />

<strong>in</strong>clude <strong>the</strong> amount of HB <strong>the</strong>y th<strong>in</strong>k is due<br />

from claims that have not yet been<br />

determ<strong>in</strong>ed.<br />

II The average council rent <strong>in</strong> Wales <strong>in</strong><br />

2000/01 was £43 (Ref. 4), whilst <strong>in</strong> <strong>the</strong><br />

hous<strong>in</strong>g association sector it was £49<br />

(estimate based on a number of properties<br />

<strong>and</strong> annual rent roll, Ref. 5).<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales 11<br />

31 However, when <strong>the</strong> effects of HB are taken <strong>in</strong>to account, <strong>arrears</strong> levels are <strong>in</strong> fact lower<br />

<strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector. HB adm<strong>in</strong>istration has a disproportionate impact on<br />

hous<strong>in</strong>g associations because many hous<strong>in</strong>g association tenants are paid HB four<br />

weeks <strong>in</strong> <strong>arrears</strong>, whilst council tenants eligible for HB have <strong>the</strong>ir accounts credited<br />

automatically, usually each week. Also, although <strong>the</strong> time taken to determ<strong>in</strong>e HB claims<br />

<strong>in</strong> 2000/01 was roughly <strong>the</strong> same for rent rebate (council tenants) <strong>and</strong> rent allowance<br />

claims (private, <strong>in</strong>clud<strong>in</strong>g hous<strong>in</strong>g association, tenants) (Ref. 8), it can take longer to<br />

collect all <strong>the</strong> <strong>in</strong>formation needed to support a rent allowance claim because HB<br />

services need to liaise with external l<strong>and</strong>lords. In <strong>the</strong>ir performance <strong>in</strong>dicator returns<br />

hous<strong>in</strong>g associations are required to net off <strong>the</strong> effect of unpaid HB direct payments on<br />

current <strong>arrears</strong> levels. Whilst <strong>the</strong>re are <strong>in</strong>consistencies <strong>in</strong> how hous<strong>in</strong>g associations<br />

def<strong>in</strong>e ‘unpaid HB direct payments’, I it is clear that HB delays significantly <strong>in</strong>crease<br />

hous<strong>in</strong>g association <strong>arrears</strong>. When unpaid direct HB payments are subtracted from<br />

hous<strong>in</strong>g association <strong>arrears</strong> for 2001/02, average current <strong>arrears</strong> levels drop by over a<br />

third from £211 to £127 (Ref. 5). Similarly, current <strong>arrears</strong> as a percentage of rent due<br />

drops from 4 per cent to 2.4 per cent <strong>in</strong> 2001/02 (Ref. 5). There is no equivalent net<br />

<strong>arrears</strong> figure for councils, although it is estimated that about a tenth of current <strong>arrears</strong><br />

<strong>in</strong> <strong>the</strong> council sector are attributable to HB delays (see Chapter 2).<br />

32 These differences make it difficult to make like-for-like comparisons between social rented<br />

sectors. However, we can be confident that when HB delays are taken <strong>in</strong>to account,<br />

current <strong>arrears</strong> levels are significantly higher <strong>in</strong> <strong>the</strong> council sector. For example, average<br />

current council <strong>arrears</strong> were £194 <strong>in</strong> 2000/01 (Ref. 2), compared with £138 (net of unpaid<br />

HB direct) <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector (Ref. 5). Even if we reduce <strong>the</strong> council figure<br />

by 10 per cent to £179 to reflect estimated HB delays, average council <strong>arrears</strong> were still<br />

more than a quarter higher than <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector. In <strong>the</strong> council sector,<br />

average current <strong>arrears</strong> (net of HB) represented an average of approximately four<br />

weeks’ rent, whilst <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector it was around three weeks’ rent. II<br />

33 It is also clear that councils have a larger proportion of serious <strong>arrears</strong> cases. Twice as<br />

many council tenants with <strong>arrears</strong> had <strong>arrears</strong> <strong>in</strong> excess of 13 weeks compared with<br />

hous<strong>in</strong>g association tenants – as of March 2001, 18 per cent compared with 8 per<br />

cent (Refs. 4 <strong>and</strong> 5). Chapter 2 describes <strong>the</strong> impact of HB <strong>in</strong> more detail.<br />

Local variations<br />

34 Exhibits 3 <strong>and</strong> 4 show that, as of March 2002, current <strong>arrears</strong> as a proportion of rent due<br />

varied significantly – from 0.03 per cent to 8.2 per cent for councils (Ref. 9), <strong>and</strong> 1.1 per<br />

cent to 5.9 per cent for hous<strong>in</strong>g associations (Ref. 5). This variation is partly <strong>the</strong> result of<br />

factors outside social l<strong>and</strong>lords’ control, such as tenants’ f<strong>in</strong>ancial circumstances <strong>and</strong> HB<br />

process<strong>in</strong>g times, but it is also a consequence of <strong>the</strong> ways <strong>in</strong> which councils <strong>and</strong> hous<strong>in</strong>g<br />

associations respond to <strong>the</strong> problem. For example, when unpaid direct HB payments are<br />

excluded from <strong>the</strong> hous<strong>in</strong>g associations’ figures, <strong>the</strong>re is a reduced but still significant<br />

variation – from 1.1 per cent to 3.7 per cent. Chapter 3 discusses <strong>the</strong> variation <strong>in</strong><br />

performance of councils <strong>and</strong> hous<strong>in</strong>g associations <strong>in</strong> more detail.


12<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales<br />

Source: Ref. 9<br />

Source: Ref. 5<br />

Exhibit 3<br />

Current <strong>arrears</strong> as a percentage of rent due to councils,<br />

March 2002<br />

Current <strong>arrears</strong> varied between 0.03 per cent <strong>and</strong> 8.2 per cent.<br />

Percentage<br />

9%<br />

8%<br />

7%<br />

6%<br />

5%<br />

4%<br />

3%<br />

2%<br />

1%<br />

0% 0%<br />

Average<br />

Councils<br />

Exhibit 4<br />

Current <strong>arrears</strong> (gross) as a percentage of rent due to<br />

hous<strong>in</strong>g associations, March 2002<br />

Current <strong>arrears</strong> varied between 1.1 per cent <strong>and</strong> 5.9 per cent.<br />

Percentage<br />

6.0% 6.0%<br />

5.0% 5.0%<br />

4.0% 4.0%<br />

3.0% 3.0%<br />

2.0% 2.0%<br />

1.0% 1.0%<br />

0.0%<br />

Average<br />

<strong>Hous<strong>in</strong>g</strong> associations


I Comparable data not available for<br />

Scotl<strong>and</strong>.<br />

II See, for example, B Gray, H F<strong>in</strong>ch, P<br />

Prescott-Clarke, S Cameron, R Gilroy, K<br />

Kirby <strong>and</strong> M Mountford, <strong>Rent</strong> Arrears <strong>in</strong><br />

Local Authorities <strong>and</strong> <strong>Hous<strong>in</strong>g</strong><br />

Associations <strong>in</strong> Engl<strong>and</strong>, London, HMSO,<br />

1994.<br />

III See, for example, <strong>Rent</strong> Arrears St<strong>and</strong>ard,<br />

<strong>Hous<strong>in</strong>g</strong> Corporation, 2000.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales 13<br />

Comparisons with Engl<strong>and</strong> <strong>and</strong> Scotl<strong>and</strong><br />

35 Arrears are lower <strong>in</strong> Wales than <strong>in</strong> Engl<strong>and</strong> or Scotl<strong>and</strong>, not just <strong>in</strong> terms of <strong>the</strong> total<br />

amount, but also <strong>in</strong> terms of <strong>the</strong> likelihood of tenants be<strong>in</strong>g <strong>in</strong> <strong>arrears</strong> <strong>and</strong> <strong>the</strong> average<br />

size of debt. For example, <strong>in</strong> <strong>the</strong> council sector <strong>in</strong> March 2001:<br />

• current <strong>arrears</strong> as a proportion of rent due was 2.7 per cent <strong>in</strong> Wales (Ref. 7),<br />

compared with 3.7 per cent <strong>in</strong> Scotl<strong>and</strong> (Ref. 10) <strong>and</strong> 3.4 per cent <strong>in</strong> Engl<strong>and</strong><br />

(Ref. 14); <strong>and</strong><br />

• average current <strong>arrears</strong> (for tenants <strong>in</strong> <strong>arrears</strong>) was £193 <strong>in</strong> Wales (Refs. 2 <strong>and</strong> 4)<br />

compared with £343 <strong>in</strong> Engl<strong>and</strong> I (Ref. 6).<br />

The different def<strong>in</strong>itions that are applied to net <strong>arrears</strong> make it difficult to make<br />

mean<strong>in</strong>gful national comparisons of hous<strong>in</strong>g association <strong>arrears</strong>.<br />

Causes of <strong>arrears</strong><br />

36 There are several underly<strong>in</strong>g reasons for rent <strong>arrears</strong>. Arrears are usually associated<br />

with low <strong>in</strong>come, often exacerbated by a change <strong>in</strong> circumstance such as a move <strong>in</strong> to<br />

or out of work, illness or relationship breakdown. A number of studies suggest that<br />

<strong>the</strong>se factors have rema<strong>in</strong>ed <strong>in</strong>fluential for many years. II HB adm<strong>in</strong>istration has also<br />

been a persistent contributory cause of <strong>arrears</strong>, with reports of its negative impact<br />

dat<strong>in</strong>g back to <strong>the</strong> early 1990s. III<br />

37 Although constant, <strong>the</strong>se causes have <strong>in</strong>creased <strong>in</strong> <strong>in</strong>tensity over recent years. Social<br />

l<strong>and</strong>lords, <strong>in</strong> particular hous<strong>in</strong>g associations, estimate that slow HB adm<strong>in</strong>istration<br />

now accounts for a substantial proportion of <strong>arrears</strong>. Given <strong>the</strong> prom<strong>in</strong>ence of <strong>the</strong><br />

issue, <strong>the</strong> l<strong>in</strong>k between HB <strong>and</strong> <strong>arrears</strong> is considered <strong>in</strong> detail <strong>in</strong> Chapter 2. O<strong>the</strong>r<br />

external factors identified by councils <strong>and</strong> hous<strong>in</strong>g associations were:<br />

Tenants’ chang<strong>in</strong>g socio-economic circumstances<br />

38 The social rented sector has changed over <strong>the</strong> last ten years or so. Social tenants are<br />

more likely to be on low <strong>in</strong>comes, dependent on benefits <strong>and</strong> vulnerable than <strong>in</strong><br />

previous years, <strong>and</strong> so are more prone to <strong>arrears</strong>. For example, <strong>in</strong> 2000, 65 per cent of<br />

heads of households liv<strong>in</strong>g <strong>in</strong> council accommodation were def<strong>in</strong>ed as economically<br />

<strong>in</strong>active, compared with 42 per cent <strong>in</strong> 1980 (Ref. 20). In 2001, over two-thirds of both<br />

council <strong>and</strong> hous<strong>in</strong>g association tenants were reliant on HB to pay <strong>the</strong>ir rent (Ref. 11).<br />

Given <strong>the</strong> problems associated with HB, this will have a major impact on <strong>arrears</strong><br />

levels. The age profile of tenants has also changed, with fewer older tenants, who<br />

traditionally have been <strong>the</strong> most ‘reliable’ payers.


14<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | <strong>Rent</strong> <strong>arrears</strong> – <strong>the</strong> picture <strong>in</strong> Wales<br />

Movements <strong>in</strong> to <strong>and</strong> out of work<br />

39 Social l<strong>and</strong>lords report an <strong>in</strong>creased tendency for tenants to move <strong>in</strong> to <strong>and</strong> out of work,<br />

partly as a result of government work <strong>in</strong>centives (Ref. 8). This disrupts benefit entitlement<br />

<strong>and</strong>, because of <strong>the</strong> time it can take councils to process HB claims, often leads to <strong>the</strong><br />

accumulation of <strong>arrears</strong>. It can also <strong>in</strong>volve frequent changes of payment method as, for<br />

example, tenants switch from personal payments to HB direct <strong>and</strong> back aga<strong>in</strong>.<br />

Chang<strong>in</strong>g attitudes to debt<br />

40 Some hous<strong>in</strong>g officers feel that overall <strong>the</strong>re is less stigma attached to be<strong>in</strong>g <strong>in</strong> debt,<br />

<strong>and</strong> that legal <strong>and</strong> court action have less of a deterrent effect than <strong>in</strong> <strong>the</strong> past (Ref. 8).<br />

The growth <strong>in</strong> personal <strong>in</strong>debtedness does suggest a grow<strong>in</strong>g acceptance of debt as<br />

a feature of daily life, <strong>and</strong> this may be even more <strong>the</strong> case <strong>in</strong> <strong>the</strong> social rented sector,<br />

given perceptions of its ‘safety net’ role.<br />

Increased physical mobility of tenants<br />

41 In many areas tenancy turnover rates are much higher than <strong>in</strong> previous years (Ref. 8).<br />

This means that a grow<strong>in</strong>g number of hous<strong>in</strong>g association tenants are hav<strong>in</strong>g <strong>the</strong>ir HB<br />

paid four weeks <strong>in</strong> <strong>arrears</strong> (regulation change <strong>in</strong>troduced <strong>in</strong> October 1996 for new<br />

awards to private tenants) <strong>and</strong> that, at any one time, a significant proportion of tenants<br />

are new <strong>and</strong> wait<strong>in</strong>g for HB claims to be processed.<br />

Chang<strong>in</strong>g attitudes to social hous<strong>in</strong>g, result<strong>in</strong>g <strong>in</strong> lower dem<strong>and</strong>, also have an impact<br />

on tenants’ preparedness to pay rent. A tenant who is plann<strong>in</strong>g to move <strong>in</strong> <strong>the</strong> short<br />

term may be less <strong>in</strong>cl<strong>in</strong>ed to pay <strong>the</strong> rent, unless <strong>the</strong>y th<strong>in</strong>k this may prevent <strong>the</strong>m<br />

secur<strong>in</strong>g accommodation <strong>in</strong> <strong>the</strong> future.<br />

The legal process<br />

42 Many social l<strong>and</strong>lords report problems with <strong>the</strong> legal process (Ref. 8). In some areas,<br />

it can take several weeks for cases to be entered <strong>in</strong>to court, dur<strong>in</strong>g which time <strong>arrears</strong><br />

cont<strong>in</strong>ue to climb. Also, courts are, underst<strong>and</strong>ably, reluctant to grant possession<br />

when a portion of <strong>the</strong> debt is due to unpaid HB s<strong>in</strong>ce it is unclear what <strong>the</strong> true arrear<br />

is. This can be a particular problem for hous<strong>in</strong>g associations, s<strong>in</strong>ce much larger<br />

proportions of <strong>the</strong>ir <strong>arrears</strong> are attributable to HB. In 2001/02, 79 per cent of hous<strong>in</strong>g<br />

association possession orders were suspended, compared with 67 per cent of council<br />

orders (Ref. 13). This problem has led a number of councils <strong>and</strong> hous<strong>in</strong>g associations<br />

to use, or consider us<strong>in</strong>g, M<strong>and</strong>atory Ground 8 to seek possession for <strong>arrears</strong> (which<br />

means that courts have no discretion to suspend an order). Although its use is fairly<br />

limited (account<strong>in</strong>g for only 13 per cent of all council <strong>and</strong> 5 per cent of hous<strong>in</strong>g<br />

association possession orders <strong>in</strong> 2001/02 (Ref. 13)), its use is explicitly discouraged<br />

<strong>in</strong> Chartered Institute of <strong>Hous<strong>in</strong>g</strong> good practice guidance.<br />

43 Although external factors undoubtedly have a major impact on rent <strong>arrears</strong> levels, we<br />

shall see <strong>in</strong> Chapter 3 that <strong>the</strong>re is still considerable scope for councils <strong>and</strong> hous<strong>in</strong>g<br />

associations to improve <strong>the</strong>ir performance on rent <strong>and</strong> rent <strong>arrears</strong> collection.


2<br />

The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong><br />

Key po<strong>in</strong>ts<br />

• Delays <strong>in</strong> process<strong>in</strong>g HB claims have a significant impact on rent<br />

<strong>arrears</strong> levels, <strong>in</strong> particular <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector<br />

where it is estimated that two-fifths of <strong>arrears</strong> are due to overdue<br />

direct HB payments. In <strong>the</strong> council sector, around a tenth of<br />

current <strong>arrears</strong> are attributable to HB delays.<br />

• The ma<strong>in</strong> problems are <strong>the</strong> payment of HB four weeks <strong>in</strong> <strong>arrears</strong>,<br />

<strong>the</strong> recovery of HB overpayments, process<strong>in</strong>g delays <strong>and</strong> HB<br />

shortfalls.<br />

• In 2001/02 it took <strong>Welsh</strong> councils an average of 54 days to<br />

determ<strong>in</strong>e new HB claims, although <strong>the</strong>re was huge variation<br />

across authorities – from 27 to 85 days.<br />

• The practice of recover<strong>in</strong>g HB over-payments from <strong>the</strong> bulk<br />

direct payments made to hous<strong>in</strong>g associations (ie from <strong>the</strong> HB<br />

due tenants who have not been overpaid) is generat<strong>in</strong>g<br />

significant problems for some associations.<br />

• The verification framework appears to be <strong>in</strong>creas<strong>in</strong>g HB<br />

process<strong>in</strong>g times.<br />

44 The majority (around two-thirds) of council <strong>and</strong> hous<strong>in</strong>g association tenants rely on<br />

HB to pay <strong>the</strong>ir rent, <strong>and</strong> so payment delays can have a major impact on rental<br />

<strong>in</strong>come. This is a particular problem for hous<strong>in</strong>g associations. A significant proportion<br />

of <strong>the</strong>ir <strong>in</strong>come comes from HB – on average 60 per cent <strong>in</strong> Wales, but for smaller<br />

associations it can be as much as 70-80 per cent. Long payment delays can generate<br />

real f<strong>in</strong>ancial difficulties.<br />

45 Although councils have also been expected to balance <strong>the</strong>ir books s<strong>in</strong>ce 1990, when<br />

<strong>the</strong> <strong>Hous<strong>in</strong>g</strong> Revenue Account (HRA) was r<strong>in</strong>g-fenced, HB (<strong>in</strong> <strong>the</strong> form of rent rebates)<br />

represents a smaller proportion of <strong>the</strong>ir <strong>in</strong>come – 45 per cent of HRA <strong>in</strong>come <strong>in</strong> Wales<br />

<strong>in</strong> 2000/01. Moreover, although <strong>the</strong>re is a clear expectation that councils should<br />

balance <strong>the</strong>ir HRAs, former tenant <strong>arrears</strong> are often passed on to f<strong>in</strong>ance departments<br />

<strong>and</strong> sundry debtors’ accounts.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> 15


16<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong><br />

I The formula is based on <strong>the</strong> average days<br />

to process new claims, average weekly<br />

rent rebate, <strong>the</strong> number of successful new<br />

rent rebate claims, total tenancies <strong>and</strong><br />

average current <strong>arrears</strong>.<br />

46 In 2000/01, <strong>Welsh</strong> hous<strong>in</strong>g associations estimated that around two-fifths of current<br />

<strong>arrears</strong> are due to unpaid direct HB payments:<br />

• <strong>Hous<strong>in</strong>g</strong> association performance <strong>in</strong>dicators for 2001/02 show 40 per cent of<br />

current <strong>arrears</strong> were due to unpaid direct HB payments (Ref. 5).<br />

• <strong>Hous<strong>in</strong>g</strong> associations respond<strong>in</strong>g to our survey estimated that 40 per cent of <strong>the</strong>ir<br />

current <strong>arrears</strong> <strong>in</strong> 2000/01 were due to HB delays (Ref. 8).<br />

47 In <strong>the</strong> council sector <strong>the</strong> proportion is significantly lower, at around a tenth:<br />

• In <strong>the</strong> absence of council <strong>arrears</strong> figures that are net of overdue HB, District <strong>Audit</strong><br />

has developed a formula for calculat<strong>in</strong>g <strong>the</strong> proportion of <strong>arrears</strong> that are due to<br />

HB delays. This shows that 13 per cent of current council <strong>arrears</strong> <strong>in</strong> Wales <strong>in</strong><br />

2000/01 were attributable to HB delays, although <strong>the</strong> proportion varied from 2 per<br />

cent to 23 per cent. I<br />

• Councils respond<strong>in</strong>g to our survey estimated that around 10 per cent of current<br />

<strong>arrears</strong> <strong>in</strong> 2000/01 were due to HB delays (Ref. 8).<br />

48 Given <strong>the</strong> considerable impact of HB adm<strong>in</strong>istration on hous<strong>in</strong>g association <strong>arrears</strong><br />

levels, <strong>the</strong> emphasis <strong>in</strong> this chapter is on <strong>the</strong> hous<strong>in</strong>g association perspective,<br />

although some of <strong>the</strong> issues will be common to both sectors. The ma<strong>in</strong> problems are:<br />

• payment of HB direct to hous<strong>in</strong>g associations four weeks <strong>in</strong> <strong>arrears</strong>;<br />

• recovery of HB overpayments;<br />

• HB shortfalls; <strong>and</strong><br />

• delays <strong>in</strong> process<strong>in</strong>g HB claims.<br />

Payment of HB direct to hous<strong>in</strong>g<br />

associations four weeks <strong>in</strong> <strong>arrears</strong><br />

49 One of <strong>the</strong> ma<strong>in</strong> problems reported by hous<strong>in</strong>g associations is <strong>the</strong> payment of HB four<br />

weeks <strong>in</strong> <strong>arrears</strong> (Ref. 8). In 1996 <strong>the</strong> Department of Social Security changed <strong>the</strong><br />

payment of HB made directly to private l<strong>and</strong>lords (<strong>in</strong>clud<strong>in</strong>g hous<strong>in</strong>g associations) from<br />

two weeks <strong>in</strong> advance/two weeks <strong>in</strong> <strong>arrears</strong> to four weeks <strong>in</strong> <strong>arrears</strong>. S<strong>in</strong>ce this applies<br />

to all but pre-1996 tenancies that have been <strong>in</strong> cont<strong>in</strong>uous receipt of HB, <strong>the</strong> majority of<br />

HB direct cases are affected. <strong>Hous<strong>in</strong>g</strong> associations have no control over this ongo<strong>in</strong>g<br />

debt (unless <strong>the</strong>y reduce <strong>the</strong> number of direct HB payments) <strong>and</strong> estimate that it<br />

accounts for a significant proportion of current <strong>arrears</strong>. The situation is exacerbated<br />

when associations have properties <strong>in</strong> more than one local authority area <strong>and</strong> receive<br />

payments on different payment cycles. Additional difficulties arise when HB services do<br />

not transfer <strong>in</strong>formation on HB payments electronically but send paper lists that hous<strong>in</strong>g<br />

associations have to <strong>in</strong>put manually. Payments four weeks <strong>in</strong> <strong>arrears</strong> make it difficult for<br />

associations to identify <strong>arrears</strong> at an early stage <strong>and</strong> take prompt action, <strong>and</strong> also make<br />

rent statements confus<strong>in</strong>g for tenants. In contrast, councils directly rebate <strong>the</strong> rent<br />

accounts of <strong>the</strong>ir own tenants by any HB entitlement, usually on a weekly basis.


I At <strong>the</strong> time of report<strong>in</strong>g <strong>the</strong> results for only<br />

17 councils were available. The average is<br />

based on <strong>the</strong>se returns.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> 17<br />

Recovery of HB overpayments<br />

50 Overpayments are amounts of HB that have been paid out but to which <strong>the</strong>re is no<br />

entitlement. They can be <strong>the</strong> result of official error or claimant error or fraud.<br />

51 In Wales <strong>in</strong> 2000/01, overpayments occurred <strong>in</strong> almost a third (32 per cent) of all new<br />

claims/renewals (Ref. 8). Claims from hous<strong>in</strong>g associations <strong>and</strong> private tenants (rent<br />

allowances) were slightly more likely to be subject to an overpayment (35 per cent),<br />

than council/rent rebate claims (29 per cent) (Ref. 8). HB overpayments accounted for<br />

3 per cent of <strong>the</strong> total value of HB transactions <strong>in</strong> Wales <strong>in</strong> 2000/01 (slightly higher at 4<br />

per cent for rent allowance cases) (Ref. 8). Although <strong>the</strong> proportions are small, <strong>the</strong><br />

size of <strong>the</strong> HB annual bill <strong>in</strong> Wales (around £500 million <strong>in</strong> 2000/01), means that just 1<br />

per cent is equivalent to £5 million. Only four councils were able to provide us with<br />

<strong>in</strong>formation on <strong>the</strong> average value of HB overpayments. The overall average for <strong>the</strong>se<br />

councils was £182, <strong>and</strong> was higher for rent allowance cases (£198) than for rent<br />

rebate cases (£171) (Ref. 8).<br />

52 In spite of government <strong>in</strong>centives, recovery rates vary considerably – <strong>in</strong> 2001/02<br />

<strong>Welsh</strong> councils on average recovered 51 per cent of overpayments, but <strong>the</strong> range was<br />

25 per cent to 73 per cent I (Ref. 9).<br />

53 Councils can recover overpayments <strong>in</strong> three ways:<br />

1. from a tenant’s HB or, <strong>in</strong> liaison with <strong>the</strong> <strong>Benefit</strong>s Agency, from o<strong>the</strong>r benefits such<br />

as Income Support or Job Seekers Allowance;<br />

2. from <strong>the</strong> civil courts; <strong>and</strong><br />

3 from hous<strong>in</strong>g associations, ei<strong>the</strong>r via an <strong>in</strong>voice or by deduct<strong>in</strong>g money from HB<br />

due to o<strong>the</strong>r tenants who have not been overpaid.<br />

54 If councils deduct money from <strong>the</strong> HB due to o<strong>the</strong>r tenants who have not been<br />

overpaid, it can have significant implications for <strong>arrears</strong> levels. Overpayments can be<br />

recovered for up to six years <strong>and</strong> so <strong>the</strong> reductions <strong>in</strong> <strong>the</strong> bulk HB payments made to<br />

associations can be substantial, especially if a council is <strong>in</strong>volved <strong>in</strong> a drive to recover<br />

overpayments. Recovered overpayments are converted immediately <strong>in</strong>to <strong>arrears</strong>, <strong>and</strong><br />

although associations can recover <strong>the</strong> debts from tenants, recovery is usually slow<br />

<strong>and</strong> difficult, especially if tenants have s<strong>in</strong>ce moved on. Most hous<strong>in</strong>g associations<br />

were unable to quantify <strong>the</strong> impact of <strong>the</strong> recovery of overpayments on rent <strong>arrears</strong><br />

levels, but for some it was significant:<br />

‘As overpayments are added to rent accounts our <strong>arrears</strong> levels have <strong>in</strong>creased<br />

significantly as a result. We are now challeng<strong>in</strong>g decisions to recover from us <strong>and</strong><br />

request<strong>in</strong>g that councils make arrangements directly with tenants’ (Ref. 8).


18<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong><br />

I Across Engl<strong>and</strong> <strong>and</strong> Wales, as of February<br />

2001, <strong>the</strong> amount of HB that was paid to<br />

both council <strong>and</strong> hous<strong>in</strong>g association<br />

tenants was on average 10 per cent less<br />

than <strong>the</strong> eligible rent (Ref. 11). Given<br />

average rent levels <strong>in</strong> <strong>the</strong> social rented<br />

sector <strong>in</strong> Wales at that time, this means<br />

that council tenants would have had to<br />

contribute on average approximately £4 a<br />

week <strong>and</strong> hous<strong>in</strong>g association tenants £5<br />

a week. In addition, some charges are<br />

<strong>in</strong>eligible for HB <strong>and</strong> have to be paid<br />

directly by tenants. In Wales as a whole <strong>in</strong><br />

2000/01, 8 per cent of <strong>the</strong> amount due<br />

from council tenants was for non-rent<br />

payments, such as service charges <strong>and</strong><br />

water rates, which are often <strong>in</strong>eligible for<br />

HB. Although <strong>the</strong> level of <strong>in</strong>eligible charges<br />

varies locally depend<strong>in</strong>g, for example, on<br />

whe<strong>the</strong>r a council collects water rates, it is<br />

equivalent to an average of £3-4 a week<br />

for each council tenant. This means that<br />

on average, council tenants on HB have to<br />

pay around £7-8 a week from <strong>the</strong>ir own<br />

pocket, ei<strong>the</strong>r because charges are<br />

<strong>in</strong>eligible for HB or because of <strong>the</strong>ir<br />

<strong>in</strong>dividual circumstances.<br />

55 A number of hous<strong>in</strong>g associations had successfully negotiated with councils for<br />

overpayments to be deducted from tenants’ ongo<strong>in</strong>g benefit entitlement, <strong>and</strong> so <strong>the</strong>re<br />

had been a reduced impact (Ref. 8). Some associations had also successfully<br />

challenged over-payments:<br />

‘Policy of request<strong>in</strong>g <strong>in</strong>ternal reviews <strong>and</strong> employ<strong>in</strong>g a specific HB officer has reduced<br />

<strong>the</strong> level of impact [of overpayment recovery]. We are f<strong>in</strong>d<strong>in</strong>g that <strong>the</strong> majority of<br />

overpayments are withdrawn because mistakes have been made by HB’ (Ref. 8)<br />

56 Given that <strong>the</strong> DWP has recently announced enhanced <strong>in</strong>centives for councils to<br />

recover overpayments, it is critically important for council <strong>and</strong> hous<strong>in</strong>g associations to<br />

work closely <strong>in</strong> this area. Clos<strong>in</strong>g <strong>the</strong> Gap outl<strong>in</strong>es a number of ways <strong>in</strong> which this can<br />

be done.<br />

HB shortfalls<br />

57 Many councils <strong>and</strong> associations feel that shortfalls <strong>in</strong> HB are a major cause of <strong>arrears</strong>,<br />

especially where claims are paid late (Ref. 8). A shortfall can ei<strong>the</strong>r occur because<br />

some charges, such as service charges or water rates, are not eligible for HB, or<br />

because of tenants’ own f<strong>in</strong>ancial or household circumstances (for example, <strong>the</strong><br />

presence of non-dependents with<strong>in</strong> <strong>the</strong> household). We have calculated that as of<br />

March 2001 council tenants <strong>in</strong> Wales had to pay an average of around £7-8 a week<br />

out of <strong>the</strong>ir own pocket because of <strong>the</strong> shortfall between HB received <strong>and</strong> <strong>the</strong> amount<br />

due to <strong>the</strong>ir council. I We do not have data on <strong>in</strong>eligible charges for <strong>the</strong> hous<strong>in</strong>g<br />

association sector, <strong>and</strong> so cannot calculate <strong>the</strong> total average shortfall for association<br />

tenants. We do know, however, <strong>the</strong>re was a m<strong>in</strong>imum average shortfall of around £5 a<br />

week, s<strong>in</strong>ce this was <strong>the</strong> average difference between HB received <strong>and</strong> <strong>the</strong> eligible rent<br />

as of February 2001 (Ref. 11). If councils are tak<strong>in</strong>g several weeks to process HB<br />

claims, <strong>the</strong> shortfall (or ‘true’ as opposed to ‘technical’ arrear) can be significant by <strong>the</strong><br />

time <strong>the</strong> first HB payment is received.<br />

Delays <strong>in</strong> process<strong>in</strong>g HB claims<br />

58 In spite of a 30 per cent decrease <strong>in</strong> <strong>the</strong> number of new rent rebate claims, <strong>and</strong> a 35<br />

per cent decrease <strong>in</strong> <strong>the</strong> number of new rent allowance cases processed by councils<br />

<strong>in</strong> Wales over <strong>the</strong> past five years (Ref. 11), <strong>the</strong> proportion of new rent rebate cases<br />

processed with<strong>in</strong> 14 days has decl<strong>in</strong>ed. In 1996/97, 78 per cent of new rent rebate<br />

cases <strong>and</strong> 79 per cent of rent allowance cases were processed with<strong>in</strong> 14 days, but by<br />

2000/01 <strong>the</strong>se proportions had decl<strong>in</strong>ed to 70 per cent <strong>and</strong> 67 per cent respectively<br />

(Ref. 4). In 2001/02 councils <strong>in</strong> Wales took an average of 54 days, that is around eight<br />

weeks, to process a new HB claim, although <strong>the</strong>re was huge variation across<br />

authorities – from 27 to 85 days (Ref. 9). Only ten HB services respond<strong>in</strong>g to our<br />

survey provided <strong>in</strong>formation on <strong>the</strong> average number of days to determ<strong>in</strong>e new rent<br />

allowance <strong>and</strong> rent rebate cases, but for <strong>the</strong>se councils <strong>the</strong>re was little difference


<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> 19<br />

between <strong>the</strong> two types of claim. There was, however, a slightly larger backlog of rent<br />

allowance cases, but this is likely to be due to verification processes be<strong>in</strong>g more<br />

<strong>in</strong>volved when deal<strong>in</strong>g with external l<strong>and</strong>lords (Ref. 8).<br />

59 The new tax <strong>and</strong> pension credits, to be implemented from April 2003, are likely to<br />

<strong>in</strong>crease HB workload <strong>and</strong>, without additional resources, leng<strong>the</strong>n process<strong>in</strong>g time –<br />

one <strong>Welsh</strong> council estimates that its workload will <strong>in</strong>crease by 7 per cent as a<br />

consequence (Ref. 8).<br />

60 It is important to note that HB delays do not only impact on cashflow. The longer<br />

councils take to process HB claims, <strong>the</strong> more likely tenants are to fall <strong>in</strong>to <strong>arrears</strong> –<br />

because of HB shortfalls, or because a tenant spends a large back-payment on<br />

someth<strong>in</strong>g o<strong>the</strong>r than rent. L<strong>and</strong>lords with high tenancy turnovers, for example those<br />

with a large number of short-stay properties such as homeless hostels, can<br />

experience acute problems s<strong>in</strong>ce it is much more difficult to recover HB shortfalls<br />

from tenants who have moved on. It is also difficult for l<strong>and</strong>lords to take prompt action<br />

when <strong>the</strong>y are uncerta<strong>in</strong> how much of any arrear is due to unpaid HB.<br />

61 Delays <strong>in</strong> pay<strong>in</strong>g HB are partly a consequence of national regulations, <strong>in</strong>clud<strong>in</strong>g<br />

measures to prevent <strong>and</strong> detect fraud, <strong>and</strong> partly a consequence of local<br />

management. Both issues are discussed below.<br />

The national HB system<br />

62 Many <strong>Welsh</strong> councils <strong>and</strong> hous<strong>in</strong>g associations believe that <strong>the</strong> national HB system, <strong>in</strong><br />

particular <strong>the</strong> number <strong>and</strong> complexity of regulations <strong>in</strong>clud<strong>in</strong>g verification<br />

requirements, has <strong>in</strong>creased HB process<strong>in</strong>g times <strong>and</strong> <strong>arrears</strong> levels (Ref. 8).<br />

‘The verification framework has had a major impact. We used to be able to send<br />

photocopies of benefit books etc, which is not now accepted. We have to rely on <strong>the</strong><br />

tenant go<strong>in</strong>g <strong>in</strong> person to <strong>the</strong> HB office <strong>and</strong> remember<strong>in</strong>g to ask for a receipt. The<br />

<strong>in</strong>crease <strong>in</strong> <strong>the</strong> number of gaps <strong>in</strong> entitlement has been immense’ (Ref. 8)<br />

63 The verification framework (VF) is a voluntary scheme, <strong>in</strong>troduced by <strong>the</strong> DWP <strong>in</strong> May<br />

1998, to improve <strong>the</strong> detection of HB <strong>and</strong> Council Tax benefit fraud. The framework<br />

sets out m<strong>in</strong>imum <strong>in</strong>formation requirements <strong>and</strong> checks that must be made before<br />

benefit is paid – for example, every claimant must be visited at least every three years<br />

(more often for high-risk groups). Although <strong>the</strong> scheme is voluntary, <strong>the</strong> DWP<br />

supports <strong>and</strong> promotes its adoption across Engl<strong>and</strong> <strong>and</strong> Wales. Six of <strong>the</strong> fifteen<br />

councils respond<strong>in</strong>g to our survey (40 per cent) were VF compliant.


20<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong><br />

64 There is some evidence that VF compliant councils are tak<strong>in</strong>g longer to process HB<br />

claims:<br />

• Although <strong>Welsh</strong> VF councils are tak<strong>in</strong>g no longer to process new claims from <strong>the</strong><br />

po<strong>in</strong>t when all necessary <strong>in</strong>formation has been collected, <strong>the</strong>ir backlogs are<br />

significantly larger – 6 per cent at <strong>the</strong> beg<strong>in</strong>n<strong>in</strong>g of 2002 compared with 3 per cent<br />

for non-VF councils. The average number of cases <strong>in</strong> backlog amongst VF<br />

councils was 500 (Ref. 8).<br />

• <strong>Welsh</strong> VF councils are tak<strong>in</strong>g longer to process renewals – only half (49 per cent)<br />

processed renewals on time <strong>in</strong> 2000/01, compared with 70 per cent of non-VF<br />

councils (Refs. 7 <strong>and</strong> 8).<br />

• Accord<strong>in</strong>g to DWP research, three-quarters of VF councils say that <strong>the</strong> framework<br />

has caused delays <strong>in</strong> process<strong>in</strong>g <strong>and</strong> <strong>in</strong>creased workload. Councils say that<br />

collect<strong>in</strong>g orig<strong>in</strong>al documentation <strong>and</strong> visit<strong>in</strong>g claimants has had <strong>the</strong> biggest<br />

impact on workload (Ref. 12).<br />

65 In most cases <strong>the</strong> problems associated with <strong>the</strong> <strong>in</strong>troduction of <strong>the</strong> verification<br />

framework reduce significantly after a year or so. However, gett<strong>in</strong>g process<strong>in</strong>g times<br />

back to acceptable levels has <strong>in</strong> some cases required <strong>the</strong> <strong>in</strong>put of significant<br />

resources:<br />

• One <strong>Welsh</strong> council has employed eight additional HB staff (represent<strong>in</strong>g a 24 per<br />

cent <strong>in</strong>crease <strong>in</strong> staff<strong>in</strong>g levels) s<strong>in</strong>ce <strong>in</strong>troduc<strong>in</strong>g <strong>the</strong> VF <strong>in</strong> 2000 (Ref. 8).<br />

• Ano<strong>the</strong>r has <strong>in</strong>creased staff<strong>in</strong>g by around 30 per cent, <strong>and</strong> restructured <strong>the</strong><br />

service to create a separate verification team responsible for collect<strong>in</strong>g <strong>and</strong><br />

check<strong>in</strong>g verification data (Ref. 8).<br />

66 Councils receive extra resources from <strong>the</strong> DWP to cover <strong>the</strong> additional costs, but <strong>the</strong><br />

majority of councils say <strong>the</strong>re is a shortfall – 43 per cent of councils th<strong>in</strong>k it covers less<br />

than half <strong>the</strong>ir extra costs, while 75 per cent th<strong>in</strong>k it covers less than three-quarters<br />

(Ref. 12). This means that <strong>the</strong> majority of VF councils have to fund some of <strong>the</strong> cost<br />

from <strong>the</strong>ir General Fund, which has a direct impact on <strong>the</strong> provision of o<strong>the</strong>r services,<br />

or from sav<strong>in</strong>gs from <strong>the</strong> prevention <strong>and</strong> detection of fraud <strong>and</strong> error.<br />

67 Given <strong>the</strong> resource implications, some <strong>Welsh</strong> councils are cautious about <strong>in</strong>troduc<strong>in</strong>g<br />

VF. For example, one council has calculated that it would require 50 per cent more<br />

staff <strong>and</strong> has concerns that <strong>the</strong> disruption could lead to a deterioration <strong>in</strong> service<br />

st<strong>and</strong>ards.<br />

68 The DWP has recognised <strong>and</strong> responded to <strong>the</strong>se fund<strong>in</strong>g issues by recently<br />

<strong>in</strong>creas<strong>in</strong>g fund<strong>in</strong>g for anti-fraud work for councils who comply with <strong>the</strong> verification<br />

framework <strong>and</strong> help<strong>in</strong>g with <strong>the</strong> costs of implement<strong>in</strong>g <strong>the</strong> changes required <strong>in</strong><br />

relation to <strong>the</strong> new tax <strong>and</strong> pension credits.


<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> 21<br />

69 Councils <strong>and</strong> hous<strong>in</strong>g associations raised a number of additional concerns <strong>in</strong> relation<br />

to <strong>the</strong> VF (Ref. 8):<br />

• Although <strong>the</strong> VF places <strong>the</strong> responsibility for mak<strong>in</strong>g HB claims more firmly on<br />

tenants’ shoulders, a number of hous<strong>in</strong>g authorities <strong>and</strong> hous<strong>in</strong>g associations<br />

said it had created more work for hous<strong>in</strong>g officers.<br />

• A concentration on anti-fraud <strong>in</strong>itiatives can deflect resources away from o<strong>the</strong>r<br />

activities such as benefit take-up work.<br />

• The <strong>in</strong>creased complexity of <strong>the</strong> application process can deter some people, <strong>in</strong><br />

particular those who vulnerable, from claim<strong>in</strong>g benefits.<br />

70 However, <strong>the</strong>se perceived disadvantages need to be viewed with<strong>in</strong> <strong>the</strong> context of <strong>the</strong><br />

significant sav<strong>in</strong>gs that <strong>the</strong> prevention <strong>and</strong> detection of fraud <strong>and</strong> error can make to<br />

<strong>the</strong> public purse. The loss of public money through fraud or error has a direct impact<br />

on public services. Although Box 1 shows that <strong>the</strong> sav<strong>in</strong>gs from <strong>the</strong> detection of fraud<br />

<strong>in</strong> Wales dur<strong>in</strong>g 2000/01 were roughly <strong>the</strong> same for VF <strong>and</strong> non-VF councils, this<br />

excludes <strong>the</strong> sav<strong>in</strong>gs made from prevention.<br />

71 The national HB system clearly has a significant impact on <strong>the</strong> time that councils take<br />

to process HB claims, as well as broader issues such as benefit take-up <strong>and</strong> relations<br />

with partner organisations such as hous<strong>in</strong>g associations. However, it is important that<br />

<strong>the</strong> sav<strong>in</strong>gs made from <strong>the</strong> prevention <strong>and</strong> detection of fraud <strong>and</strong> error are also taken<br />

<strong>in</strong>to account. A national evaluation of <strong>the</strong> VF would provide an opportunity to review<br />

<strong>the</strong> relative costs <strong>and</strong> benefits systematically.<br />

Box 1<br />

Impact of anti-fraud <strong>in</strong>itiatives <strong>in</strong> Wales, 2000/01<br />

• The average number of fraud cases identified by <strong>Welsh</strong> authorities <strong>in</strong> 2000/01 was<br />

226, represent<strong>in</strong>g 1.4 per cent of all claims (new <strong>and</strong> renewal) <strong>in</strong> <strong>the</strong> same year .<br />

The proportion was slightly higher for VF sites; at 1.7 per cent (Ref. 8).<br />

• The amount saved from <strong>the</strong> identification of fraud was 1 per cent of <strong>the</strong> total value<br />

of benefits paid out – some £5-6 million <strong>in</strong> 2000/01. The percentage sav<strong>in</strong>gs were<br />

<strong>the</strong> same for VF <strong>and</strong> non-VF councils (Ref. 8).<br />

• The average sav<strong>in</strong>gs per fraud case was £1,178 <strong>in</strong> 2000/01, <strong>and</strong> per local<br />

authority was <strong>in</strong> <strong>the</strong> region of £266,000 (Ref. 8).<br />

• An average of seven fraud cases per council were prosecuted <strong>in</strong> 2000/01, that is<br />

3 per cent of all cases identified. The average number (eight) <strong>and</strong> proportion of<br />

fraud cases (5 per cent) prosecuted by VF councils was only slightly higher<br />

(Ref. 8).<br />

• Approximately half of <strong>the</strong> 102 fraud cases taken to court <strong>in</strong> Wales <strong>in</strong> 2000/01 are<br />

likely to have resulted <strong>in</strong> a sentence (Ref. 12).


22<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | The impact of <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong><br />

72 It is also important to remember that <strong>the</strong> local context, <strong>in</strong>clud<strong>in</strong>g <strong>the</strong> way <strong>in</strong> which<br />

councils organise <strong>and</strong> manage HB services, can be just as <strong>in</strong>fluential <strong>in</strong> determ<strong>in</strong><strong>in</strong>g<br />

service st<strong>and</strong>ards.<br />

Local management <strong>and</strong> context<br />

73 Local socio-economic factors can have a major impact on HB caseload <strong>and</strong><br />

performance, by <strong>in</strong>fluenc<strong>in</strong>g not just <strong>the</strong> number of claimants, but also <strong>the</strong> flow of new<br />

claims <strong>and</strong> <strong>the</strong> number of renewals <strong>and</strong> changes of circumstance. Local performance<br />

will also be <strong>in</strong>fluenced by major changes such as <strong>the</strong> <strong>in</strong>troduction of <strong>the</strong> VF, a new IT<br />

system or organisational restructur<strong>in</strong>g. Recruitment <strong>and</strong> retention difficulties can also<br />

have a major impact on service st<strong>and</strong>ards:<br />

• Over a half (54 per cent) of <strong>Welsh</strong> councils f<strong>in</strong>d it difficult to recruit HB staff, <strong>and</strong><br />

three-quarters (74 per cent) experience difficulties reta<strong>in</strong><strong>in</strong>g staff (Ref. 8).<br />

• As of early 2002, staff<strong>in</strong>g numbers <strong>in</strong> <strong>Welsh</strong> HB services were on average runn<strong>in</strong>g<br />

at 90 per cent of establishment <strong>and</strong> 12 per cent of those <strong>in</strong> post were temporary<br />

(Ref. 8).<br />

74 Given how quickly HB backlogs can accumulate, staff<strong>in</strong>g problems are a major issue<br />

for councils.<br />

75 Notwithst<strong>and</strong><strong>in</strong>g <strong>the</strong> importance of <strong>the</strong>se local factors, <strong>the</strong> <strong>Audit</strong> <strong>Commission</strong> <strong>and</strong><br />

<strong>Benefit</strong> Fraud Inspectorate (BFI) have found that councils work<strong>in</strong>g <strong>in</strong> very similar<br />

circumstances often have very different st<strong>and</strong>ards of service, which suggests that<br />

organisation <strong>and</strong> management can be at least as important as environment (Ref. 15).<br />

The <strong>Audit</strong> <strong>Commission</strong>/BFI recommend that HB services take action <strong>in</strong> four ma<strong>in</strong><br />

areas to improve performance (Ref. 15):<br />

• underst<strong>and</strong><strong>in</strong>g <strong>the</strong> needs of claimants;<br />

• strong leadership <strong>and</strong> performance management;<br />

• improv<strong>in</strong>g IT systems; <strong>and</strong><br />

• improv<strong>in</strong>g relations <strong>and</strong> jo<strong>in</strong>t work<strong>in</strong>g arrangements with o<strong>the</strong>r council<br />

departments/agencies.<br />

76 Nei<strong>the</strong>r this report, nor <strong>the</strong> accompany<strong>in</strong>g positive practice guidance report Clos<strong>in</strong>g<br />

<strong>the</strong> Gap, directly address how HB services should improve <strong>the</strong>ir management<br />

practices. Comprehensive advice <strong>and</strong> support on this are available from o<strong>the</strong>r<br />

sources. The DWP <strong>in</strong>troduced national performance st<strong>and</strong>ards for HB services <strong>in</strong> April<br />

2002, <strong>and</strong> has recently developed a toolkit to help councils review how <strong>the</strong>y do th<strong>in</strong>gs<br />

<strong>and</strong> improve <strong>the</strong>ir performance. The BFI has specific responsibility for monitor<strong>in</strong>g<br />

councils’ performance <strong>in</strong> this area. However, Clos<strong>in</strong>g <strong>the</strong> Gap does <strong>in</strong>clude a chapter<br />

specifically on how HB services <strong>and</strong> social l<strong>and</strong>lords can work more closely toge<strong>the</strong>r<br />

to reduce <strong>the</strong> impact of HB adm<strong>in</strong>istration on claimants <strong>and</strong> tenants.


3 How<br />

social l<strong>and</strong>lords are<br />

respond<strong>in</strong>g<br />

Key po<strong>in</strong>ts<br />

• In 2001/02, councils collected 96.2 per cent of <strong>the</strong> rent due that<br />

year, <strong>and</strong> hous<strong>in</strong>g associations 97.9 per cent.<br />

• The rent collection rate amongst hous<strong>in</strong>g associations is<br />

improv<strong>in</strong>g, <strong>in</strong> contrast to <strong>the</strong> council sector where <strong>the</strong> collection<br />

rate cont<strong>in</strong>ues to deteriorate.<br />

• The performance of <strong>in</strong>dividual <strong>Welsh</strong> councils <strong>and</strong> hous<strong>in</strong>g<br />

associations <strong>in</strong> collect<strong>in</strong>g rent/<strong>arrears</strong> varies considerably.<br />

• Although <strong>the</strong> majority of councils <strong>and</strong> hous<strong>in</strong>g associations have<br />

experienced a decrease <strong>in</strong> <strong>the</strong> proportion of rent collected over<br />

recent years, a half of associations <strong>and</strong> two-fifths of councils<br />

have improved <strong>the</strong>ir performance.<br />

• Councils <strong>and</strong> hous<strong>in</strong>g associations are adapt<strong>in</strong>g <strong>the</strong>ir<br />

approaches to <strong>arrears</strong> prevention <strong>and</strong> recovery. Most<br />

significantly <strong>the</strong>y are:<br />

– tak<strong>in</strong>g a firmer l<strong>in</strong>e on <strong>arrears</strong> recovery, as reflected <strong>in</strong><br />

<strong>in</strong>creased levels of court action <strong>and</strong> evictions;<br />

– mov<strong>in</strong>g to more specialised staff<strong>in</strong>g arrangements;<br />

– plac<strong>in</strong>g more emphasis on tenants’ responsibility to pay <strong>the</strong><br />

rent; <strong>and</strong><br />

– spend<strong>in</strong>g more time liais<strong>in</strong>g with HB services.<br />

• Key weaknesses that are h<strong>in</strong>der<strong>in</strong>g effective prevention <strong>and</strong><br />

management of rent <strong>arrears</strong> are:<br />

– poor availability <strong>and</strong> quality of advice <strong>and</strong> support;<br />

– a limited range of payment methods;<br />

– neglect of former tenant <strong>arrears</strong>;<br />

– weak performance management systems;<br />

– lack of corporate clarity <strong>and</strong> commitment; <strong>and</strong><br />

– poor relations with HB services.<br />

• Where councils <strong>and</strong> hous<strong>in</strong>g associations have improved <strong>the</strong>ir<br />

performance, a number of key <strong>the</strong>mes have emerged:<br />

– <strong>in</strong>creased emphasis on <strong>arrears</strong> prevention, <strong>in</strong>clud<strong>in</strong>g <strong>the</strong><br />

provision of advice <strong>and</strong> support;<br />

– a firmer approach to <strong>arrears</strong> recovery;<br />

– empower<strong>in</strong>g staff, <strong>and</strong> giv<strong>in</strong>g <strong>the</strong>m clear targets <strong>and</strong><br />

responsibilities;<br />

– improved liaison <strong>and</strong> <strong>in</strong>formation-shar<strong>in</strong>g with HB services; <strong>and</strong><br />

– clear corporate strong strategic management commitment,<br />

<strong>in</strong>clud<strong>in</strong>g adequate resourc<strong>in</strong>g.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g 23


24<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g<br />

Source: Refs 5 <strong>and</strong> 9<br />

Councils<br />

<strong>Hous<strong>in</strong>g</strong> associations<br />

Overall performance<br />

77 The most accurate national measure of how well councils <strong>and</strong> hous<strong>in</strong>g associations are<br />

do<strong>in</strong>g <strong>in</strong> relation to rent/<strong>arrears</strong> collection is rent collected as a percentage of total rent<br />

collectable. Current <strong>arrears</strong> levels <strong>and</strong> percentages can be mislead<strong>in</strong>g. For example, <strong>in</strong><br />

areas of high tenancy turnover, a significant proportion of current <strong>arrears</strong> will be<br />

converted <strong>in</strong>to former tenant <strong>arrears</strong>, which, subject to policy, can be written off.<br />

78 Arrears will cont<strong>in</strong>ue to <strong>in</strong>crease as long as rent collection rates rema<strong>in</strong> below 100 per<br />

cent (s<strong>in</strong>ce current <strong>arrears</strong> are <strong>in</strong>cluded <strong>in</strong> <strong>the</strong> total rent collectable figure). Only when<br />

rates <strong>in</strong>crease above 100 per cent do councils <strong>and</strong> hous<strong>in</strong>g associations not only collect<br />

<strong>the</strong> rent due that year but also beg<strong>in</strong> to make <strong>in</strong>roads <strong>in</strong>to cumulative <strong>arrears</strong>. Exhibit 5<br />

shows that <strong>in</strong> 2001/02 councils collected 96.2 per cent of <strong>the</strong> rent due that year, <strong>and</strong><br />

hous<strong>in</strong>g associations 97.9 per cent. Both rates are clearly below 100 per cent, which<br />

mean that <strong>arrears</strong> will cont<strong>in</strong>ue on <strong>the</strong>ir upward trend. However, <strong>the</strong> improvement <strong>in</strong> <strong>the</strong><br />

hous<strong>in</strong>g association collection rate, from around 96 per cent <strong>in</strong> 1999/2000 to 98 per cent<br />

<strong>in</strong> 2001/02, will reduce <strong>the</strong> rate at which <strong>arrears</strong> <strong>in</strong>crease. This is already evident <strong>in</strong> <strong>the</strong><br />

reduction <strong>in</strong> average hous<strong>in</strong>g association <strong>arrears</strong> <strong>in</strong> <strong>the</strong> year to 31 March 2002 – average<br />

current gross <strong>arrears</strong> reduced from £219 to £211, <strong>and</strong> <strong>the</strong> proportion of tenants <strong>in</strong><br />

<strong>arrears</strong> ow<strong>in</strong>g 13+ weeks reduced from 8 per cent to 7 per cent. However, <strong>the</strong> cont<strong>in</strong>u<strong>in</strong>g<br />

downward trend <strong>in</strong> <strong>the</strong> council sector is a cause for concern.<br />

Exhibit 5<br />

Changes <strong>in</strong> rent collection rates<br />

In 2001/02 councils collected 96.2 per cent of <strong>the</strong> rent due that year, <strong>and</strong><br />

hous<strong>in</strong>g associations 97.9 per cent.<br />

Percentage<br />

100%<br />

99%<br />

98%<br />

97%<br />

96%<br />

95%<br />

94%<br />

93%<br />

92%<br />

91%<br />

90%<br />

1998/99<br />

1999/2000 2000/01 2001/02


Source: Ref. 9<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g 25<br />

79 There is considerable variation <strong>in</strong> <strong>the</strong> performance of <strong>Welsh</strong> councils <strong>and</strong> hous<strong>in</strong>g<br />

associations <strong>in</strong> collect<strong>in</strong>g rent/<strong>arrears</strong>. For example, <strong>the</strong> rent collection rates of<br />

councils <strong>in</strong> 2001/02 varied from 89 per cent to 103 per cent, <strong>and</strong> amongst hous<strong>in</strong>g<br />

associations <strong>the</strong> range was narrower but still significant at 95 per cent to 101 per cent<br />

[Exhibits 6 <strong>and</strong> 7]. In 2001/02, 1 per cent of rent due represented around £4 million <strong>in</strong><br />

<strong>the</strong> council sector <strong>and</strong> £1.4 million <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector, which underl<strong>in</strong>es<br />

<strong>the</strong> significance of <strong>the</strong>se seem<strong>in</strong>gly m<strong>in</strong>or variations.<br />

80 A half of hous<strong>in</strong>g associations <strong>and</strong> almost two-fifths (38 per cent) of councils had<br />

improved <strong>the</strong>ir collection rate over <strong>the</strong> four year period 1998/99 to 2001/02.<br />

81 In spite of <strong>the</strong> strong <strong>in</strong>fluence of external factors (such as HB delays <strong>and</strong> low<br />

<strong>in</strong>comes), <strong>in</strong>dividual councils <strong>and</strong> hous<strong>in</strong>g associations can have a major impact on<br />

rent <strong>arrears</strong> levels. The fact that <strong>arrears</strong> levels vary so significantly, even amongst<br />

councils <strong>and</strong> hous<strong>in</strong>g associations work<strong>in</strong>g <strong>in</strong> similar areas <strong>and</strong> fac<strong>in</strong>g comparable HB<br />

delays, demonstrates that <strong>the</strong> way <strong>in</strong> which l<strong>and</strong>lords respond to <strong>the</strong> problem is highly<br />

<strong>in</strong>fluential.<br />

Exhibit 6<br />

Proportion of rent collected, councils 2001/02<br />

<strong>Rent</strong> collection rates of councils varied from 89 per cent to 103 per cent.<br />

Percentage<br />

104%<br />

102%<br />

100%<br />

98%<br />

96%<br />

94%<br />

92%<br />

90%<br />

88%<br />

Councils<br />

Average


26<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g<br />

Source: Ref.5<br />

Exhibit 7<br />

Proportion of rent collected, hous<strong>in</strong>g associations 2001/02<br />

<strong>Rent</strong> collection rates of hous<strong>in</strong>g associations varied from 95 per cent to<br />

101 per cent.<br />

Percentage<br />

102%<br />

101%<br />

100%<br />

99%<br />

98% 98%<br />

97% 97%<br />

96% 96%<br />

95% 95%<br />

94% 94%<br />

Average<br />

<strong>Hous<strong>in</strong>g</strong> associations<br />

82 The study found that councils <strong>and</strong> hous<strong>in</strong>g associations are adapt<strong>in</strong>g <strong>the</strong>ir<br />

approaches to <strong>arrears</strong> prevention <strong>and</strong> recovery. Most significantly <strong>the</strong>y are:<br />

• tak<strong>in</strong>g a firmer l<strong>in</strong>e on <strong>arrears</strong> recovery, as reflected <strong>in</strong> <strong>in</strong>creased levels of court<br />

action <strong>and</strong> evictions;<br />

• mov<strong>in</strong>g to more specialised staff<strong>in</strong>g arrangements;<br />

• plac<strong>in</strong>g more emphasis on tenants’ responsibility to pay <strong>the</strong> rent; <strong>and</strong><br />

• spend<strong>in</strong>g more time liais<strong>in</strong>g with HB services.<br />

A firmer l<strong>in</strong>e on <strong>arrears</strong> recovery<br />

83 Grow<strong>in</strong>g <strong>arrears</strong> levels have prompted many <strong>Welsh</strong> councils <strong>and</strong> hous<strong>in</strong>g associations<br />

to take a firmer l<strong>in</strong>e on <strong>arrears</strong> recovery. For example, Swansea City Council has<br />

adopted a Gett<strong>in</strong>g Tough policy follow<strong>in</strong>g a Scrut<strong>in</strong>y Committee review of rent <strong>arrears</strong><br />

management carried out <strong>in</strong> April 2001. The policy <strong>in</strong>volves mov<strong>in</strong>g to <strong>the</strong> next stage <strong>in</strong><br />

<strong>the</strong> recovery process if tenants break a repayment agreement without contact<strong>in</strong>g <strong>the</strong><br />

council or without a valid reason. Although <strong>the</strong> policy is <strong>in</strong> its <strong>in</strong>fancy, it has already<br />

resulted <strong>in</strong> a downturn <strong>in</strong> <strong>the</strong> rate of <strong>in</strong>crease <strong>in</strong> <strong>arrears</strong> – <strong>in</strong> <strong>the</strong> first quarter of 2002/03<br />

current <strong>arrears</strong> showed a 4.25 per cent <strong>in</strong>crease compared with an <strong>in</strong>crease of 6.35<br />

per cent <strong>in</strong> <strong>the</strong> same period last year.


I A <strong>Welsh</strong> Assembly Government survey<br />

found that 98 per cent of council <strong>and</strong> 99<br />

per cent of hous<strong>in</strong>g association<br />

possession orders <strong>in</strong> 2001/02 were for<br />

rent <strong>arrears</strong> (<strong>the</strong> rema<strong>in</strong>der were for antisocial<br />

behaviour) (Ref.13).<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g 27<br />

84 This firmer approach is reflected <strong>in</strong> <strong>in</strong>creased levels of court action <strong>and</strong> evictions<br />

nationally. The number of actions entered <strong>in</strong>to courts <strong>in</strong> Wales for <strong>the</strong> recovery of<br />

social rented properties <strong>in</strong>creased by over half between 1996 to 2001, from 4,200<br />

(1.7 per cent of social hous<strong>in</strong>g stock) to 6,600 (2.7 per cent of stock). The <strong>in</strong>crease <strong>in</strong><br />

court orders made for <strong>the</strong> recovery of properties was even steeper, from 600 (0.2 per<br />

cent of stock) <strong>in</strong> 1996 to 1,800 (0.8 per cent of stock) <strong>in</strong> 2001 (Ref. 19). Although <strong>the</strong>se<br />

figures are for all recovery actions, almost all actions will have been for <strong>arrears</strong>. I<br />

85 A recent survey by <strong>the</strong> <strong>Welsh</strong> Assembly Government has collected detailed<br />

<strong>in</strong>formation on <strong>the</strong> levels <strong>and</strong> nature of court action <strong>in</strong> both <strong>the</strong> council <strong>and</strong> hous<strong>in</strong>g<br />

association sectors <strong>in</strong> 2001/02 (Ref. 13). Some of <strong>the</strong> overall f<strong>in</strong>d<strong>in</strong>gs are <strong>in</strong>cluded <strong>in</strong><br />

Box 2.<br />

Box 2<br />

Possession activity, 2000/01<br />

• A total of 5,685 possession orders for social rented properties were granted, 70<br />

per cent of which were suspended.<br />

• The average number of possession orders obta<strong>in</strong>ed was 108. The average for<br />

hous<strong>in</strong>g associations was 62, for councils 169.<br />

• A total of 866 eviction warrants were granted aga<strong>in</strong>st hous<strong>in</strong>g association<br />

tenants, an average of 31 per association. Forty-five per cent of hous<strong>in</strong>g<br />

association tenants with eviction warrants aga<strong>in</strong>st <strong>the</strong>m left <strong>the</strong>ir property.<br />

• A total of 2,776 eviction warrants were granted aga<strong>in</strong>st council tenants, an<br />

average of 126 per council. Thirty-n<strong>in</strong>e per cent of council tenants with eviction<br />

warrants aga<strong>in</strong>st <strong>the</strong>m left <strong>the</strong>ir property.<br />

• A total of 282 hous<strong>in</strong>g association tenants were evicted <strong>in</strong> 2001/02, an average of<br />

ten evictions per association. A fur<strong>the</strong>r 107 tenants with eviction notices aga<strong>in</strong>st<br />

<strong>the</strong>m left <strong>the</strong>ir property before <strong>the</strong> warrant was executed <strong>and</strong> <strong>in</strong> 477 cases <strong>the</strong><br />

eviction notice was suspended or not executed.<br />

• A total of 889 council tenants were evicted <strong>in</strong> 2001/02, an average of 40 evictions<br />

per council. A fur<strong>the</strong>r 189 council tenants with eviction notices aga<strong>in</strong>st <strong>the</strong>m left<br />

<strong>the</strong>ir property before <strong>the</strong> eviction notice was executed, <strong>and</strong> <strong>in</strong> 1,698 cases <strong>the</strong><br />

eviction warrant was suspended or not executed.<br />

Note: Figures are for all warrants. However, a <strong>Welsh</strong> Assembly Government Survey found that 98 per cent of<br />

council <strong>and</strong> 99 per cent of hous<strong>in</strong>g association possession orders <strong>in</strong> 2001/02 were for rent <strong>arrears</strong>.<br />

Source: Ref. 13<br />

86 <strong>Hous<strong>in</strong>g</strong> associations are more likely to take court action than <strong>the</strong>ir council<br />

counterparts. For example, <strong>in</strong> 2001/02, <strong>the</strong>re was one possession order for every 32<br />

hous<strong>in</strong>g association tenancies, whilst <strong>in</strong> <strong>the</strong> council sector <strong>the</strong> ratio was 1 <strong>in</strong> 47<br />

[Table 3].


28<br />

Source: ??<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g<br />

Table 3<br />

Ratio of recovery action to tenancies, 2001/02<br />

<strong>Hous<strong>in</strong>g</strong> associations are more likely to take court action than <strong>the</strong>ir council<br />

counterparts<br />

Possession orders<br />

Eviction warrants<br />

Evictions<br />

Ratio of actions to tenancies<br />

<strong>Hous<strong>in</strong>g</strong> associations Councils<br />

1:32 1:47<br />

1:62 1:66<br />

1:192 1:238<br />

87 There is, however, considerable unevenness of approach between <strong>in</strong>dividual councils<br />

<strong>and</strong> hous<strong>in</strong>g associations. For example, <strong>the</strong> ratio of possession orders to tenancies<br />

varied from 1:19 to 1:655 <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector <strong>and</strong> from 1:25 to 1:445 <strong>in</strong><br />

<strong>the</strong> council sector. Similarly, <strong>the</strong> ratio of eviction warrants to tenancies shows wide<br />

variation – from 1:25 to 1:328 <strong>in</strong> <strong>the</strong> hous<strong>in</strong>g association sector <strong>and</strong> from 1:39 to 1:444<br />

<strong>in</strong> <strong>the</strong> council sector.<br />

88 There does appear to be a relationship between <strong>the</strong> level of court action <strong>and</strong> rent<br />

recovery rates. Councils <strong>and</strong> hous<strong>in</strong>g associations who were <strong>in</strong> <strong>the</strong> highest quartile <strong>in</strong><br />

terms of <strong>the</strong> ratio of possession orders to tenancies had rent collection rates that<br />

were, on average, 1 per cent higher than <strong>the</strong>ir counterparts <strong>in</strong> <strong>the</strong> bottom quartile.<br />

However, this is not to advocate an escalation <strong>in</strong> court action, which is costly <strong>in</strong> both<br />

human <strong>and</strong> f<strong>in</strong>ancial terms. It is important that court action is only taken when o<strong>the</strong>r<br />

preventative <strong>and</strong> recovery measures have failed.<br />

Mov<strong>in</strong>g to more specialised staff<strong>in</strong>g arrangements<br />

89 There is evidence, especially amongst hous<strong>in</strong>g associations, of a move towards a<br />

more specialised approach to <strong>arrears</strong> management (Ref. 8). Typically, dedicated<br />

posts have been <strong>in</strong>troduced where specialist expertise is required – for example, <strong>in</strong><br />

deal<strong>in</strong>g with serious <strong>arrears</strong> cases, benefit advice, tak<strong>in</strong>g cases to court <strong>and</strong> liais<strong>in</strong>g<br />

with HB services. A number of councils <strong>and</strong> hous<strong>in</strong>g associations have <strong>in</strong>troduced<br />

hous<strong>in</strong>g assistant posts to deal with low level <strong>arrears</strong> cases, thus free<strong>in</strong>g up hous<strong>in</strong>g<br />

officers’ time to deal with more complex cases.<br />

90 The benefits of <strong>in</strong>creased specialism are seen to be greater control over <strong>arrears</strong> <strong>and</strong><br />

effectiveness <strong>in</strong> <strong>the</strong>ir recovery, as well as a speedier identification of problems,<br />

allow<strong>in</strong>g for a quicker response. However, on <strong>the</strong> debit side is a concern about<br />

restrict<strong>in</strong>g <strong>the</strong> role of hous<strong>in</strong>g officers, <strong>and</strong> <strong>the</strong> need for more effective team work<strong>in</strong>g.<br />

Those who had <strong>in</strong>troduced dedicated staff were positive about <strong>the</strong> results. However,<br />

for some smaller social l<strong>and</strong>lords (or even for larger organisations with small area<br />

teams) <strong>the</strong> opportunity for <strong>in</strong>creased specialisation may be limited.


<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g 29<br />

Increased emphasis on tenants’ responsibility to pay <strong>the</strong> rent<br />

91 Many councils <strong>and</strong> hous<strong>in</strong>g associations are plac<strong>in</strong>g more emphasis on <strong>the</strong><br />

responsibility of tenants to ensure that <strong>the</strong>ir rent is paid, even if <strong>the</strong>y are <strong>in</strong> receipt of<br />

HB. This is sometimes re<strong>in</strong>forced through pre-tenancy meet<strong>in</strong>gs, written <strong>in</strong>formation<br />

to tenants, publicity campaigns or <strong>in</strong>centive schemes to encourage regular payments.<br />

More time liais<strong>in</strong>g with HB services<br />

92 Given <strong>the</strong> impact that HB adm<strong>in</strong>istration has on <strong>arrears</strong> levels, council <strong>and</strong> hous<strong>in</strong>g<br />

association <strong>in</strong>itiatives to speed up <strong>the</strong> HB application process have become<br />

<strong>in</strong>creas<strong>in</strong>gly important. For example, a grow<strong>in</strong>g number of hous<strong>in</strong>g associations have<br />

created specialist HB liaison posts, <strong>and</strong> l<strong>and</strong>lords are plac<strong>in</strong>g more emphasis on pretenancy<br />

advice <strong>and</strong> support to ensure that HB applications are submitted promptly. In<br />

some cases social l<strong>and</strong>lords are postpon<strong>in</strong>g tenancy start dates until claims forms<br />

<strong>and</strong> all support<strong>in</strong>g documentation have been submitted.<br />

Key weaknesses<br />

93 The study uncovered a number of key weaknesses that are h<strong>in</strong>der<strong>in</strong>g effective<br />

prevention <strong>and</strong> management of rent <strong>arrears</strong>:<br />

• poor availability <strong>and</strong> quality of advice <strong>and</strong> support;<br />

• limited range of payment methods;<br />

• neglect of former tenant <strong>arrears</strong>;<br />

• weak performance management systems;<br />

• lack of corporate clarity <strong>and</strong> commitment; <strong>and</strong><br />

• poor relations with HB services.<br />

Availability <strong>and</strong> quality of advice <strong>and</strong> support<br />

94 Councils <strong>and</strong> hous<strong>in</strong>g associations clearly recognise <strong>the</strong> importance of advice <strong>and</strong><br />

support to <strong>the</strong> prevention of <strong>arrears</strong>. The majority provide welfare benefit advice, visit<br />

tenants with<strong>in</strong> <strong>the</strong> first few weeks of <strong>the</strong>m tak<strong>in</strong>g up <strong>the</strong>ir tenancies <strong>and</strong> advise tenants<br />

who have applied for HB of any potential shortfall <strong>and</strong> <strong>the</strong> amount <strong>the</strong>y are likely to<br />

have to pay.<br />

95 However, <strong>the</strong>re is considerable scope for councils <strong>and</strong> associations to be more<br />

systematic <strong>and</strong> <strong>in</strong>novative <strong>in</strong> <strong>the</strong>ir provision of advice <strong>and</strong> support services.<br />

96 The type <strong>and</strong> quality of advice <strong>and</strong> support provided by <strong>Welsh</strong> councils <strong>and</strong><br />

associations is highly variable. Some make limited use of local agencies, <strong>and</strong> although<br />

<strong>the</strong> provision of advice features <strong>in</strong> all <strong>the</strong> procedure manuals we reviewed, how <strong>and</strong><br />

when advice <strong>and</strong> support should be provided is rarely spelt out. Very few – just one <strong>in</strong><br />

ten – councils <strong>and</strong> associations have st<strong>and</strong>ards or targets <strong>in</strong> relation to advice. This is<br />

clearly an issue across Engl<strong>and</strong> <strong>and</strong> Wales. The limited availability of money, benefits


30<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g<br />

<strong>and</strong> debt advice was criticised <strong>in</strong> over a third of <strong>Hous<strong>in</strong>g</strong> Inspectorate <strong>and</strong> <strong>Hous<strong>in</strong>g</strong><br />

Corporation <strong>in</strong>spection reports cover<strong>in</strong>g rent/<strong>arrears</strong> collection services, analysed by<br />

<strong>the</strong> <strong>Hous<strong>in</strong>g</strong> Quality Network. There is also limited evidence of councils <strong>and</strong><br />

associations actively referr<strong>in</strong>g tenants to debt counsell<strong>in</strong>g services or sources of<br />

reasonably priced f<strong>in</strong>ance (for example, credit unions).<br />

Limited range of payment methods<br />

97 Although <strong>Welsh</strong> councils <strong>and</strong> hous<strong>in</strong>g associations are beg<strong>in</strong>n<strong>in</strong>g to extend <strong>the</strong><br />

payment options available to tenants, <strong>the</strong>re is scope to improve customer choice<br />

fur<strong>the</strong>r. Payment <strong>in</strong> person at council/hous<strong>in</strong>g association offices <strong>and</strong> post offices<br />

cont<strong>in</strong>ues to be <strong>the</strong> most widely available payment options. Over two-thirds of <strong>Welsh</strong><br />

councils still provide door-to-door rent collection services.<br />

98 Where councils <strong>and</strong> associations have <strong>in</strong>troduced alternatives, <strong>the</strong>se are most likely to<br />

be direct debit <strong>and</strong> Paypo<strong>in</strong>t/Payzone (which allows tenants to pay <strong>in</strong> post offices or<br />

designated shops us<strong>in</strong>g a swipe card). However, a third of social l<strong>and</strong>lords (<strong>and</strong> 44 per<br />

cent of hous<strong>in</strong>g associations) do not offer <strong>the</strong> option of pay<strong>in</strong>g by direct debit, <strong>and</strong><br />

only a tenth offer onl<strong>in</strong>e payment facilities.<br />

99 The ma<strong>in</strong> barriers to extend<strong>in</strong>g payment options are:<br />

• Set-up <strong>and</strong> ongo<strong>in</strong>g costs, especially for small RSLs.<br />

• Dispersal of stock, <strong>in</strong> particular <strong>in</strong> rural areas.<br />

• Staff <strong>and</strong>/or elected member resistance. Many councils rema<strong>in</strong> committed to<br />

door-to-door collection.<br />

• Lack of <strong>in</strong>formation on <strong>the</strong> costs <strong>and</strong> benefits of exist<strong>in</strong>g methods.<br />

• A significant proportion of social tenants do not have bank accounts.<br />

100 Although Best Value has encouraged, first of all councils, <strong>and</strong> more recently hous<strong>in</strong>g<br />

associations, systematically to challenge <strong>the</strong>ir services <strong>and</strong> ways of work<strong>in</strong>g, few<br />

social l<strong>and</strong>lords <strong>in</strong> Wales have carried out a detailed cost benefit analysis of <strong>the</strong>ir rent<br />

collection methods.


<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g 31<br />

Neglect of former tenant <strong>arrears</strong><br />

101 We saw <strong>in</strong> Chapter 1 that former tenant <strong>arrears</strong> <strong>and</strong> debts account for significant <strong>and</strong><br />

grow<strong>in</strong>g amounts of money. Although <strong>the</strong> majority (95 per cent) of social l<strong>and</strong>lords <strong>in</strong><br />

Wales have written policies <strong>and</strong> procedures <strong>in</strong> relation to former tenant <strong>arrears</strong>, <strong>the</strong>re<br />

is considerable variation <strong>in</strong> <strong>the</strong> approaches <strong>and</strong> effort applied to <strong>the</strong>ir recovery<br />

(Ref. 8). For example:<br />

• Only a third of social l<strong>and</strong>lords have targets for <strong>the</strong> recovery of former tenant<br />

<strong>arrears</strong>.<br />

• A third of social l<strong>and</strong>lords (<strong>and</strong> 62 per cent of councils) do not use debt collection<br />

agencies.<br />

• Less than half (42 per cent) of social l<strong>and</strong>lords have allocated <strong>the</strong> responsibility for<br />

former tenant <strong>arrears</strong> to a specific <strong>in</strong>dividual/s.<br />

• Write-off policies vary considerably <strong>in</strong> terms of how str<strong>in</strong>gent or liberal <strong>the</strong>y are.<br />

• In some cases elected/board members receive no or limited <strong>in</strong>formation on <strong>the</strong><br />

level of former tenant <strong>arrears</strong> <strong>and</strong> <strong>the</strong> amounts written off.<br />

102 There is evidence of some social l<strong>and</strong>lords focus<strong>in</strong>g more attention on <strong>the</strong> collection<br />

of former tenant <strong>arrears</strong> (for example, by creat<strong>in</strong>g specific posts) but practices <strong>in</strong> many<br />

councils <strong>and</strong> hous<strong>in</strong>g associations are still lax (Ref. 8).<br />

Weak performance management systems<br />

103 There is considerable scope <strong>in</strong> <strong>the</strong> majority of councils <strong>and</strong> hous<strong>in</strong>g associations to<br />

improve performance management arrangements for prevent<strong>in</strong>g <strong>and</strong> manag<strong>in</strong>g rent<br />

<strong>arrears</strong>. Current arrangements are weak <strong>in</strong> a number of respects (Ref. 8):<br />

• In many cases, performance <strong>in</strong>dicators <strong>and</strong> targets are not provid<strong>in</strong>g a balanced<br />

picture of performance.<br />

• Only a half of hous<strong>in</strong>g associations (52 per cent) <strong>and</strong> 15 per cent of councils set<br />

targets for <strong>in</strong>dividual staff.<br />

• Limited use is made of trend <strong>and</strong> profile <strong>in</strong>formation to underst<strong>and</strong> <strong>the</strong> <strong>arrears</strong><br />

problem better <strong>and</strong> tailor responses more effectively.<br />

• A large proportion of councils <strong>and</strong> associations do not monitor separately <strong>the</strong><br />

amounts of debt attributable to different sources such as rechargeable repairs,<br />

water rates <strong>and</strong> HB overpayments.<br />

• Less than one-half (46 per cent) of councils <strong>in</strong>volve elected members <strong>in</strong> <strong>the</strong><br />

sett<strong>in</strong>g <strong>and</strong> monitor<strong>in</strong>g of service st<strong>and</strong>ards <strong>and</strong> targets (compared with 96 per<br />

cent of hous<strong>in</strong>g associations).<br />

• Only one-fifth of councils <strong>and</strong> hous<strong>in</strong>g associations <strong>in</strong>volve tenants or external<br />

agencies <strong>in</strong> sett<strong>in</strong>g service st<strong>and</strong>ards <strong>and</strong> targets.<br />

• One-third of councils <strong>and</strong> one-tenth of hous<strong>in</strong>g associations do not monitor <strong>the</strong><br />

number of evictions due to rent <strong>arrears</strong>.


32<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g<br />

Lack of corporate clarity <strong>and</strong> commitment<br />

104 Councils <strong>and</strong> hous<strong>in</strong>g associations need a clear corporate view of <strong>the</strong> aims <strong>and</strong><br />

objectives for <strong>the</strong> rent/<strong>arrears</strong> collection service, <strong>and</strong> how <strong>the</strong>se <strong>in</strong>teract with o<strong>the</strong>r<br />

corporate priorities. Although all <strong>Welsh</strong> hous<strong>in</strong>g associations <strong>and</strong> three-quarters of<br />

councils have an <strong>arrears</strong> strategy (Ref. 8), this alone does not guarantee a consistent<br />

approach. Some councils <strong>and</strong> associations lack a clear corporate approach, due<br />

ma<strong>in</strong>ly to <strong>the</strong> conflicts <strong>in</strong>herent <strong>in</strong> <strong>arrears</strong> management <strong>and</strong> <strong>the</strong> relatively low profile of<br />

<strong>the</strong> service. Arrears often only get corporate attention when th<strong>in</strong>gs go wrong – <strong>arrears</strong><br />

<strong>in</strong>crease <strong>and</strong> <strong>the</strong>re is an outcry from senior managers <strong>and</strong> elected members/board<br />

members at <strong>the</strong> impact this has on <strong>in</strong>come levels <strong>and</strong> PI performance. Also, <strong>the</strong><br />

conflicts <strong>in</strong>herent <strong>in</strong> <strong>arrears</strong> management – namely <strong>the</strong> requirement to ‘get <strong>the</strong> money<br />

<strong>in</strong>’ <strong>and</strong> also to meet a range of social objectives – are not always recognised at <strong>the</strong><br />

corporate level. If <strong>the</strong>se objectives are not reconciled corporately, <strong>in</strong>dividual staff will<br />

have to wrestle with different, sometimes conflict<strong>in</strong>g priorities at <strong>the</strong> operational level –<br />

<strong>and</strong> <strong>the</strong> organisation could be pulled <strong>in</strong> different directions. This is frustrat<strong>in</strong>g <strong>and</strong><br />

stressful for staff – <strong>and</strong> sends out confus<strong>in</strong>g messages to tenants, o<strong>the</strong>r service users<br />

<strong>and</strong> stakeholders.<br />

105 Although an <strong>arrears</strong> strategy is not a general panacea, it is an essential mechanism for<br />

agree<strong>in</strong>g aims <strong>and</strong> objectives, reconcil<strong>in</strong>g potentially conflict<strong>in</strong>g objectives <strong>and</strong> rais<strong>in</strong>g<br />

<strong>the</strong> profile of <strong>arrears</strong> management. It is, <strong>the</strong>refore, a cause for concern that a quarter<br />

of <strong>Welsh</strong> councils (compared with all hous<strong>in</strong>g associations respond<strong>in</strong>g to our survey)<br />

did not have an <strong>arrears</strong> policy <strong>and</strong> only four <strong>in</strong> ten had a corporate debt policy (Ref. 8).<br />

Poor relations with HB services<br />

106 Although arrangements for work<strong>in</strong>g with HB services do seem to be streng<strong>the</strong>n<strong>in</strong>g <strong>in</strong><br />

many areas, relations rema<strong>in</strong> problematic for a significant m<strong>in</strong>ority (Ref. 8):<br />

• Around one-fifth of both council hous<strong>in</strong>g services <strong>and</strong> hous<strong>in</strong>g associations<br />

describe relations with HB services as poor or <strong>in</strong>effective.<br />

• One-half of hous<strong>in</strong>g associations said that <strong>the</strong>ir service level agreements with HB<br />

services were <strong>in</strong>effective.<br />

107 Particular pressure po<strong>in</strong>ts <strong>in</strong>clude:<br />

• Shar<strong>in</strong>g <strong>in</strong>formation<br />

There is currently some confusion over what <strong>in</strong>formation councils <strong>and</strong> hous<strong>in</strong>g<br />

associations can <strong>and</strong> should share. Many hous<strong>in</strong>g associations feel <strong>the</strong>y are<br />

treated like just ano<strong>the</strong>r private l<strong>and</strong>lord by HB services, ra<strong>the</strong>r than a partner with<br />

shared objectives. They say councils often hide beh<strong>in</strong>d benefit regulations <strong>and</strong><br />

<strong>the</strong> Data Protection Act, <strong>and</strong> are unprepared to share <strong>in</strong>formation. On <strong>the</strong> o<strong>the</strong>r<br />

h<strong>and</strong>, councils do need to observe privacy <strong>and</strong> data protection rules. Clearer<br />

guidance <strong>in</strong> this area would be of considerable benefit to all parties.


<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g 33<br />

• Access problems<br />

HB staff can be difficult to reach, <strong>and</strong> slow to respond to enquiries on <strong>in</strong>dividual<br />

cases. As one hous<strong>in</strong>g association commented:<br />

‘It’s very difficult track<strong>in</strong>g down <strong>the</strong> right person to talk to, <strong>and</strong> when you do <strong>the</strong>y<br />

often can’t answer your queries <strong>the</strong>re <strong>and</strong> <strong>the</strong>n. It’s a very frustrat<strong>in</strong>g process that<br />

takes up a huge amount of hous<strong>in</strong>g officer time’<br />

Local authority <strong>arrears</strong> staff are usually <strong>in</strong> a better position to obta<strong>in</strong> up-to-date<br />

<strong>in</strong>formation on claims because of easier access to staff <strong>and</strong> <strong>the</strong> HB IT system.<br />

However, <strong>the</strong>re can still be difficulties – for example, almost a quarter of hous<strong>in</strong>g<br />

services said that <strong>the</strong> HB system was difficult for <strong>the</strong>m to <strong>in</strong>terrogate ei<strong>the</strong>r<br />

because access was via a small number of PCs or because <strong>in</strong>formation was<br />

difficult to <strong>in</strong>terpret.<br />

• Lack of communication/consultation<br />

A number of hous<strong>in</strong>g associations, said <strong>the</strong>y had not been <strong>in</strong>formed of major<br />

changes that had impacted significantly on service performance – for example,<br />

<strong>the</strong> <strong>in</strong>troduction of <strong>the</strong> verification framework or a new IT system.<br />

• Poor <strong>in</strong>formation<br />

Councils <strong>and</strong> hous<strong>in</strong>g associations reported that <strong>in</strong>formation sent to <strong>the</strong>m <strong>and</strong> to<br />

tenants was often difficult to underst<strong>and</strong> <strong>and</strong>/or <strong>in</strong>correct. Sometimes letters did<br />

not comply with regulatory requirements.<br />

108 In spite of <strong>the</strong>se weaknesses, <strong>the</strong> study uncovered many examples of effective<br />

practice, which are described <strong>in</strong> Clos<strong>in</strong>g <strong>the</strong> Gap.<br />

Driv<strong>in</strong>g improvement<br />

109 Councils <strong>and</strong> hous<strong>in</strong>g associations are more <strong>in</strong> control of <strong>the</strong>ir dest<strong>in</strong>ies than <strong>the</strong>y<br />

often assume. Many have managed to improve <strong>the</strong>ir performance on rent collection<br />

significantly:<br />

• Torfaen County Borough Council has reduced its current <strong>arrears</strong> by around<br />

one-third from £1 million <strong>in</strong> 1999 to £680,000 <strong>in</strong> March 2002. The council<br />

attributes its success to:<br />

– significant improvement <strong>in</strong> <strong>the</strong> time taken to determ<strong>in</strong>e new HB claims. In<br />

2000/01 it was tak<strong>in</strong>g <strong>the</strong> council an average of around 90 days, but by<br />

2001/02 this had been halved to 43 days;<br />

– commitment from senior politicians <strong>and</strong> managers to tackle rent <strong>arrears</strong>;<br />

– a firm but fair approach to deal<strong>in</strong>g with tenants <strong>in</strong> <strong>arrears</strong>, which has been<br />

endorsed by tenants;<br />

– a dedicated team work<strong>in</strong>g exclusively on rent <strong>arrears</strong> management;<br />

– a s<strong>in</strong>gle m<strong>in</strong>ded <strong>and</strong> determ<strong>in</strong>ed approach to achiev<strong>in</strong>g targets with<strong>in</strong> <strong>the</strong><br />

<strong>arrears</strong> team;


34<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | How social l<strong>and</strong>lords are respond<strong>in</strong>g<br />

– good quality performance <strong>in</strong>formation to enable staff to see trends early <strong>and</strong><br />

be flexible <strong>in</strong> <strong>the</strong>ir approach; <strong>and</strong><br />

– a review of <strong>the</strong> rent <strong>arrears</strong> management function, which has <strong>in</strong>troduced<br />

substantial change to work<strong>in</strong>g arrangements.<br />

• Denbighshire CC’s hous<strong>in</strong>g rents service has changed significantly s<strong>in</strong>ce its<br />

negative Best Value review report was published <strong>in</strong> May 2001. A five year<br />

development plan has been <strong>in</strong>troduced for <strong>the</strong> service <strong>and</strong> a comprehensive<br />

performance management framework put <strong>in</strong> place. Performance over <strong>the</strong> past<br />

year has improved significantly:<br />

Position as at: 30/9/01 15/9/02<br />

Current tenant <strong>arrears</strong> £959,640 £597,132<br />

Number of high level <strong>arrears</strong> cases 298 174<br />

(ow<strong>in</strong>g more than £1,000)<br />

Former tenant <strong>arrears</strong> £261,522 £182,883<br />

In September 2002, current <strong>arrears</strong> were at <strong>the</strong>ir lowest s<strong>in</strong>ce 1996. Key factors<br />

that have produced this turnaround <strong>in</strong> <strong>the</strong> council’s performance are:<br />

– empowerment of frontl<strong>in</strong>e staff through <strong>the</strong> <strong>in</strong>troduction of <strong>in</strong>dividual <strong>arrears</strong><br />

patches <strong>and</strong> br<strong>in</strong>g<strong>in</strong>g all legal work <strong>in</strong>-house;<br />

– new policies <strong>and</strong> procedures devised <strong>in</strong> consultation with tenants, staff <strong>and</strong><br />

external agencies;<br />

– mak<strong>in</strong>g best use of <strong>the</strong> IT system to free up specialist staff to concentrate on<br />

more complex cases;<br />

– an ongo<strong>in</strong>g high profile publicity campaign <strong>in</strong> local press; <strong>and</strong><br />

– development of l<strong>in</strong>ks with welfare rights agencies across <strong>the</strong> county to<br />

support vulnerable tenants <strong>and</strong> promote debt prevention.<br />

110 Where councils <strong>and</strong> hous<strong>in</strong>g associations have improved <strong>the</strong>ir performance, a<br />

number of key <strong>the</strong>mes have emerged:<br />

• Increased emphasis on <strong>arrears</strong> prevention, <strong>in</strong>clud<strong>in</strong>g <strong>the</strong> provision of advice <strong>and</strong><br />

support.<br />

• A firmer approach to <strong>arrears</strong> recovery.<br />

• Empower<strong>in</strong>g staff, <strong>and</strong> giv<strong>in</strong>g <strong>the</strong>m clear targets <strong>and</strong> responsibilities.<br />

• Improved liaison <strong>and</strong> <strong>in</strong>formation-shar<strong>in</strong>g with HB services.<br />

• Clear corporate commitment, <strong>in</strong>clud<strong>in</strong>g adequate resourc<strong>in</strong>g.<br />

• Strong strategic management.


4<br />

I Average cost of repairs (<strong>in</strong>clud<strong>in</strong>g<br />

responsive, programmed <strong>and</strong> cyclical<br />

repairs) <strong>in</strong> 2000/01 was £705 per property<br />

(Ref. 4). 1 per cent of collectable rent <strong>in</strong><br />

2000/01 was £4,034,355 (estimate based<br />

on average rent <strong>and</strong> number of occupied<br />

properties).<br />

II Average cost of management (exclud<strong>in</strong>g<br />

repairs) per property <strong>in</strong> 2000/01 was £500<br />

(Ref. 7). One per cent of collectable rent <strong>in</strong><br />

2000/01 was £4,034,355 (estimate based<br />

on average rents <strong>and</strong> number of occupied<br />

properties).<br />

III Average cost of management per property<br />

<strong>in</strong> 2001/02 was £418 (exclud<strong>in</strong>g repairs).<br />

One per cent of total rent collectable <strong>in</strong><br />

2001/02 was £1,413,994 (Ref. 5).<br />

Conclusions <strong>and</strong><br />

recommendations<br />

Conclusions<br />

High <strong>arrears</strong> levels have a major impact<br />

on councils, hous<strong>in</strong>g associations <strong>and</strong><br />

tenants<br />

111 High levels of <strong>arrears</strong> have a major impact on both social l<strong>and</strong>lords <strong>and</strong> tenants.<br />

Clearly, debts create anxiety for tenants <strong>and</strong>, if not reduced, can lead to eviction <strong>and</strong><br />

homelessness.<br />

112 For social l<strong>and</strong>lords <strong>the</strong> consequences of high <strong>arrears</strong> are:<br />

• higher rent levels <strong>and</strong>/or poorer quality services;<br />

• less <strong>in</strong>come to repair <strong>and</strong> ma<strong>in</strong>ta<strong>in</strong> homes; <strong>and</strong><br />

• failure to meet <strong>the</strong> performance expectations of central government <strong>and</strong> <strong>the</strong><br />

regulatory bodies <strong>and</strong> lenders.<br />

113 A 1 per cent decl<strong>in</strong>e <strong>in</strong> <strong>the</strong> rent collection rate <strong>in</strong> <strong>the</strong> council sector across Wales <strong>in</strong><br />

2000/01 (<strong>the</strong> most recent year for which figures are available) was equivalent to:<br />

• <strong>the</strong> cost of ma<strong>in</strong>ta<strong>in</strong><strong>in</strong>g 5,722 council homes for a year, or 260 <strong>in</strong> each council<br />

area. I<br />

• <strong>the</strong> cost of manag<strong>in</strong>g 8,069 council homes, or 367 <strong>in</strong> each council area. II<br />

114 In <strong>the</strong> hous<strong>in</strong>g association sector, a 1 per cent decl<strong>in</strong>e <strong>in</strong> <strong>the</strong> rent collection rate <strong>in</strong><br />

2001/02 was equivalent to:<br />

• <strong>the</strong> cost of manag<strong>in</strong>g 3,383 homes, or 113 homes for every hous<strong>in</strong>g association. III<br />

115 For hous<strong>in</strong>g associations <strong>the</strong>re can be <strong>the</strong> additional difficulty of repay<strong>in</strong>g loans <strong>and</strong><br />

susta<strong>in</strong><strong>in</strong>g <strong>the</strong> confidence of lenders. Small associations can experience considerable<br />

f<strong>in</strong>ancial difficulties, even <strong>in</strong>solvency, because of high <strong>arrears</strong> levels.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Conclusions <strong>and</strong> recommendations 35


36<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Conclusions <strong>and</strong> recommendations<br />

I <strong>Rent</strong><strong>in</strong>g Homes 1: Status <strong>and</strong> Security,<br />

Law <strong>Commission</strong> Consultation Paper No.<br />

162.<br />

Payment of HB direct payments to<br />

hous<strong>in</strong>g associations four weeks <strong>in</strong><br />

<strong>arrears</strong> is generat<strong>in</strong>g significant problems<br />

116 Around two-fifths of current hous<strong>in</strong>g association <strong>arrears</strong> <strong>in</strong> Wales are due to unpaid<br />

direct HB payments, whilst councils attribute just a tenth of <strong>the</strong>ir <strong>arrears</strong> to HB delays.<br />

The recovery of HB overpayments direct from hous<strong>in</strong>g associations also generates<br />

significant problems for some associations. There is a compell<strong>in</strong>g argument <strong>in</strong> favour<br />

of a s<strong>in</strong>gle <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> that would apply equally to both councils <strong>and</strong> hous<strong>in</strong>g<br />

associations. A s<strong>in</strong>gle benefit would elim<strong>in</strong>ate <strong>the</strong> anomaly of councils <strong>and</strong> hous<strong>in</strong>g<br />

associations – <strong>and</strong> tenants – be<strong>in</strong>g treated so differently by <strong>the</strong> HB system, a<br />

difference that is thrown <strong>in</strong>to sharp relief when a council transfers its hous<strong>in</strong>g stock to<br />

a hous<strong>in</strong>g association. A forthcom<strong>in</strong>g <strong>Audit</strong> <strong>Commission</strong> report on <strong>the</strong> implications of<br />

stock transfer will highlight a range of issues <strong>in</strong> relation to HB. A s<strong>in</strong>gle <strong>Hous<strong>in</strong>g</strong><br />

<strong>Benefit</strong> would br<strong>in</strong>g council <strong>and</strong> hous<strong>in</strong>g association payment cycles <strong>in</strong>to l<strong>in</strong>e, <strong>the</strong>reby<br />

improv<strong>in</strong>g <strong>the</strong> cash flow <strong>and</strong> reduc<strong>in</strong>g <strong>the</strong> <strong>arrears</strong> of hous<strong>in</strong>g associations.<br />

Harmonistaion would also be <strong>in</strong> keep<strong>in</strong>g with <strong>the</strong> Government’s commitment to create<br />

a s<strong>in</strong>gle rents structure <strong>and</strong> <strong>the</strong> Law <strong>Commission</strong>’s plans for a s<strong>in</strong>gle social hous<strong>in</strong>g<br />

tenancy. I<br />

In some areas <strong>the</strong> verification framework<br />

is <strong>in</strong>creas<strong>in</strong>g HB process<strong>in</strong>g times<br />

117 A number of <strong>Welsh</strong> councils <strong>and</strong> hous<strong>in</strong>g associations believe that <strong>the</strong> verification<br />

framework (VF) is hav<strong>in</strong>g a significant impact on <strong>the</strong> time it takes to process HB<br />

claims, on benefit take-up rates <strong>and</strong> relations with partner organisations such as<br />

hous<strong>in</strong>g associations. However, <strong>the</strong>se perceived disadvantages need to be seen<br />

with<strong>in</strong> <strong>the</strong> context of <strong>the</strong> sav<strong>in</strong>gs made from <strong>the</strong> prevention <strong>and</strong> detection of HB fraud<br />

<strong>and</strong> error, which can have a major impact on <strong>the</strong> public purse <strong>and</strong> services.<br />

118 Certa<strong>in</strong>ly, <strong>the</strong> need to reduce <strong>the</strong> complexity of <strong>the</strong> national HB system is widely<br />

acknowledged. The <strong>Audit</strong> <strong>Commission</strong>, <strong>in</strong> its recent report <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong>: The<br />

National Perspective, presents a case for simplify<strong>in</strong>g some of <strong>the</strong> requirements<br />

relat<strong>in</strong>g to non-dependent deductions <strong>and</strong> benefit periods, grant<strong>in</strong>g more flexibility to<br />

high perform<strong>in</strong>g councils <strong>and</strong> shift<strong>in</strong>g <strong>the</strong> emphasis of fund<strong>in</strong>g away from a penalty<br />

based regime towards one that encourages good performance <strong>and</strong> customer focus.<br />

119 There may <strong>in</strong>deed be a case for a more tailored approach, based on a set of m<strong>in</strong>imum<br />

st<strong>and</strong>ards <strong>and</strong> a locally based risk assessment. In <strong>the</strong> meantime, a national evaluation<br />

of <strong>the</strong> VF would provide an opportunity to assess relative costs <strong>and</strong> benefits more<br />

systematically.


<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Conclusions <strong>and</strong> recommendations 37<br />

Many councils <strong>and</strong> hous<strong>in</strong>g associations<br />

have responded to <strong>in</strong>creased <strong>arrears</strong><br />

levels by adopt<strong>in</strong>g a firmer l<strong>in</strong>e<br />

120 Many councils <strong>and</strong> hous<strong>in</strong>g associations are tak<strong>in</strong>g a firmer l<strong>in</strong>e on <strong>arrears</strong>, as<br />

reflected <strong>in</strong> <strong>the</strong> grow<strong>in</strong>g numbers of court actions <strong>and</strong> evictions. The number of court<br />

orders for <strong>the</strong> recovery of social rented properties has <strong>in</strong>creased threefold s<strong>in</strong>ce 1996,<br />

with hous<strong>in</strong>g associations be<strong>in</strong>g more likely to take action than councils.<br />

Court action <strong>and</strong> repossession should be<br />

viewed as a last resort<br />

121 Although councils <strong>and</strong> hous<strong>in</strong>g associations need to take prompt, firm action where<br />

tenants are persistently fail<strong>in</strong>g to pay <strong>the</strong>ir rent, repossession should be used only as a<br />

last resort. It is costly both f<strong>in</strong>ancially <strong>and</strong> <strong>in</strong> human terms. Councils <strong>and</strong> associations<br />

should do more to prevent <strong>arrears</strong> accumulat<strong>in</strong>g <strong>in</strong> <strong>the</strong> first place. As a m<strong>in</strong>imum <strong>the</strong>y<br />

should provide advice on benefits <strong>and</strong> act as a gateway to more specialised<br />

advice/<strong>and</strong> support such as debt counsell<strong>in</strong>g, f<strong>in</strong>ancial advice <strong>and</strong> sources of<br />

reasonably priced f<strong>in</strong>ance.<br />

<strong>Hous<strong>in</strong>g</strong> authorities/hous<strong>in</strong>g associations<br />

need to work more closely with HB<br />

services to m<strong>in</strong>imise <strong>the</strong> impact of HB<br />

process<strong>in</strong>g delays<br />

122 Effective work<strong>in</strong>g relationships between hous<strong>in</strong>g authorities/hous<strong>in</strong>g associations <strong>and</strong><br />

HB services are critically important. In one <strong>Welsh</strong> council, <strong>the</strong>y have helped to reduce<br />

current <strong>arrears</strong> levels by a third over <strong>the</strong> past two years. There are many examples of<br />

positive relationships at both <strong>the</strong> strategic <strong>and</strong> operational level, but this needs to be<br />

replicated across Wales. At <strong>the</strong> national level, <strong>the</strong>re needs to be greater clarity <strong>in</strong> terms<br />

of what <strong>in</strong>formation different parties can share with<strong>in</strong> <strong>the</strong> framework of <strong>the</strong> Data<br />

Protection Act <strong>and</strong> o<strong>the</strong>r privacy laws.


38<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Conclusions <strong>and</strong> recommendations<br />

There is considerable scope for councils<br />

<strong>and</strong> hous<strong>in</strong>g associations to improve <strong>the</strong>ir<br />

performance<br />

123 Although some councils <strong>and</strong> hous<strong>in</strong>g associations are beg<strong>in</strong>n<strong>in</strong>g to improve <strong>the</strong>ir<br />

management of <strong>arrears</strong> – for example, by <strong>in</strong>troduc<strong>in</strong>g specialist posts <strong>and</strong> adopt<strong>in</strong>g<br />

‘firm but fair’ policies, <strong>the</strong>re is still considerable scope for improvement. The wide<br />

range of rent collection rates that exists <strong>in</strong> both sectors is <strong>in</strong>dicative of <strong>the</strong> gulf<br />

between <strong>the</strong> best <strong>and</strong> worst performers. There are ten key areas for action:<br />

1. more emphasis on prevention, <strong>in</strong>clud<strong>in</strong>g more systematic <strong>and</strong> <strong>in</strong>novative<br />

approaches;<br />

2. more flexible payment options;<br />

3. a firm but fair approach to <strong>arrears</strong> recovery, that <strong>in</strong>cludes early action;<br />

4. more emphasis on <strong>the</strong> collection of former tenant <strong>arrears</strong>;<br />

5. clear corporate aims <strong>and</strong> objectives;<br />

6. underst<strong>and</strong><strong>in</strong>g better <strong>the</strong> nature <strong>and</strong> scale of <strong>the</strong> problem;<br />

7. effective performance management arrangements;<br />

8. strong tenant focus;<br />

9. committed <strong>and</strong> tra<strong>in</strong>ed staff; <strong>and</strong><br />

10. closer work<strong>in</strong>g relationships with HB services.


<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Conclusions <strong>and</strong> recommendations 39<br />

Key recommendations<br />

Councils <strong>and</strong> hous<strong>in</strong>g associations should:<br />

• have a clear strategy on <strong>arrears</strong> prevention <strong>and</strong> recovery – that has <strong>the</strong><br />

back<strong>in</strong>g of senior managers <strong>and</strong> elected/board members, <strong>and</strong> has clear<br />

l<strong>in</strong>ks to o<strong>the</strong>r corporate strategies;<br />

• place more emphasis on <strong>arrears</strong> prevention to avoid <strong>the</strong> substantial<br />

f<strong>in</strong>ancial <strong>and</strong> human costs associated with court action <strong>and</strong> eviction;<br />

• ensure that <strong>the</strong> approach to <strong>arrears</strong> recovery is firm but fair, with an<br />

emphasis on early contact;<br />

• have flexible payment options to suit tenants’ circumstances <strong>and</strong><br />

preferences;<br />

• avoid tak<strong>in</strong>g court action where <strong>arrears</strong> are due to HB process<strong>in</strong>g delays;<br />

• monitor <strong>the</strong> impact of <strong>arrears</strong> action on <strong>the</strong> number of possession<br />

orders, evictions <strong>and</strong> ab<strong>and</strong>onments;<br />

• pursue former tenant debts more actively;<br />

• streng<strong>the</strong>n performance management arrangements;<br />

• help to reduce <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> process<strong>in</strong>g times by work<strong>in</strong>g more<br />

closely with HB services;<br />

• ensure <strong>arrears</strong> staff have clear roles, responsibilities <strong>and</strong> targets; <strong>and</strong><br />

• consider jo<strong>in</strong><strong>in</strong>g (or establish<strong>in</strong>g) a rents forum or benchmark<strong>in</strong>g group<br />

to improve comparative <strong>in</strong>formation, share positive practice <strong>and</strong><br />

discuss national issues.<br />

Councils should:<br />

• ensure that <strong>the</strong>ir homelessness strategy takes account of policies on<br />

<strong>arrears</strong> prevention <strong>and</strong> recovery, <strong>and</strong> vice-versa; <strong>and</strong><br />

• have a corporate debt recovery policy.<br />

HB services should:<br />

• help to reduce <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> process<strong>in</strong>g times, by work<strong>in</strong>g more<br />

closely with hous<strong>in</strong>g authorities/hous<strong>in</strong>g associations. There should be<br />

agreements relat<strong>in</strong>g, for example, to <strong>the</strong> shar<strong>in</strong>g of <strong>in</strong>formation, how


40<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Conclusions <strong>and</strong> recommendations<br />

enquiries are dealt with, <strong>the</strong> prioritisation of serious <strong>arrears</strong> cases <strong>and</strong><br />

<strong>the</strong> recovery of HB overpayments; <strong>and</strong><br />

• consider establish<strong>in</strong>g a <strong>Welsh</strong> HB forum to improve comparative<br />

<strong>in</strong>formation, share positive practice <strong>and</strong> discuss national issues.<br />

The guidance report, Clos<strong>in</strong>g <strong>the</strong> Gap, looks at how councils <strong>and</strong> hous<strong>in</strong>g<br />

associations can implement <strong>the</strong> recommendations listed above.<br />

<strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> is clearly a key national as well as a local issue. The <strong>Welsh</strong><br />

Assembly Government should consider:<br />

• mak<strong>in</strong>g representations to <strong>the</strong> Department for Works <strong>and</strong> Pensions to<br />

<strong>in</strong>troduce a s<strong>in</strong>gle <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> for councils <strong>and</strong> hous<strong>in</strong>g<br />

associations;<br />

• issu<strong>in</strong>g guidance (jo<strong>in</strong>tly with <strong>the</strong> Department for Work <strong>and</strong> Pensions)<br />

on <strong>in</strong>formation shar<strong>in</strong>g between councils <strong>and</strong> hous<strong>in</strong>g associations;<br />

<strong>and</strong><br />

• mak<strong>in</strong>g representations to <strong>the</strong> Department for Work <strong>and</strong> Pensions to<br />

carry out an evaluation of <strong>the</strong> impact of <strong>the</strong> verification framework – for<br />

example, on <strong>the</strong> sav<strong>in</strong>gs made from <strong>the</strong> prevention <strong>and</strong> detection of HB<br />

fraud <strong>and</strong> error, <strong>and</strong> <strong>the</strong> effects on operat<strong>in</strong>g costs, HB process<strong>in</strong>g<br />

times, <strong>arrears</strong> levels <strong>and</strong> benefit take-up.<br />

There is a press<strong>in</strong>g need to improve <strong>the</strong> quality of data on rent collection <strong>and</strong><br />

<strong>arrears</strong> at <strong>the</strong> national level. It has been difficult compil<strong>in</strong>g a Wales-wide<br />

picture of <strong>arrears</strong> <strong>in</strong> <strong>the</strong> council sector, <strong>and</strong> <strong>the</strong>re are <strong>in</strong>consistencies <strong>in</strong> how<br />

performance <strong>in</strong>dicators are def<strong>in</strong>ed <strong>and</strong> collated. Given <strong>the</strong> importance of<br />

councils <strong>and</strong> hous<strong>in</strong>g associations be<strong>in</strong>g able to measure <strong>the</strong>ir own<br />

performance accurately <strong>and</strong> compare it with o<strong>the</strong>rs, we recommend that <strong>the</strong><br />

<strong>Welsh</strong> Assembly Government:<br />

• issues additional guidance to councils <strong>and</strong> hous<strong>in</strong>g associations on <strong>the</strong><br />

def<strong>in</strong>itions to be applied to performance <strong>in</strong>dicators on rent<br />

collection/<strong>arrears</strong>;<br />

• reviews data held at a national level, with a view to harmonis<strong>in</strong>g data<br />

across social hous<strong>in</strong>g sectors;<br />

• collects key <strong>in</strong>formation on possession <strong>and</strong> eviction action by councils<br />

<strong>and</strong> hous<strong>in</strong>g associations on an ongo<strong>in</strong>g basis; <strong>and</strong><br />

• re<strong>in</strong>states <strong>the</strong> council performance <strong>in</strong>dicator on rent collected as a<br />

percentage of rent due.


Appendix 1:<br />

acknowledgements<br />

Advisory Group members<br />

Andrew Bowden Represent<strong>in</strong>g <strong>the</strong> Royal Institute of Chartered Surveyors<br />

Peter Campbell Represent<strong>in</strong>g <strong>the</strong> <strong>Welsh</strong> Local Government Association<br />

Anne Delaney <strong>Hous<strong>in</strong>g</strong> Inspectorate Wales<br />

Maureen Haire <strong>Welsh</strong> Assembly Government<br />

Mike Harmer <strong>Welsh</strong> Assembly Government<br />

Steve Jones Represent<strong>in</strong>g <strong>the</strong> <strong>Welsh</strong> Federation of <strong>Hous<strong>in</strong>g</strong> Associations<br />

Carol Kay Tenants’ Participation Advisory Service Wales<br />

Steve Long Represent<strong>in</strong>g <strong>the</strong> Chartered Institute of <strong>Hous<strong>in</strong>g</strong> Cymru<br />

Ia<strong>in</strong> Marshalsay <strong>Benefit</strong> Fraud Inspectorate<br />

Phillip Nash Represent<strong>in</strong>g <strong>the</strong> <strong>Welsh</strong> Local Government Association<br />

John Puzey Shelter Cymru<br />

Raymond Smith Represent<strong>in</strong>g <strong>the</strong> All Wales Chief <strong>Hous<strong>in</strong>g</strong> Officers Panel<br />

O<strong>the</strong>r acknowledgements<br />

• All councils <strong>and</strong> hous<strong>in</strong>g associations that returned <strong>the</strong>ir survey forms <strong>and</strong><br />

provided positive practice <strong>in</strong>formation.<br />

• Staff at Cardiff Community <strong>Hous<strong>in</strong>g</strong> Association, Clwyd Alyn <strong>Hous<strong>in</strong>g</strong><br />

Association, Cardiff City <strong>and</strong> County Council, Caerphilly County Borough<br />

Council, Torfaen County Borough Council <strong>and</strong> Monmouthshire County<br />

Council for <strong>the</strong>ir co-operation with <strong>the</strong> case studies.<br />

• Price Waterhouse Coopers for distribut<strong>in</strong>g questionnaires to <strong>the</strong>ir local authority<br />

clients.<br />

• Expert panel members – Richard Batt (Newydd <strong>Hous<strong>in</strong>g</strong> Association), Sian<br />

Carey (Dewi Sant <strong>Hous<strong>in</strong>g</strong> Association), JJ Costello (Shelter Cymru), Julie<br />

Evans (Cardiff Community <strong>Hous<strong>in</strong>g</strong> Association), Terry Hennegan (<strong>Welsh</strong><br />

Tenants’ Federation), Roger Howard (<strong>Welsh</strong> Tenants’ Federation), Simon Inkson<br />

(Torfaen County Borough Council), Kerry McDermott (Pembrokeshire County<br />

Council), David Power (Cardiff Shortlife <strong>Hous<strong>in</strong>g</strong> Cymru), Janet Smith (Bridgend<br />

County Borough Council), Christ<strong>in</strong>e Steele (Newport CAB).<br />

• Gill Lewis, Anthony Snow, Andrew Lewis, Steve Barry <strong>and</strong> Helen McArthur<br />

(<strong>Audit</strong> <strong>Commission</strong> <strong>in</strong> Wales), John Gaughan <strong>and</strong> Rita Patel (Public Services<br />

Research, <strong>Audit</strong> <strong>Commission</strong>), Roger Jarman <strong>and</strong> Mart<strong>in</strong> Symonds (<strong>Audit</strong><br />

<strong>Commission</strong> <strong>Hous<strong>in</strong>g</strong> Inspectorate) for <strong>the</strong>ir comments on <strong>the</strong> draft<br />

questionnaires <strong>and</strong> reports.<br />

• Iolo Llewellyn <strong>and</strong> Chris Rasp<strong>in</strong> for statistical analysis <strong>and</strong> advice.<br />

• Beth Powell <strong>and</strong> Joanne Smith (<strong>Audit</strong> <strong>Commission</strong> for Wales) for adm<strong>in</strong>istrative<br />

<strong>and</strong> data analysis support.<br />

• Henry Small <strong>and</strong> Sarah Thomas (<strong>Hous<strong>in</strong>g</strong> Statistics Directorate, <strong>Welsh</strong><br />

Assembly Government) for provid<strong>in</strong>g statistical <strong>in</strong>formation.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Appendix 1: acknowledgements 41


42<br />

Appendix 2:<br />

references<br />

1 Local authority draft accounts for 2001/02. Note that <strong>the</strong>se accounts were unaudited<br />

at <strong>the</strong> time of report<strong>in</strong>g <strong>and</strong> may be subject to change.<br />

2 Local authority summary accounts 2000/01.<br />

3 <strong>Hous<strong>in</strong>g</strong> Revenue Account Subsidy claim forms, data provided by <strong>the</strong> <strong>Welsh</strong><br />

Assembly Government.<br />

4 Local Authority <strong>Hous<strong>in</strong>g</strong>: Management <strong>and</strong> Performance (based on WHO4 returns),<br />

<strong>Welsh</strong> Assembly Government.<br />

5 Performance Indicators for Registered Social L<strong>and</strong>lords <strong>in</strong> Wales, <strong>Welsh</strong> Assembly<br />

Government.<br />

6 <strong>Hous<strong>in</strong>g</strong> <strong>Rent</strong> Arrears <strong>and</strong> <strong>Benefit</strong>s Statistics, CIPFA. Note that <strong>the</strong> response rate for<br />

<strong>Welsh</strong> authorities is usually around two-thirds. Although results have been grossed<br />

up, <strong>the</strong>y should be treated with caution.<br />

7 National Assembly for Wales Performance Indicators, to 2000/01.<br />

8 <strong>Audit</strong> <strong>Commission</strong> <strong>in</strong> Wales/Cardiff University survey.<br />

9 <strong>Welsh</strong> Assembly government Performance Indicators, <strong>in</strong>cluded <strong>in</strong> 2001/02<br />

Performance Plans, unaudited at <strong>the</strong> time of report<strong>in</strong>g.<br />

10 2000/01 Performance Information for Scotl<strong>and</strong>, provided by <strong>Audit</strong> Scotl<strong>and</strong>.<br />

11 <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>and</strong> Council Tax <strong>Benefit</strong>, Quarterly Summary Statistics, Department<br />

for Work <strong>and</strong> Pensions.<br />

12 Local Authority Omnibus Survey – Wave Two, Department for Work <strong>and</strong> Pensions,<br />

2000.<br />

13 <strong>Welsh</strong> Assembly Government local authority <strong>and</strong> RSL survey on possession <strong>and</strong><br />

eviction action, due for publication November 2002.<br />

14 <strong>Audit</strong> <strong>Commission</strong> Performance Indicators, Engl<strong>and</strong>.<br />

15 Learn<strong>in</strong>g from Inspection: <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> Adm<strong>in</strong>istration, <strong>Audit</strong> <strong>Commission</strong>, 2001.<br />

16 Performance st<strong>and</strong>ards, Department for Work <strong>and</strong> Pensions, 2002.<br />

17 Performance Indicators for Registered Social L<strong>and</strong>lords <strong>in</strong> Engl<strong>and</strong>, <strong>Hous<strong>in</strong>g</strong><br />

Corporation.<br />

18 Communities Scotl<strong>and</strong> Performance Indicators.<br />

<strong>Rent</strong> <strong>arrears</strong> <strong>and</strong> <strong>Hous<strong>in</strong>g</strong> <strong>Benefit</strong> <strong>in</strong> <strong>the</strong> <strong>Welsh</strong> social rented sector | Appendix 2: references<br />

19 General Household Surveys 1980 <strong>and</strong> 2000, Office for National Statistics.

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