Opportunities for Credit Unions and Social Landlords to work in Partnership Robin Lawler CIH President & Chief Executive, Northwards Housing
WHAT WILL I COVER THIS MORNING? Role of Social Landlord in the provision and development of financial services for tenants. How Social Landlords are planning to meet the challenges of Welfare Reform. How Social Landlords plan to strengthen partnership working with Credit Unions.
Role of Social Landlord in the provision and development of financial services for tenants.
Social Landlords Social Landlords over 2,000 across UK They are legally Registered Providers (RPs) with Homes and Communities Agency - Housing Associations or Housing Trusts - Local Authorities (Direct Management) - Arms Length Management Organisations (managing 700,000 plus council homes) Legal Contract between Social Landlord and Tenant home in return for rent Social Landlords have vested interest in tenants being able to afford rent on their homes and paying on time. Wider interest in Community Well Being
Key facts concerning Debt and Household Stress Almost one million people have taken out a payday loan to help pay their rent or mortgage in the last 12 months, (Shelter). The shelter survey also reveals that almost 7 million people in total are relying on credit in some form to help pay their housing costs - using payday loans, unauthorised overdrafts, other loans or credit cards. Recession and growing unemployment so rising numbers of people turning to loan sharks/high interest lenders to buy the things they need. Social housing tenants are more vulnerable & at risk of exploitation:
Key facts concerning Debt and Household Stress cont d Lower income households more likely to be exposed to unfair lending practices - 20% of social housing tenants have used doorstep lenders. Household debt is key issue for low income households - likely to get worse in light of Welfare Reform... CAB across England and Wales advised 0.52million clients with new problems in the 3 months (July and September) 2011 Debt was the second largest advice category (behind benefits) Debt enquiries represented 31% of all problems dealt with
Support for tenants to get into Training & Employment Many Social Landlords have active programmes to support tenants into Training & employment An example is Local Employment Action Project in GM 20% of entry level jobs reserved for local unemployed people
HACT & Centre for Economic and Social Inclusion found: 88% of Social landlords are investing in employability skills 42% have information on employment status of their tenants 28% are linked to the Work Programme or Job Centre Plus schemes.
How Social Landlords are planning to meet the challenges of Welfare Reform.
Welfare Reform: The Context Work and Pensions is largest Government budget more than entire NHS spending More than twice Education spending HB spending 18 billion second largest Social Security item after retirement Pensions
DWP Policy Aims Reduce public spend and bring benefit payment into line with average income of working households. total benefit cap of 26k per year irrespective of family size. Universal Credit (UC) payment to be more aligned with the experience of being waged - monthly payment. Benefit system more flexible - making it easier to move in and out of work. Taper on benefits more gradual for those in work to tackle poverty trap improve better off in work
What s happening now Housing Benefit Non-dependant charges: circa 25%+ increase each year for next 3 years from April 2011 Private rented sector Local Housing Allowance capped LHA rates set at 30 th percentile (was 50 th percentile) Shared accommodation rate extended to under 35 s (was under 25 s)
Changes to Housing Benefit HB will become part of Universal Credit Under-Occupancy deduction to be introduced for tenants of working age under occupying by one bedroom or more HB element of UC will be paid directly to working age tenants - except where there are issues of vulnerability
Universal Credit UC combines all means-tested benefits for working age claimants into single working age benefit (already under way) - paid monthly.
Universal Credit cont d Single Income Assessment (most effective way of dealing with deepest part of poverty trap) Incentives to start work and increase hours to build over time Retired claimants will claim Pension Credit not Universal Credit
Timetable for change June 2012 Housing Benefit demonstration projects to test out direct payments 12 month pilots. April 2013 Universal Credit demonstration project in one area. October 2013 Wholesale transition to UC - currently will be done benefit by benefit starting with JSA, to be completed by 2017.
Demonstration Pilots to test out Universal Credit There will be five demonstration pilots which will take place from June 2012 to June 2013. Aim of the pilots will be to test how claimants will manage housing benefit monthly payments ahead of the introduction of Universal Credit from October 2013. The projects will also look at the appropriate level of safeguards needed to help secure landlord income streams if tenants fall behind on their rent - which is one of the key concerns for social housing landlords. The five local authority and housing association partnerships named for the demonstration projects are: Southwark Council and Family Mosaic, Oxford City Council and Oxford Citizens, (part of the) Greensquare Group, Southern England
Demonstration Pilots cont d Shropshire Unitary County Council and Bromford Group, Sanctuary Housing and The Wrekin Housing Trust Wakefield Metropolitan Borough Council and Wakefield and District Housing Torfaen Borough County Council and Bron Afon Community Housing and Charter Housing, Wales Wakefield Metropolitan Borough Council and Wakefield and District Housing Torfaen Borough County Council and Bron Afon Community Housing and Charter Housing, Wales
Demonstration Pilots cont d Each of the areas will be involved in testing out different elements of the project: including testing different trigger points when social landlords should receive direct payments if tenants fall into specified levels of arrears. how best to communicate the changes to claimants provide assistance and support with budgeting
Demonstration Pilots cont d Universal Credit will be introduced in Greater Manchester and Cheshire - six months ahead of roll out Pathfinder where 1500 claimants will move onto Universal Credit across Tameside, Oldham, Wigan and Warrington each month from April 2013. These pilots will be expected to start in Autumn - to focus on delivering fact to face support to those who may need to make claims for Universal Credit.
How will welfare changes affect tenants? Social Housing tenants will no longer be able to choose to have their rent paid directly to their landlord HB will be reduced if tenants are deemed to be under occupying their property ( bedroom tax ) Any shortfall in HB payment due to household cap or under occupancy will have to be made up by tenants themselves Local Authorities are likely to reduce Council Tax benefit to 90% of CT - so tenants will also have to top up that payment.
How will changes affect Social Landlords High potential increase in levels of rent arrears bad debt provision and cash flow. Threat to tenancy sustainability if many households face a decrease in overall amount of benefit Risk to housing providers own financial viability could impact on their own credit rating and ability to borrow for new building and major repairs Household stress will impact adversely on communities & neighbourhoods
Other landlord concerns Cost of rent collection/transaction costs will increase as more many more tenants will pay their landlord Many tenants don t have current accounts, or accounts may not be used due to being significantly overdrawn and any benefit paid in could be swallowed up by existing debt. Using possession action/ eviction as a sanction against tenants would need to be balanced against the cost of legal action and issue of whether eviction is reasonable.
Welfare Reform and Financial Inclusion Widely acknowledged that welfare reform has significant impact on potential demand for services of Credit Unions Renewed emphasis on importance of access to transactional current account for those receiving UC. Switch to monthly payment of UC likely to lead to demand for budgeting and bill paying accounts that are affordable and appropriate for low income households Increased demand for support and advice services such as financial capability training.
How Social Landlords plan to strengthen partnership working with Credit Unions.
Credit Union Survey Northern Housing Consortium is a non-profit making organisation representing Social Landlords and other organisations involved in housing across NW, NE and Yorkshire & Humberside Undertook an email survey of all NHC members in Spring 2012
Credit Union Survey cont d Survey asked: awareness & understanding of services and products CUs can offer what additional services RPs would like to see changes RPs are making to support themselves and their tenants to manage impact of Universal Credit
Survey Results 38 completed questionnaires were returned representing a response rate of 39% 87% of respondents reported that they were involved with a credit union remaining 13% were not involved respondents were asked whether they were aware of the different products and services Credit Unions offer
Survey Results cont d 97% replied yes and 3% were not aware of their products and services 79% of the respondents would like to see Jam Jar/Budgeting accounts being offered by their local credit unions 34% of respondents stated that they would like their local credit union(s) to offer some form of financial capability advice and support, and training 32% stated that they would like to see a direct debit facility or equivalent through a basic bank account
Survey Results cont d Survey findings mirror the findings of the DWP Credit Union Modernisation and Expansion feasibility study Huge gap in the financial sector market, and the models available out there do not meet the needs of consumers on low incomes or with poor financial management skills many struggle to avoid penalty fees and unauthorized overdraft charges The survey also asked registered providers if their organisation would be looking to work with a credit union outside their locality 97% stated they would if this would provide the opportunity for housing providers to work with stronger, more sustainable credit unions and for those credit unions to benefit from a wider membership demographic
Response to Universal Credit The introduction of Universal Credit poses a huge challenge to housing providers and their internal rent/cash collections processes and procedures 60% of survey respondents stated that they would be changing their cash collection services in response to UC 40% advised that they would not be changing 60% who are or will be changing their cash collection services were asked what they were doing around this 48% stated that they were considering it at the moment, and were looking at the different options and partners to work with. 19% advised that their organisation was looking into Jam Jar/Budgeting accounts to safeguard against non payment
Response to Universal Credit Other activity survey respondents are involved in is: - Pushing direct debit payments on tenancy sign up Looking at alternatives to direct debit Promoting basic bank accounts and credit union accounts Mobile point of sale payment terminals for doorstep payments
Role of Credit Union in a Supporting Capacity Respondents offered information on the support they are currently providing or planning for the future around money management and budgeting for their tenants, and the support they would like from credit unions Responses included: Developing partnerships with credit unions to extend the debt and advisory service, at a very early stage Jam jar/budgeting accounts Co-ordinated approach to financial capability training for tenants, and training for staff Communicating to tenants - targeting particular groups who will be affected Promoting and developing partnerships Information sharing protocols
Services for Future The survey was also designed to gather insight from NHC members around what additional services they would like to see from NHC and ABCUL The responses included: Staff training around the changes Improvement of payment facilities - to compete against door step lenders and other high cost lenders Strengthen the relationship between housing, banking and the credit union sector Set up a communications plan a list of credit unions willing to work with registered providers Lobbying Tackling digital inclusion
Opportunities for Credit Unions Credit Unions are already working with local authorities and housing providers in the HB demonstration project including offering budgeting accounts to tenants selected to received their rent direct. Using Credit Union business case calculator to demonstrate case for housing provider/ local authority investment Staff working for Social Landlords encouraged to use the Credit Unions
North West Partnership Working ABCUL & 4 Credit Unions working with: - 10 Social Landlords - Northern Housing Consortium (NHC) - Association of Greater Manchester Authorities (AGMA) Landlords want to expand the capacity & coverage of CUs to give their tenants access to better & more affordable transactional, saving & lending products
North West Partnership Working cont d NW Group is exploring mutually beneficial business opportunities including: - Proposition of a combined CU Debit Card & RP Rent Account Card- business case to be project tested by ABCUL & NHC - Sharing best practice on established partnership working between CUs & RPs - Exploring other opportunities for practical support to CUsjoin CU boards, business/hr support, marketing & communications, joining staff - Examining ways to improve customer experiencetelephony support, web design, etc - Links to Financial Inclusion work
North West Partnership Working cont d Landlords involved: Bolton at Home Northwards Housing Arawak Walton New Charter Halton Housing Trust Wulvern Housing Calico Housing Kirklees Neighbourhood Housing Plus Dane Housing (Neighbourhood Investors) Places for People CUs involved: HOOT! Wise with Money Manchester CU Halton CU Tameside CU
Conclusion Welfare Reform changes are likely not only to have a huge impact on individual lives, but also on local places and economies One NHC member has reported that there is potential for the overall loss to the local economy to be in region of 150 million in 2013/14 It is vital that residents are supported into sustainable employment and for the local economies to generate employment opportunities Initiatives led by social landlords and their local partners around employment and training programmes will grow in importance But UC could affect their ability to fund training/employment initiatives
Conclusion cont d In one Northern County a 10% reduction in CTB will result in a 5.5million loss per annum - in addition to the other public spending restrictions to the local economy For many areas across the North, economic development and regeneration are classed as important priorities for their areas The proposals set out as part of welfare reform is likely to mean that there will be less money invested in the local economy There is a clear opportunity for Credit Unions to work closely with Registered providers and vice versa, to support tenants and local communities Important that relationship is tackling financial inclusion and supporting their tenants and staff in preparation for Universal Credit Involves developing the right products, accounts and services, training, awareness raising through partnership working