Beans – what landlords count while their tenants survive on them

Over the past few years I have been looking critically at the welfare reform policies of the coalition and especially the impacts they have on housing.  I have always believed that reform means to improve and a quick check in the dictionary confirms that.

The bedroom tax has until now had most attention and it is two years ago this month that I first advocated tenants should appeal against it and some 7 months before it come into operation.  Before that I warned strongly that the overall benefit cap was being largely ignored by social landlords who (a) believed it largely only affected high rent areas and the PRS when 46% of households affected lived in social housing; and (b) that it contained a systemic flaw which would see more households every year hit by the cap as the cap figures of £350 / £500 per week increased at a much slower rate than welfare benefits and especially rent rises.

Yet the biggest issue for social housing in the welfare reforms (sic) was always the payment of housing benefit direct to the tenant and not to the landlord, known as direct payments.  Direct payments put the social tenant IN CONTROL of the payment or not of rent whereas before HB was invariably paid to the landlord direct and it must be said the social tenant was more than happy with this.

It is this loss of control that sees the great and the good of social housing not needing to take natural senna and Corporal Jones of Dad’s Army fame is calm by comparison to the responses of these great and good which have been inept with all welfare reform policies but especially so and dangerously so with regard to direct payments.

The spectre of direct payments produces the same lack of business thinking that the bedroom tax and benefit cap see, it produces a dangerous level of ineptitude and bad practice and unlawful practice very much in evidence this past week, and so much so that even the uber conservative CIH has warned landlords about unduly pressurising the social tenant.

All the welfare reform policies focus the social landlord mind on its finances.  The risk to arrears from the bedroom tax, the higher arrears risk with the benefit cap and with no mitigation there outside of splitting up a family of 2 parents with 6 children into 2 households of 1 parent and 3 children each all impact on landlord bottom lines.

Much of this financial risk has been contained but largely due to the Affordable (sic) Rent  model (hereafter called AR) which in 2012/13, the year before the bedroom tax and benefit cap implementation, saw 38,000 or so AR products being let at much higher rents to give an additional rental income of roughly £95 million per year and then the bedroom tax itself had a monumental cock up by government in the pre 1996 issue which saw a further £30 or so million being repaid to about 40,000 households.

As more and more AR units come to market the offsetting of welfare reform arrears risk is even more mitigated for the social landlord as even more additional rental income each year is produced.

Yet direct payment is an entirely different kettle of fish.  It puts the tenant in control of the payment of rent and takes that control away from the social landlord.  In the bedroom tax landlords still got between 75% and 86% of the rent paid directly depending on whether the tenant had a 14% or 25% bedroom tax deduction.

Landlords with the bedroom tax only had to chase this 14% or 25% of the rent yet with direct payments they need to chase 100% of the rent.

In a nutshell the entire dynamic of paying rent changes as tenants gain control and landlords lose control and this is THE most radical change that social housing faces from the welfare reform policies.  It changes social housing and it changes the landlord/tenant relationship forever.  Landlords now do have to have full regard for their tenants and the tenant changes from being a captive customer to one with much more choices.  Direct payment is a seismic shift in this relationship between tenant and landlord and one that has rightly got landlords worried.

But let me first explain the ‘captive’ customer that the tenant is ahead of direct payment as landlords often call the social tenant a customer and wrongly.  If you have ever baulked at paying £4 for a single sausage at a motorway service station or for paying £3.50 for a bottle of water on a Ryanair or Easyjet flight you are a captive customer, the customer of no choice.  The tenant because they mostly can’t move freely or quickly cannot change their housing provider – the landlord – like they could change their supermarket or other consumer choice.

Despite homeswapper dating clubs and social landlords regionally getting together to promote home swaps or taking down constraints to moving such as in Merseyside and elsewhere over arrears greater than £250 for example, the social tenant is still a captive customer, they are still on that Ryanair flight after stopping en route to the airport at a motorway service station to pay 50% more for a Burger King or MCDonalds or KFC. And of course the captive customer has paid triple the price for the flight in school holidays than they would a week before or after.  The captive customer that gets shafted in terms of holidays is no different to the social tenant as customer.

Yet now these captive customers will have full control over the payment of rent and they will judge their provider (former name landlord) in the same way they judge all providers and the often poor customer service they have had previously from their landlord is going to play a huge part in whether and in how much they pay the rent.

The captive social tenant will be liberated, set free and able to make a choice.  Landlords, sorry housing providers, will have to compete for their pound in the same way supermarkets do and all other competing demands do.  The payment of rent is not only inevitably going to fall at Christmas and other peak expenditure times and is not only going to be sporadic rather than every 4 weeks on the dot for landlords to easily manage cash flow, it is also going to markedly change due to what the tenant who is now not the captive customer feels about their landlord.

I have been urging social landlords to financially support their tenants to appeal the bedroom tax as an example of good business practice.  Not only does a winning tenant see the landlord rent level stay the same and ongoing HB payments are higher and a sizeable back payment of HB happen when a tenant wins appeal and be a great financial benefit to the landlord, the same landlord also builds up very positive goodwill in their tenants and that will translate into a higher degree of rent payment once direct payment comes in.

By contrast the landlord that has bombarded the bedroom tax tenant with red-inked letters, that has their officers doorstep tenants, that has bombarded the tenant with phone call and email and text message in order to pay the bedroom tax gets no goodwill; and simply stores up tenant resentment and perplexed resentment too as landlords have always stood four square behind their tenants in the past.

There is a solid and very valid business argument there and there always has been to support tenants to appeal the sham policy and sham decision making evident in the bedroom tax.  Yet rather than the social landlord looking at that and even contemplating whether to say ah ok let’s draw a line in the sand – the usual sophistry for yes you’re right we cocked up but we’re not admitting it publicly – social landlords have taken the opposite path and not learned from their mistakes and are making this even worse by compounding those mistakes.

The arrogance of their ineptitude as well as the ineptitude itself knows no bounds.

The national press, the housing trade press and social media have all published articles in the last week over coercive practices in landlords demanding tenants already hit with the bedroom tax pay even more so as to be a month in advance on their rent ahead of UC.  Over unlawful practice such as a landlord refusing to pay tenants their money back when their rent accounts go into credit.  And bizarre, gimmicky and dangerous practice such as we will only communicate with tenants via digital means.  Even the notoriously conservative CIH have cautioned social landlords over this and that it truly saying something.

Social landlords should take a look at Facebook (or indeed the anger over the gimmicks in comments on Inside Housing) and see in light of the litany of coercive, dangerous and unlawful practices above and see just how virulently tenants feel about this.  The ratchet of tenant opprobrium for social landlords has increased by ten notches this past week and such tenants have elephantine memories, or in very simple terms they prove the old adage that it takes 20 years to build a good reputation and 5 minutes to lose it all.

That lack of goodwill will undoubtedly transfer to the tenant’s willingness to prioritise the payment of rent when direct payment comes in and landlords arrogance in believing it won’t and that they hold all the aces or they can hoodwink the tenant simply beggars belief.

This pay your rent or else strategy sees the tenant not as a captive customer but a knowledgeable one and one informed by the rapid spread of social media.  The tenant knows the average eviction costs the landlord many thousands of pounds and somewhere close to £7,000 or so and hence a £1000 or more of arrears is a bargaining tool whereas before most tenants were afraid of going a few hundred pounds in arrears.

The direct payment tenant will become like a petulant child pushing the boundaries of what is acceptable or perhaps a better analogy is the customer with his first credit card and religiously paying off the balance each and every month, at first, but then lapsing into not doing so and unlike Mastercard and Visa landlord’s don’t charge interest, rent arrears become the cheapest form of credit anyone?

Tenants, sorry customers, with HB paid direct to them will have more money at their disposal and have more choices on which to spend it, and those choices will be informed by what they can get away with and what they think of their housing provider.  Note that term ‘housing provider’ which is what the now misnamed social landlord will become and not even move from social landlord to mere landlord, they will just become the housing provider.

The other radical theme in the welfare reform policies is they deal with people and not with bricks and mortar.  They (allegedly) incentivise the social tenant to change behaviours such as working a few more hours or taking in a lodger or downsizing, all of which are personal behaviour change.  Yet this nudge theory also means social landlords have to know their tenant’s likely responses and prior to welfare reforms they never had to know and still don’t know.  Instead of social landlords looking within housing to supported housing which does deal with people and always has, the general needs social landlord that has always dealt not with people but with bricks and mortar kept their focus on bricks and mortar.

In supported housing, that complex (and too much bloody trouble niche?) of housing, dealing with some very vulnerable and often chaotic residents sees being firm but fair as far and away the best strategy.  Yet general needs landlords bombarding general needs tenants with red inked letters, doorstepping and other bombarding is firm and firm and does not work.  It merely builds up later resentments which as I outline above will have far reaching consequences.  As much as landlords have tried to pigeonhole bedroom tax tenants into cant and wont payers their actions have mostly been all along the all tenants are wont payers and been far too firm and with little flexibility or scope for being fair.

Supported housing professionals do KNOW how people behave and respond as it is a central theme of their job.  Yet the general needs housing professional is now in that situation of not knowing what the tenant will do and the same general needs housing professional (sic?) is the one who thinks that supported housing is that too much bloody trouble niche of social housing and also because of the arrogance of the general needs housing professional wouldn’t dream of consulting the supported housing professional despite them having the answers needed.

If you can persuade your ‘client’ that the rent has to be paid before he or she can have the fix of any form of substance misuse they crave or get through to a totally innumerate supported housing resident the importance of paying rent over any other ‘priority’ they may have, then persuading the general needs tenant to pay their rent as a priority to keep a roof over their heads is pretty simple by comparison.  People buy from people and the supported tenant has a relationship of trust with his support worker and vice versa – the same trust that is now lacking between the general needs tenant and landlord because the general needs landlord does not know people or how to deal or talk WITH them and rather talks AT them and continues to lose this necessary trust.

Many of the answers for social landlords can be found within if they consult supported housing professionals who are used to dealing with people.  Yet social landlords are either too stupid or too arrogant to realise that, and probably a bit of both, and are dogmatic creatures of the “we have always done it this way” school.  Instead of treating tenants as the enemy and believing they will ‘waste’ their benefit on not paying rent once UC direct payments hits, housing providers / social landlords need to finally start to think and ask themselves what welfare reform means…and then think about it again…and even heaven forfend consult with supporting housing professionals….some truly earth shatteringly radical landlords may realise that they should even speak WITH tenants too.

Yet the only tablets landlords will take are the gimmicky freebies some allegedly innovative ones wishes to give away in return for their ‘customers’ giving up their rights.

This pathetic ill-thought through response continues the worrying trend very evident since the welfare reforms began of Finance Directors panicking about the bottom line and about the bottom line and about the superficial bottom line dictating landlord approaches to welfare reform – the same people who count beans and never meet their tenants who are forced to survive on them as a staple meal.

The tenant is not the landlords enemy that landlord Finance Directors believe, the real enemy to landlords is landlord’s Finance Directors holding sway over rational thought


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