Direct Payments – the tenant moves from captive customer to real customer

One of the welfare reform policies is direct payments or DP and this is the one that will change the face of social housing more than any other.  Forget the bedroom tax or any other welfare reform policy, DP is the one policy that has council and housing association landlords worried sick.

Yet, as with all welfare reform policies DP is ill-considered by government and yet again social landlords are making a pig’s ear of a response by not thinking it through fully and being ill-prepared for this particular change.

3.4 million or so social housing tenants have their rent paid through Housing Benefit. This goes directly to the social landlord with the HB money never passing through the tenants hands.  Landlords like this arrangement and have become accustomed to it.  Tenants like this too as they have never had to worry about paying rent if on benefit.

To put that into context the coalition admits 1.4 million of social housing HB claimants are not affected by any welfare reform policy by being pensioners and so this DP change will affect the other 2 million social housing tenants of working-age who claim HB.  Eventually that is 2 million rent accounts each week that will be affected and 2 million rent accounts with rent payments no longer guaranteed.   Social housing has just over 4 million tenant households so DP sees a change from roughly two in every three rents being guaranteed by Housing Benefit to just 1.4 million being guaranteed out of 4 million or about one in three.

This is a huge change and quite rightly has social landlords and especially their finance directors worried as hell.

The coalition says in its spin on DP that it wants to make tenants more responsible by paying them directly so that they can pay the landlord. This is an issue of control between tenant and social landlord with the current system seeing landlords in control of the payment of rent: Yet that changes with DP which puts the responsibility and the control of rent payment with the social tenant – and that is a monumental change as the social tenant finally becomes the customer is what DP means.

At present the social tenant is at best a captive customer who does not change his housing provider because he can’t easily do so.  The social tenant is the same captive customer forced to pay £4 for a bottle of water on the Ryanair flight or £6 for two sausage and two rounds of toast at a motorway service station.

The social tenant moves once every 14 years and to date has to put up with the level of service his landlord provides.  Thankfully social housing is regulated and social landlords average service level is good compared with the private unregulated landlord.

However social landlords service levels vary significantly and tenants currently have little klout in forcing their landlord to undertake repairs or the like.  Yet that changes dramatically with DP as the tenant becomes in control of the payment of rent.  If and when the tenant has any form of beef with the landlord he can potentially, and will in practice, withhold rent.  It makes no difference that social tenants withholding rent while awaiting repair has a highly dubious legal basis as tenants will withhold rent for this reason in far greater numbers.

Even if no particular beef over repairs with his landlord the tenant has the power with DP to reduce the priority of paying rent.  I note a report issued today which says that only 32% of tenants are satisfied with their social landlord. All social landlords are well aware that at peak expenditure times DP will mean that rent paid at Christmas will inevitably fall as even the most  responsible tenants have the choice to skip a payment or two so that they and their children have a happier Christmas. There will be other ad hoc peak expenditure times too for the social tenant; a family celebration such as a wedding or other typical occasion.

Yet what these all do is see the social tenant in control of the payment of rent and become the real customer not the captive one.

For decades social landlords have positioned themselves as more than just a landlord by delivering anti social behaviour services and other ‘community’ functions that sees tenant’s look to social landlords to provide.  Landlords have made a rod for their own backs with this as tenants will expect and do expect more and more from their social landlord yet as landlords will have less guaranteed income they will have to reduce service levels making them less responsive to the now full not captive customer and more tenants will withhold rent or at least pay less or less frequently or more sporadically than before when they never had that option.

IF social landlords have less income to deliver these ‘housing plus’ services which will be the case with DP then tenants will ‘judge’ their landlords just as they judge other providers.  If a tenant has a bad experience with Tesco they can take their custom to Aldi and they do this and so if a landlord does not deliver as tenants ‘expect’ or landlord staff don’t come up to a standard the social tenant ‘expects’ then tenants will further de-prioritise the payment of rent.

Tenant expectations and tenant perceptions which currently are not a real factor in the provision of social housing become very real factors with DP as the tenant takes control of the payment of rent.

Over the last 18 months or so I have met and spoken with hundreds of tenants (and landlords) across Merseyside and beyond.  Some landlords have far more money than others in terms of repair and in terms of standards of properties because of this.  The age old landlord tenant problem of your property is not damp its condensation sees significantly different outcomes for tenants and all down to how much money each landlord has.  Often tenants in the same street can have different social landlords with Landlord A who has money deals directly with the ‘damp’ issue yet Landlord B who has much less repair money saying it is not damp its condensation and down to the tenant not opening windows and drying clothing on the radiators etc.

Yet when DP comes in the tenant of Landlord B above will be just as aggrieved as he is now but ABLE to do more about it by attempting to withhold rent.  That tenant with DP has other options and no doubt the no win no fee Philadelphia lawyers will be targeting such tenants of Landlord B soon enough to seek redress and to get some ‘compo!’

That is just another example of how DP will change the landlord tenant relationship and there are scores of other similar examples that will emerge and BECAUSE the tenant becomes in control of the payment of rent and has influence and power over the payment of rent.

Landlords know that DP means tenants have influence and take control of the payment of rent yet they tend not to see the above issues.  Landlords see the bottom line issue and only the bottom line issue of much less rent being guaranteed and how this may affect their borrowing levels and interest rates paid on borrowing which is a huge and legitimate concern and one I am not downplaying at all.

However landlords have not paid enough attention to the landlord tenant relationship and how the dynamics of that will inevitably change; or how the power balance shifts dramatically from the landlord to the tenant in terms of the DP tenant becoming a real not a captive customer.

The DP tenant will hold the aces yet landlords who are rightly acutely worried about the impacts of DP come up with hare brained schemes such as the Halton Housing Trust response to DP of only communicate with us via digital means in return for a cheap tablet device and internet access.  While we must assume the bare costs of such a scheme have been considered for financial viability of such a project, what this does to the landlord tenant relationship dynamic clearly have not.

DP means that aggrieved tenant have more influence and power to get redress and as I outline above DP also means that more social tenants will be aggrieved and come forward with their grievances – whether deserved or not – because DP gives them much more potential influence over issues of grievance.  Very simply the social tenant will see more prospect of success for any grievance issue they have because they hold the power lever which DP gives.

More grievances and with a higher chance of redress is what DP holds for the tenant and more cost for the landlords is what DP really means. Whether the tenant tells the landlord by digital means or by snail post doesn’t change that and as a matter of obvious fact digital communication hugely increases that.

I like the radical nature of the HHT plan for so many reasons not least that it gives tenants digital access and there is much to applaud in it.  Yet as we saw in the KHT example social media is a very dangerous animal indeed.  KHT issued a standard letter to tenants in essence saying pay your (bedroom tax) rent else we will tell social services who will come and take your kids and was an unfortunately drafted as well as offensive letter.  That letter was seen 140,000 times in the first weekend thanks to social media and universally condemned.

The reputation of the landlord KHT took a hammering.  It also hardened the grassroots activist’s response to the bedroom tax in Knowsley.  Tenants have long memories and over time 2 plus 2 does become 5 and therein lies a huge problem and an ineptly neglected issue for social landlords panicking over DP.

Social landlords before all of the welfare reform policies paid scant attention to reputational risk unless they also delivered NIMBY supported housing services for ex-offenders, single homeless hostels and the like where reputational risk is THE biggest risk.  General needs or ‘bog standard’ social housing never held any real reputational risks to mainstream social landlords.

Yet the emergence of social media and the welfare reforms hugely increased reputational risk and why I have long maintained that social landlords should be supporting tenants to appeal the bedroom tax.  Aside from rent levels staying the same and more HB coming in and a significant back payment when a bedroom tax appeal succeeds, it also makes the social landlord a good one in tenant perceptions MY landlord is supporting me and the landlord achieves huge tenant goodwill.  By contrast the landlord not supporting the tenant to appeal receives the opposite.

Now with DP starting to roll out across the country and tenants taking control of the payment of rent the real significance of that becomes very apparent.

Social media and the digital way so beloved and advocated by Nick Atkin at HHT holds huge dangers in and of itself.  Combine that with the tenant becoming the real customer and having full control of the payment of rent and you disregard what all of this means to the landlord tenant relationship.  The aggrieved tenant, whether they are rightly or wrongly aggrieved, is a real concern for all social landlords and something they have to consider in much greater detail than they have to date.  Social landlords reputational risk for mainstream ‘bog-standard’ general needs lets which is 95%+ of their business, their core business, is just as prone to reputational risk as the tiny percentage their NIMBY supported housing lets have had for decades.

When the IT cocks up, as it will, as IT always does, and when the HHT tenant has stopped looking at cats doing stupid things on YouTube and realises they can’t get redress for any issue face to face, these HHT tenants will become aggrieved.  When they are bombarded with emails because the administration of Universal Credit and its DP element is such a farce as neighbouring Warrington states here, the tenant will be aggrieved by this IT cock up.  Those HHT tenants will find more reason to be aggrieved and matters of repair will take on a new and higher significance and importance and HHT tenants will bombard HHT with more and more repair requests and more and more why aren’t you doing anything about drug dealing and ASB on my estate etc.

IT is always sold as a panacea and those who advocate it are radical and innovative and those who diss any part of the idea are by definition a Luddite.  That is crassly naive and in business terms incredibly inept even as a superficial selling point which is what the HHT plan is.

The HHT plan is ‘sold’ on this naive basis by HHT and given undue credence by the National Housing Federation (NHF) who also publicise this ill-considered idea to sell seminar places.  Regrettably this is the all too typical ‘omniscient landlord’ response to a welfare reform policy of ‘we are landlords so we know best.’  The social landlord blinded by the panacea and deluded belief that IT will save the day fails to address the landlord tenant relationship dynamic at huge peril.

DP makes the social tenant the customer and social landlords treat the tenant the same as Gerald Ratner treated his customers, with contempt and chronically inept consideration.  The HHT plan lauded as the radical innovative way forward is a classic example of how landlords may change the name of housing directors to customer service directors yet fail to understand and appreciate what customer service means.

Once the social tenant becomes a real customer, which is precisely what DP entails, landlords are going to have to radically change their modus operandi and look at what a customer is and what a customer expects and that customer is going to be a far more powerful and real customer than any social housing tenant has ever been before.

Social landlords dismissed and still dismiss the benefit cap as a ‘real’ issue for them despite 46% of all those affected being social tenants. Oh this doesn’t affect us they say it is only a problem in London and only then with high private rent levels when it is an issue for all larger families irrespective of where they live.  The same indifferent approach is seen in the bedroom tax appeal with social landlords showing antipathy there despite it being a financial no brainer for them to support tenants appealing.  The same landlords are accused of becoming overly commercialised too and moving away from their ethos and core values and they are with a much greater uptake of AR and other ‘non-traditional’ income sources to compensate for the income reduction policies of bedroom tax, benefit cap and that will have to increase too with DP.

Despite #4councilhousing and the Shout campaigns which have sprung up to fight for social housing social landlords still don’t sell what they offer and still hold on to some ethereal notion of being ‘social’ landlords while their finance directors within social housing increasingly take control and direction away from chief executives and boards.

With DP they will make the same mistakes again of bombarding tenants with red inked letters and make these now customers even more aggrieved and expect everything to be as before the welfare reform policies were implemented, or in simple terms not know the industry in which they work and especially not know the customer that the tenant becomes with DP.  If ever you wanted a classic case of we have always done it this way and a steadfast refusal to change then look at social housing.

Again the HHT plan comes to mind.  It can be portrayed as radical and innovative all you like by its developers HHT and by NHF and others who want it to work and naively believe it will.  Yet this plan is a huge risk too far and a risk which will alienate and take tenants for granted even more and once more just another example of social landlords not knowing who their customers are or what they require.  With DP and the increased take up in digital and social media landlords need to fundamentally think what impacts this will have, yet they do and have not – Plus ca change!

Overlong? Yes

Bit of a rant? Yes

Repeats itself? Yes

Too long and too involved for the zealots who state IT is a universal panacea and only issue superficial subterfuge in bit size chunks because the housing reader cant be bothered to pay attention for more than the length of a gnat and are not prepared to stop and think for once? Undoubtedly!