Social housing providers brace themselves for 80% rise in rent arrears rate

Social housing providers are preparing themselves for an 80 per cent rise in rent arrears rates by 2014 due to the impact of welfare reforms, according to the latest survey from Baker Tilly.

Respondents to the survey, which was commissioned to understand how providers are responding to the challenges brought about by the Welfare Reform Act, reported that the average level of rent arrears was 2.64 per cent in the year ending 2013, but that this was expected to rise to 4.82 per cent in 2014-15.

In all instances, providers said they had budgeted for an increase in bad debts in the current financial year when compared to the level experienced in 2012-13.

This is supported by separate data from Baker Tilly’s Back Office Benchmarking programme (BOB Plus) which found that social housing providers collectively responsible for 250,000 tenants were budgeting for bad debts of 1.85 per cent in the current financial year, up from 0.86 per cent last year, a rise of 115 per cent.

Eighty-four per cent of respondents to the survey said they had employed additional members of staff as a direct response to welfare reforms, most commonly in income recovery and welfare benefit adviser roles. A further 11 per cent said they were considering or planning to take on new support staff as a means of supporting tenants through the changes.

The Welfare Reform Act received Royal Assent in March 2012 and since that time registered social housing providers have been seeking to understand the full extent of the reforms and what they mean for tenants. The most significant of these include the introduction of the benefit cap, the roll out of universal credit and the removal of the spare room subsidy.

Data from Baker Tilly’s BOB Plus programme suggests that approximately 73 per cent of Housing Association tenants are on at least one form of housing benefit.

Gary Moreton, Baker Tilly’s Head of Social Housing said:

‘Social housing providers are devoting significant time and resource preparing for the potential impact of welfare reform, but there is still a great deal of uncertainty about what the future may hold for rent arrears and bad debts, and the type of housing stock required to meet tenant needs.’

A copy of the report is available here.