Financial exclusion was a growing concern before the credit crunch hit. In its aftermath, in the form of cuts to welfare benefits and local services like money advice, it is set to grow. Social housing tenants will be affected particularly severely since they make up a large part of those on low incomes and welfare benefits. They are also disproportionately dependent upon high-cost credit, including both legal and illegal aspects.
A new report by the Human City Institute in partnership with pressure group Compass and Trident Inclusion, a midlands based agency tackling financial exclusion, covers the findings of 252 interviews with social housing tenants in late 2010.
The findings are stark. Tenants are experiencing high levels of financial exclusion with seven out of ten economically inactive, of whom 44% are unemployed. Three quarters are in receipt of housing benefit. More than half have net annual household incomes of below £5,200. Some 54% are officially in fuel poverty.
More than a third say their financial circumstances are poor or very poor with only 4% describing them as very good. Only 2% say that their savings are very high. Some 57% don’t have any savings at all, although most believe that saving is important but are unable to do so given their income levels.
One third of tenants are currently in debt, although others would be if they could access credit. A quarter of tenants with debt describe their debt as high or very high. The average debt is £1,200 equating to almost a quarter of average income. Close to half have debts exceeding £1,000.
So, how are tenants dealing with debt? Some 28% say they are finding their financial situation increasingly unmanageable. Significant minorities of tenants rely on credit from high interest lenders such as pawnbrokers, mail-order catalogues, legal money lenders, payday loan companies, discount stores and illegal door-to-door lenders.
More than a third say accessing credit is difficult for them. Over one fifth always or often feel harassed by lenders, especially high interest lenders, and a quarter feel harassed on an occasional basis. Some 34% of tenants using high cost credit describe their experience as ‘awful’ and a further 18% as ‘not good’.
Only 9% of tenants are aware that the courts can now over-rule lending judged as unfair. Clamping down on credit charges, capping credit costs and accessing more affordable credit are all popular with tenants.
The stranglehold that debt has on tenants is highlighted by the fact that repayments account for 14% of tenants’ annual income. One fifth of those in debt have repayment schedules that account for more than 20% of their annual incomes. A significant minority of tenants have to go without necessities, such as food and heating, on a regular basis to meet their debt repayments with close to half saying that this is an occasional requirement.