Social landlords need to lead tenants through changes

As changes to the benefits system begin to take effect, the issue of how to tackle financial exclusion comes to the forefront of our minds.

One key element of the changes is the introduction of direct payment of housing benefit to social housing tenants rather than landlords. There’s no doubt that direct payment has created concern as housing associations meet the task of helping their customers to pay rent on time but we can view this as an opportunity to tackle financial exclusion.

A significant proportion of tenants do not have a bank account and therefore have limited options by which to pay their rent. According to a report published last year by the National Housing Federation and consultancy Policis, some 14% only have a Post Office Card Account (without a direct debit facility) and 5% have no account at all.

Financial inclusion is an area that many housing associations are stepping up their involvement in, often through debt advice and education programmes.

We are entering uncharted territory: social housing tenants have never been directly involved in the payment of rent before. Some fear the switch will lead to rising rent arrears, particularly given the number of people across the country already struggling to pay their bills.

This is why it’s essential landlords take the initiative. There are numerous products out there which enable tenants to pay rent directly to their landlord. But instead of viewing rent payment in isolation, we should consider the broader benefits a product like this brings to a tenant who’s never had a bank account.

One example is a pre-paid card created by Advanced Payment Solutions (APS). It’s linked to a bank account and used by tenants to complete everyday banking tasks such as paying bills and setting up direct debits.

The Co-operative Bank supports this wider introduction of payment methods and has provided the infrastructure that allows APS to link the card direct to a bank account. The card offers tenants a range of options with which to pay their rent while opening the door to payment by direct debit gives them access to discounts on energy bills and much more. The key here is it’s pre-paid so tenants can’t go overdrawn, protecting them from bank charges.

Housing associations are in a strong position to find the right option for their tenants and get them a better deal on a range of products, from savings to home insurance. It can be a complex area for landlords’ procurement officers but specialist purchasing consortia like Procurement for Housing undertake all the regulatory compliance and supplier assessments necessary. This ensures suppliers have been heavily vetted in advance.

And by taking a collaborative approach to procurement landlords can work together and use their bulk buying power to get better value for money and share good practice. This in turn helps them cut the risk of rent arrears and bring down living costs for their tenants.

A number of local authorities have taken this approach to get a better deal on energy bills for their residents using reverse auctions. Social landlords could use the same tactic to drive a better deal on financial products, going to market and saying ‘we have X many tenants who want to buy Y, what will you offer us?’

It’s up to housing associations to take the lead and use the current situation to put themselves – and their tenants – on a more secure long-term financial footing.

• Stuart Nicholson is a senior manager at the Co-operative Bank. He will be discussing how procurement can address the challenges of welfare reform at PfH Live in Manchester on June 27.