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Welfare Reform Impact report
Authored by John Wickenden
December 2018
Welfare Reform Impact report
Report author: John Wickenden
December 2018
Welfare Reform Impact report
December 2018
2
Contents
Contents ............................................................................................................................................................ 2
Executive summary ........................................................................................................................................ 3
Introduction....................................................................................................................................................... 5
What does this report cover? ................................................................................................................. 5
The data ......................................................................................................................................................... 5
Welfare Reform Impact Club ................................................................................................................... 5
Facts and figures ............................................................................................................................................. 6
Policy context .............................................................................................................................................. 6
Universal Credit ........................................................................................................................................... 6
Housing benefit ........................................................................................................................................... 7
Local Housing Allowance ......................................................................................................................... 7
Benefit cap .................................................................................................................................................... 7
Discretionary Housing Payments.......................................................................................................... 8
The impact of welfare reform ................................................................................................................. 8
Latest HouseMark data ............................................................................................................................... 10
Performance data analysis .................................................................................................................... 10
Cost data analysis .................................................................................................................................... 13
Preparing for managed migration ........................................................................................................... 19
About managed migration ..................................................................................................................... 19
Moving to UC from legacy benefits .................................................................................................... 19
How will managed migration affect landlords? ............................................................................... 20
Appendix A: Disclosure of information .................................................................................................. 23
Appendix B: Benchmarking methodology ............................................................................................ 24
Welfare Reform Impact report
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Executive summary
About this report
This report considers the impact of the changes in welfare support on social landlords’
income, arrears and collection costs. It uses HouseMark and publicly available data to
measure the current impact and model the effect of forthcoming migration to Universal
Credit.
Welfare reform facts and figures
Currently, 1.3 million people are claiming Universal Credit (UC). Of these, 530,000 UC
claimants’ households are entitled to support for housing costs – 55% are in the social
rented sector. The next phase is ‘managed migration’ of 5.5 million existing claimants of
legacy benefits to UC by the end of 2023.
In May 2018, 4 million people were claiming housing benefit (HB), down from around 5
million in April 2013. There are still about 2 million working-age tenants due to move onto
UC before 2023. This is around 40% of all social sector tenants in the UK.
Discretionary Housing Payments (DHPs) continue to make up rent shortfalls. In 2017/18,
governments in England, Wales and Scotland funded £224m of DHPs to cover welfare
reforms such as the bedroom tax and benefit cap.
Latest HouseMark data
The table below outlines national median figures for key HouseMark measures managing
rent arrears and collection.
Measure National
median
Commentary
UC claimants as a % of stock 2.84% Some landlords have large numbers
of UC claimants. Across the UK,
about 1 in 20 tenants is a known UC
claimant.
Rent collected from current
and former tenants as % rent
due (excluding arrears b/f)
99.63% Rent collection levels remain high
despite a small decrease since
2016/17.
Rent arrears of current tenants
as % rent due
2.65% Current arrears have remained low
with a small increase since 2016/17.
Rent arrears of former tenants
as % rent due
1.22% Former arrears are at the same
position as 2013/14.
Evictions as % of properties
managed
0.26% Eviction rates have reduced
steadily over the past five years.
Cost per property - total Rent
Arrears & Collection (includes
overheads)
£147 We estimate that it costs the UK
social housing sector around
£725m to collect around £25bn in
rent. Costs are rising faster than
inflation.
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There is some correlation between the proportion of tenants claiming UC and the
following measures:
• Current tenant arrears – higher proportion of UC claimants tends to correspond
with higher arrears
• Eviction rates – higher proportion of UC claimants tends to correspond with higher
eviction rates
• Write-offs – higher proportion of UC claimants tends to correspond with larger
levels of rent write-offs.
Preparing for managed migration
The DWP’s project to extend UC to households who would otherwise remain on legacy
benefits and tax credits includes a safe, steady and secure approach to roll out, not
moving everyone at once and working with stakeholders to co-design the processes.
Managed migration means that all affected tenants will need to make a claim for UC
whatever their circumstances.
We believe that landlords should be preparing a communication plan to advise tenants
about claiming UC. This should be aligned to the managed migration timetable and have
the flexibility to be altered as a result of changes from the DWP’s ‘test and learn’ phase.
There are several studies linking UC claimants with increased arrears levels. Using
HouseMark data and other sources we estimate that by 2023:
• UC could add £500m to sector arrears levels
• On average, UC claimants’ arrears would rise by £250
• This would increase current tenant arrears by 35%
• Median current tenant arrears could rise to 4.10%
Welfare Reform Impact report
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Introduction
What does this report cover?
This report considers the impact of the changes in welfare support on social landlords’
income, arrears and collection costs. It is the first sector analysis report on welfare reform
published by HouseMark since December 2016. The figures have been collected from a
cross section of our members managing over 1.7 million properties. This report includes
analysis of the very latest data – up to March 2018.
The data
The main source of data in this report is HouseMark’s cost and performance annual
benchmarking exercise. The exercise covers all aspects of social landlords’ housing
management and maintenance services, together with other areas such as development
and estate services.
Core landlord services are broken down into a number of housing management activity
areas (such as rent arrears and collection management) allowing a detailed analysis of
costs, performance and satisfaction.
All costs are taken into account – including employee pay, non-pay costs (such as legal
fees) and overheads such as Finance, HR and IT. In order to complete the submission, all
benchmarked operating costs and turnover must match the participant’s financial
statements.
Welfare Reform Impact Club
HouseMark’s Welfare Reform Impact Club is aimed at housing professionals working in
income management, debt advice, financial inclusion, other housing management and
strategy roles. The Club discusses good practice, shares learning and helps members find
solutions to manage the impact of welfare reform on the ground - with the opportunity for
benchmarking extra measures on a regular basis.
Club meetings take place three times a year and focus on practical discussions, advice,
shared learning, and networking. If you'd like to join the Club, please contact
Welfare Reform Impact report
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Facts and figures
Policy context
When reform of the UK welfare benefits system started in the wake of the 2010 election,
much was expected to be completed by the end of 2017. Some measures were
introduced swiftly, some measures have come and gone, while others have taken much
longer than any official publicly anticipated.
The effect on landlords has been eight years of change while waiting for the next big
reform to impact on their business in terms of performance and resources. The effect on
tenants has been a massive change in the timings and amount of welfare benefits they
claim in a system that has been designed to cut public spending.
Universal Credit
Universal Credit (UC) was introduced in 2013 through the Welfare Reform Act 2012. It was
created to bring together six benefits, including housing benefit, working tax credits and
jobseeker's allowance, within one scheme and paid to claimants monthly through the
DWP. Face-to-face contact with claimants is administered through the DWP’s Job Centre
Pluses (JCPs).
The complexity involved in bringing together the six benefits into one claim and the variety
of circumstances that affect the payments made by the DWP has resulted in a careful
‘Test and Learn’ rollout to groups of claimants across different geographical areas. The
phase of rolling the ‘full service’ out to all JCPs is due to complete in December 2018.
From 2019, all UK JCPs will offer UC to all types of claimants.
Key UC statistics1:
• 1.3 million people were claiming UC in October 2018 – a 8% rise from September
2018
• 470,000 (36%) of these UC claimants were in employment
• £650 average UC monthly payment by household
• 1 million households were home to a UC claimant (August 2018)
• 150,000 households claim UC but do not receive a payment
• The North West region, where rollout started, has the largest number of Universal
Credit claimants
• 530,000 UC claimants’ households are entitled to support for housing costs – of
these 55% are in the social rented sector
• 22% of households with housing support costs have them paid direct to the
landlord – this includes 7,500 as a result of Universal Credit Scottish Choice
• 84% of new UC claims were recorded as being paid in full on time in August 2018
The next phase is ‘managed migration’ of existing claimants of legacy benefits (e.g.
Housing Benefit) without a change in circumstances to UC. The DWP estimates that there
are 5.5 million households who will move to UC by the end of 20232.
1 UC statistics bulletin Nov 2018 2 DWP response to SSAC recommendations on managed migration Nov 2018
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Using the same ‘Test and Learn’ approach, the DWP will begin managed migration in 2019
with small-scale testing to ensure that the processes work before the volume increases
from 2020. No more than 10,000 people will be migrated during the testing period.
Housing benefit
As the number of UC claimants has been rising since its introduction in 2013, the number
of housing benefit (HB) claimants has been falling. In May 2018, 4.18 million people were
claiming HB, down from around 5.03 million in April 20133. This is a good indication of the
scale of the task to move people onto UC and shows why the project still has around five
years to run before the estimated completion date.
Around 70% of the 4.18 million HB claimants were under 65 years old in May 2018 and
70% of these working-age claimants were renting properties in the social housing sector.
If the proportion of social sector tenants claiming HB and aged under 65 is similar to the
overall figure, there are still about 2 million tenants due to move onto UC before 2023. This
is around 40% of all social sector tenants in the UK.
Local Housing Allowance
Local Housing Allowance (LHA) applies to people who are claiming HB and renting from a
private landlord. It became relevant to the social housing sector in 2015 with proposals to
limit housing benefit for social tenants taking up new tenancies to Local Housing
Allowance rates. This would have restricted claims from younger, single tenants in the
social sector to the LHA for a room in a shared house.
However, the Prime Minister announced in October 2017 that the Government would not
be applying LHA rates to the social sector. This U-turn means that LHA rates were not
applied from 2019 to housing benefit or Universal Credit for anyone in the social rented
sector.
Benefit cap
The benefit cap is a limit on the total amount of benefit that most people aged 16 to 64 can
get. The cap works by reducing the HB or UC payment made to the claimant. Measures to
introduce the cap were included in the Welfare Reform Act 2012 and the related
regulations from 2013.
The Welfare Reform and Work Act 2016 lowered the annual limits to £20,000 for couples
and lone parents with children (£23,000 in Greater London) and £13,400 for single person
households (£15,410 in Greater London) from November 2016. This resulted in additional
43,000 households having their benefits capped4.
In August 2018, 58,000 households had their HB reduced and 7,800 had their UC capped.
This has reduced from a peak of over 70,000 households in July 2017. Prior to the
reduction in the cap, around 23,000 claimants were capped at any given time.
3 Housing Benefit and Council Tax Benefit statistics DWP Aug 2018 4 Benefit cap statistics DWP Nov 2018
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Typically, capped households are single-parent families, whose child tax credits are
reduced by less than £50 a week. Since being introduced, 140,000 households have
moved off the cap, usually due to receiving working tax credits (i.e. in work) or another
exempt benefit.
Discretionary Housing Payments
Discretionary Housing Payment (DHP) is a discretionary scheme that allows local
authorities (LAs) to make financial awards to people experiencing financial difficulty with
housing costs who qualify for HB or the housing costs element of UC.
DHPs are awarded at the discretion of each LA and can provide help with on-going
housing costs or one-off expenses (e.g. moving costs). In addition to the central
Government contribution, English and Welsh LAs are able to top up DHP funding up to a
maximum of two and a half times this figure using their own funds. DHPs for Scotland were
devolved from 1 April 2017, under the Scotland Act 2016.
In 2017/18, central Government contributed £166.5m to DHP funding in England and
Wales. The Scottish Government contributed £57.9m over the same period. While these
funds appear quite small in relation to the estimated £25bn annual rent roll of social
landlords, DHPs are crucial to help individual stay in their homes.
In England and Wales around 40% of central Government funds were spent mitigating the
benefit cap, with a further 32% paid to claimants who had HB reduced by the Bedroom
Tax. In Scotland, 81% of funds were allocated to mitigate the effect of the Bedroom Tax on
claimants.
The impact of welfare reform
In-work poverty
JRF’s annual poverty report 2018 has found that poverty rates for workers are higher than
at any point in the past 20 years5. The JRF argues that cuts to UC from the July 2015
Budget mean it provides less of a top-up to working families than it was originally designed
to. It estimates that 1.8 million working families with children will be worse-off under UC
compared to the current benefits system6. Furthermore, JRF analysis has highlighted that
half of all children in poverty are in families where parents are meeting employment
expectations within Universal Credit. It suggests that the solution to working poverty must
focus on pay, tax credits and housing costs as well as employment rates and hours.
Food banks
Since the introduction of many benefit changes in 2013, the number of referrals of people
in financial hardship to food banks has increased. Food banks provide emergency food to
people in crisis. The Trussell Trust has a network of over 420 foodbanks across the UK
and provides a minimum of three days’ emergency food and support to people
experiencing crisis.
5 Joseph Rowntree Foundation UK Poverty 2018 6www.jrf.org.uk/blog/universal-credit-needs-reform-unlock-families-work-poverty
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In 2017/18, Trussell Trust gave 1,332,952 three-day emergency food supplies to people in
crisis7, a 45% increase on the number of supplies handed out in 2013/14. Around 42% of
emergency food supplies were given to people experiencing benefit delays or benefit
changes. This figure suggests what may happen to the 14% of UC claimants whose first
claim is not paid in full on time.
Personal debts
While the DWP offers advances on UC to provide funds for claimants prior to the first
monthly payment, there is evidence of an increase in personal debts amongst claimants.
Citizens Advice research published in September 20178 found that UC clients are more
likely to have debt problems than those on legacy benefits.
More than 40% of debt Citizens Advice’s clients on UC had no spare income to pay
creditors, compared to a third on legacy benefits. Over three quarters (79%) of debt
clients on UC had priority debts (including housing costs and utilities), compared to 69%
on legacy benefits.
In its qualitative research, Citizens Advice found that some UC clients are trying to avoid
borrowing more from lenders during the wait for their first payment, as they don’t want to
add to their debts. Instead, they are relying on informal borrowing from friends and family
or delaying payment of bills – for example 47% of all UC clients had rent arrears, compared
to 30% of legacy benefit clients.
7 www.trusselltrust.org 8 Universal Credit and Debt Citizens Advice 2017
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Latest HouseMark data
The figures in this section are drawn from our core benchmarking submissions over a five-
year period from 2013/14 to 2017/18. The trend over time results are based on a balanced
panel9 comprising HouseMark members that submitted consistent data each year. The
measures contained in this report have been selected to help understand how and where
the sector has moved over the period. They form a small proportion of the hundreds of
available measures we calculate for our members.
Performance data analysis
In the main, our rental income measures look at how much rent has been collected as a
proportion of how much rent has been charged. The arrears and write-off measures
calculate the amount of uncollected rent as a proportion of rent due. The eviction rate
calculates evictions as a proportion of all tenancies.
UC claimants
In 2017/18 HouseMark members submitted data on the number of known UC claimants
living in properties they manage.
Up to November 2018, 158 landlords had submitted data for this measure. In total these
landlords recorded 69,725 known UC claimants. This represents around 5% of all
properties managed, which suggests that around 1 in 20 households are home to a tenant
claiming UC. These figures are consistent with the DWP figures10, which show that over
250,000 UC claimants live in the social rented sector.
The proportion of properties with known UC claimants varies considerably between
landlords. Of the 158 submitting data, five recorded zero known UC claimants – it’s not
clear from the data where these landlords had no claimants, or simply did not know
whether they had UC claimants living in their stock. The highest proportion of UC
claimants in the dataset was 23% - almost 1 in 4 tenants already claiming UC.
The table below outlines the quartile points11 for the number of known UC claimants as a
proportion of stock.
UC claimants as % of
stock
Quartile 3 6.97%
Median 2.84%
Quartile 1 1.33%
Across each quartile, the results show that a relatively small proportion of tenants are
known to be claiming UC. After managed migration completes in 2023, this proportion is
likely to rise to 40%.
9 Further explanation of panels is available in Appendix B 10 See the Universal Credit section of this report 11 The charts in this report have been given no valuative polarity (though some guidance is given in the commentary). The
terms Quartile 1 (lowest 25%) and Quartile 3 (highest 25%) are used consistently throughout – more detail in Appendix B.
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Rent collection
The chart below outlines the quartile positions for the measure ‘Rent collected from
current and former tenants as % rent due excluding arrears’ (brought forward from
previous year) over a five-year period for a consistent dataset of 85 organisations.
The chart shows that rent collection rates reached a high-point in 2016/17 with a median
rate of 99.83%, before reducing in 2017/18. While the number of UC claimants has
increased over the last year of the period, there was only a weak negative correlation12
between rent collection rates and UC claimants as a proportion of stock. This suggests
that rent collection rates are unlikely to be lower at organisations with a high proportion of
UC claimants.
Across different locations there is something of a North / South divide. Landlords based in
Scotland, northern and central England all, recorded decreases in median rent collection
rates over the last two years of the period, while those based in London and southern
England recorded an increase.
Current and former tenant arrears
We collect two arrears measures – rent arrears of current tenants as % rent due and rent
arrears of former tenants as % rent due. Rent due excludes losses due to void (empty
property) periods.
12 Pearson correlation coefficient of -0.25
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
Quartile 3 99.84 99.83 99.97 100.36 100.19
Median 99.37 99.52 99.70 99.83 99.63
Quartile 1 98.96 99.18 99.29 99.33 99.12
98.00
98.50
99.00
99.50
100.00
100.50
Rent collected from current and former tenants as % rent due (excluding arrears b/f)
Welfare Reform Impact report
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The chart below outlines the median positions for current tenant arrears (CTAs) and
former tenant arrears (FTAs) rates over a five-year period.
The pattern for current tenant arrears over the five-years corresponds with median rent
collection rates over the same period. Overall, current tenant arrears have reduced, but
there is an increase between 2016/17 and 2017/18. The pattern for former tenant arrears
shows a low-point in 2015/16, with the 2017/18 result matching the figure from 2013/14.
There is a moderate correlation13 between current tenant arrears and the proportion of UC
claimants in a landlord’s properties. The relationship between the proportion of UC
claimants with former tenant arrears rates was slightly lower, but still identifiable as a
moderate correlation14.
This shows that there is some relationship between the amount of arrears recorded by a
landlord and the number of tenants known to be UC claimants. While there are several
exceptions to the rule, this does provide some evidence that arrears built up by UC
claimants are starting to affect landlords’ overall results.
The pattern of median arrears rates across each location tends to follow the national
results. One interesting point is a rise in median current tenant arrears rates for London-
based landlords between 2015/16 and 2016/17 from 3.68% to 4.13%. This corresponds
with the lowering of the benefit cap in November 2016, which is likely to have affected
more tenants in London than in other locations. The 2017/18 figure is more in line with the
national results.
Other rent collection measures
In addition to arrears, we measure the effect of eviction rates, rent write-offs and income
lost due to empty properties (void rent loss). Rent write-offs and void rent loss are shown
as a percentage of rent due, while evictions are measured as a proportion of properties
managed.
13 Pearson correlation coefficient of 0.4 14 Pearson correlation coefficient of 0.3
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
Median CTAs 2.93 2.71 2.62 2.58 2.65
Median FTAs 1.22 1.18 1.13 1.21 1.22
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
Median arrears rates
Welfare Reform Impact report
December 2018
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The chart below outlines the median position for these measures over the five-year
period.
There is no evidence that welfare changes have resulted in an increase in eviction rates,
with a steady reduction each year across the period. In spite of this national decrease in
evictions, there is a moderate correlation15 between the proportion of UC claimants and
the rates of evictions. This suggests a tendency for landlords with higher proportions of
UC claimants to be carrying out higher numbers of evictions – another indication of the
risks involved in the managed migration of UC from 2019.
Rent written off as unrecoverable increased in the years up to 2015/16, but remained
stable up to 2017/18 at the median point. This measure also showed a moderate
correlation16 with the proportion of UC claimants, which suggests another method that
landlords are using to deal with arrears built up by UC claimants.
The decrease in void rent loss over the five-year period corresponds with a reduction in
re-let times, which is most likely to drive this figure. Overall, this suggests that occupancy
rates are not being affected by changes to the welfare system.
Cost data analysis
HouseMark cost measures are made up of employee pay costs, direct non-pay costs and
overhead costs. Employee time spent managing rent arrears and collection and other
housing management activities is apportioned by HouseMark members when they take
part in the exercise. Overheads are apportioned automatically based on the number and
type of employees working on the service.
HouseMark’s methodology calculates costs for individual services by breaking down
operating costs into a hierarchy of functions and activities. Managing rent arrears and
collection is an activity within the housing management function.
15 Pearson correlation coefficient of 0.5 16 Pearson correlation coefficient of 0.4
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
Median void rent loss 1.19 0.99 0.91 0.83 0.87
Median write-off rates 0.40 0.42 0.46 0.46 0.45
Median eviction rates 0.32 0.33 0.31 0.28 0.26
0.00
0.50
1.00
1.50
2.00
2.50
Median rates for evictions, write-offs and void rent loss
Welfare Reform Impact report
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Activities in this category include:
• Arrears prevention, monitoring and recovery (including eviction)
• Providing advice to individual tenants in arrears on benefit claims which can help
pay the rent, including universal credit
• Recovery of non-dwelling arrears
• Former tenant arrears
• Debt write-offs
• Rent collection and rent collection monitoring
The cost of activities such as rent accounting and financial inclusion (outside of the
arrears process) are excluded from this activity and counted elsewhere in the submission.
Managing rent arrears and collection costs in 2017/18
Up to November 2018, 183 housing associations, local authorities and ALMOs across the
UK had submitted cost data to HouseMark covering rent collection activities.
The table below outlines the quartile positions for the UK.
Cost per property - total
Rent Arrears & Collection
(includes overheads)
Quartile 3 £187.80
Median £145.47
Quartile 1 £115.31
At the median, a landlord spends around £145 per property collecting rent and managing
arrears. On this basis, we estimate that it costs the UK social housing sector around
£725m to collect around £25bn in rent.
The benchmarking exercise collects the number of Whole Time Equivalent (WTE)
employees working on each activity. To allow landlords to compare results, we present
this as a ratio of WTE per 1,000 properties.
The table below outlines how many WTEs per 1,000 properties manage rent arrears and
collection for participating landlords.
Rent Arrears & Collection
WTE employees per 1,000
properties
Quartile 3 2.45
Median 2.05
Quartile 1 1.67
At the median point, landlords have about 1 WTE employee managing rent arrears and
collection for every 500 properties. As well as specialist rent collection officers, this group
includes the time spent managing arrears and rent collection by generic housing officers,
housing assistants and senior housing management staff. Rent collection employees
make up around 30% of all housing management teams and rent collection is usually the
largest activity within the housing management function.
Welfare Reform Impact report
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By location, London-based landlords spend more on this activity than those based outside
the capital. This is more due to higher wages rather than needing to employ more staff to
collect rent and manage arrears.
Housing associations tend to have higher costs than local authorities for this activity. This
is often due to higher overheads (e.g. IT, HR, finance, office premises). Housing
associations also recorded slightly higher staffing ratios and average pay costs.
The proportion of tenants known to be UC claimants only has a small effect on rent
collection costs. Organisations with comparatively high proportions of UC claimants
recorded a median cost per property of £140, compared to £135 for landlords with
comparatively low proportions of UC claimants.
Rent collection cost trends over five years
This analysis looked at a balanced panel of 114 landlords that submitted consistent cost
data on managing rent arrears and collection each year between 2013/14 and 2017/18. A
balanced panel allows a more precise analysis of trends, so quartile figures are not
affected by fluctuations in the number of participants.
The chart below outlines the cost trends for each quartile position over the five-year
period.
The chart shows that median costs have risen by around 12% between 2013/14 and
2017/18, with a sharp rise in the first year. This rise is considerably higher than CPI
inflation over the same period, which increased by around 5%17.
17 Based on ONS Consumer Prices Index in Sep following year-end over the five-year period
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
Quartile 3 £159 £169 £173 £185 £184
Median £127 £140 £140 £141 £145
Quartile 1 £105 £105 £113 £109 £109
£0£20£40£60£80
£100£120£140£160£180£200
Cost per property - total Rent Arrears & Collection (includes overheads)
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The chart below outlines the trends for staffing ratios each quartile position over the five-
year period.
Each quartile in the chart shows some small fluctuations over the five-year period, with
2017/18 results remaining close the figures for 2013/14. There is no evidence of an
increase in resources for this activity.
Looking at individual organisations’ results, it appears that there is a one-off rise in costs
at a single point in the five-year period, with costs staying the same or reducing in the
other years. This suggests that many landlords made a structural change at a single point
in the period rather than adding incrementally each year.
By location, these fluctuations are evident. Most locations recorded a rise in the median at
some point during the period. While some areas adopted welfare reforms such as UC
earlier than others, the rollout to full service has been staged across the country, so it is
difficult to view regional patterns in landlords’ costs and resources as they react the
additional workload.
Comparison of rent collection to other housing management activities’ costs
Managing rent arrears and collection is a key activity within the housing management
function. This section compares the cost of rent collection to the overall housing
management function.
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
Quartile 3 2.30 2.44 2.42 2.63 2.40
Median 1.96 2.07 2.08 2.05 2.02
Quartile 1 1.60 1.70 1.74 1.62 1.58
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Rent collection and arrears WTEs per 1,000 properties
Welfare Reform Impact report
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The table below outlines the trend for housing management costs over the five-year
period.
Between 2013/14 and 2017/18 the median cost of housing management increased by 8%,
this compares to an increase in the dataset’s median rent collection costs of 14% over the
same period. This suggests that landlords have diverted resources away from housing
management activities such as resident involvement and tackling ASB to concentrate on
rent collection, with an overall above-inflation rise in costs.
This chart shows how the proportion of housing expenditure allocated to managing rent
arrears and collection has increased over the five-year period.
The chart shows that the increase in housing management resources allocated to rent
collection has risen across each quartile by 2-3 percentage points over the five-year
period.
This pattern is evident across most locations. However, landlords based in southern
England and Scotland both recorded decreases in the proportion of rent collection costs
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
Quartile 3 £541 £572 £559 £599 £564
Median £435 £454 £443 £457 £469
Quartile 1 £347 £353 £365 £362 £368
£0
£100
£200
£300
£400
£500
£600
£700
Cost per property - total Housing Management (includes overheads)
2013/2014 2014/2015 2015/2016 2016/2017 2017/2018
Quartile 3 33.2% 33.8% 34.1% 35.3% 35.8%
Median 28.9% 30.1% 30.8% 31.6% 31.5%
Quartile 1 25.9% 26.8% 27.7% 27.1% 27.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Rent collection costs as % of Housing Management costs
Welfare Reform Impact report
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over the five-year period. This is likely to be the result of individual organisational changes
rather than operating conditions in these locations.
While housing associations recorded a pattern similar to the national results, local
authorities and ALMOs recorded no change over the five-year period. This suggests that
local authorities and ALMOs have been less likely to divert housing management
resources in to rent collection activities.
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Preparing for managed migration
About managed migration
‘Managed Migration’ is the DWP’s project to extend UC to households who would
otherwise remain on legacy benefits and tax credits as they are not expected to be
subject to a change of circumstance – which currently trigger a move onto UC. The DWP
estimates that UC caseload will increase in size from around one million households today
to around 6.5 million households by the end of 202318.
Currently, the DWP is planning to phase managed migration in over a period of up to five
years – following a set of key principles:
• A safe, steady and secure approach to roll out – using the rollout of the full
service as a template – starting in one postcode area, scaling up to a JCP area
before rolling out to other JCPs.
• Not moving everyone at once – starting with small-scale testing in 2019 of up to
10,000 to ensure that the processes work well before the volume of managed
migration increases.
• Working with stakeholders to co-design the migration processes – including
charities, experts, Local Authorities, Housing Associations and claimants to design
the process of managed migration.
• Effective governance – to oversee the project and set success criteria. These
criteria are due to be published in 2020 after the initial testing phase alongside a
new timetable for UC.
Moving to UC from legacy benefits
The DWP believes it will be crucial that people moving to UC through managed migration
should make new claims – to ensure data is as accurate and as up-to-date as possible.
Some form of consent would be required from each claimant – showing they understand
UC and the corresponding responsibilities it brings.
Under full service, around 99% of UC claims are made online. While wishing to keep claims
digital by default, the DWP has pledged to make reasonable adjustments to meet
individual needs during managed migration. This includes communication in a variety of
different formats to help claimants make and manage their claim, such face-to-face
interviews or via the telephone.
The DWP accepts that the gap to the first payment of UC will be ‘a challenge for some
claimants’. Under managed migration, it plans to introduce a two-week run on of
entitlement for those on income-related Employment and Support Allowance, Income
Support, or income-based Jobseekers Allowance from 2020. During the testing phase the
DWP will issue discretionary financial support to claimants. In addition to these payments,
claimants will also have access to the Transition to UC Housing Payment currently in place
for full service claimants.
18 Social Security Advisory Committee (SSAC) report on the draft Universal Credit (Managed Migration) Regulations 2018,
and the government’s response.
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How will managed migration affect landlords?
The information published by DWP about managed migration suggests that transition will
be a slow and deliberate march towards UC for all claimants in 2023. While the Test and
Learn approach has distinct advantages to a ‘big bang’ transition, there are important
considerations for landlords including:
• Changes and delays as a result of testing
• Continuing understanding and working with two benefit systems
• Extra work checking and verifying the housing elements of migrating UC claimants
Apart from the practical work involved in overseeing the migration of thousands of claims
to UC, individual landlords will still have to collect rent and manage arrears through the
transition period. Experience of UC full service shows that even with DWP mitigation in
place, managed migration is likely to have a negative impact on the performance of teams
managing arrears and rent collection.
Communication
One issue that is likely to cause problems is communicating managed migration to the
right tenants at the right time, and explaining what help is available for the housing part of
the process.
Draft regulations19 published by the DWP state that managed migration will include ‘a
comprehensive preparation period for claimants, which will last about four to six months’.
Claimants will receive generic communications to warm them up to the fact that their
existing benefits will be ending and that they will have to make a claim for UC. Knowing
when and where this will occur for tenants will be crucial for landlords.
The DWP is unlikely to publish plans outlining the timetable of managed migration until
2020 – after the initial phase of testing (and learning) is complete. Experience from the
rollout of full service suggests that this timetable will be subject to change and delay as
testing issues are resolved. This affects landlords in that they could be talking about
getting ready for UC for years before it affects tenants – resulting in apathy and inaction
when the change actually starts.
Working with the information available, it seems landlords should have their own
communication plan in place that:
• Is contingent on managed migration rollout to JCPs covering the landlord’s
properties – i.e. covers the right tenants at the right time
• Can be changed or delayed in line with alterations to the managed migration
timetable
• Starts around the same time as the ‘comprehensive preparation period’ outlined
above
• States what the landlord can and will do to help claimants pay rent during the
migration period – including any advice or advocacy services available
19 Social Security Advisory Committee (SSAC) report on the draft Universal Credit (Managed Migration) Regulations 2018,
and the government’s response.
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Arrears performance
There are several studies linking UC claimants with increased arrears levels. This report
shows a moderate correlation between the comparatively high proportions of UC
claimants, while previous HouseMark research from 2017 showed that average arrears
were around £390 higher for UC claimants than for non-UC claimants.
A National Audit Office report ‘Rolling out Universal Credit’20 showed an increase in arrears
of around £300 for individuals renting from a housing association. A National Housing
Federation report published in July 201821 found this had reduced since 2017, but was still
around £225 at the median point. Joint research published by the National Federation of
ALMOs (NFA) and Association of Retained Council Housing (ARCH) found that arrears were
around £200 higher for UC claimants renting from local authority landlords (where average
rents are generally lower than housing associations).
These studies have also shown that arrears built up by the transition to UC take longer to
pay off through ongoing deductions than comparable housing benefit arrears. The NHF
report suggests that arrears take up to six months to return to pre-UC levels, while the
NFA and ARCH report suggests that this ‘arrears tail’ can take 18-24 months to clear for
some landlords.
Another issue that these studies raise is the increased likelihood of tenants to go into
arrears when they move to UC. The NHF report states that a median of 72% of UC claiming
housing association tenants were in arrears compared to 29% of non-UC claimants. The
NFA and ARCH report contains similar proportions for UC claimants who are local
authority tenants (74% of UC claimants compared to 26% of all tenants).
Taking these factors into account, it is possible to estimate the effect of managed
migration on social landlords’ arrears performance. The tables below outline the possible
effect on CTAs (current tenant arrears) levels.
Background information Amount Comment
Number of properties 10,000
Annual rent roll £50m
Void rent loss £435,000 Based on median of 0.87%
Assumptions Amount Comment
Number of UC claimants 4,000 40% of all tenants
Number of UC claimants in
arrears
2,880 72% of UC claimants
Average arrears for all tenants £203 Based on NFA / ARCH research that
26% of all tenants are in arrears
Average additional arrears per
UC claimant
£250 Estimate based on HouseMark,
NAO, NHF, NFA and ARCH studies
20 https://www.nao.org.uk/report/rolling-out-universal-credit/ 21 Universal Credit and the Impact on rent arrears NHF 2018
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Effect of UC Amount Comment
Increase in cash arrears 35% An additional £720k
CTA rate after UC managed
migration
4.10% As a % of rent due minus void loss
Increase in CTA arrears rate 1.45% Compared to median CTA rate of
2.65%
The results show that, based on research into the migration to full service, landlords could
see considerable increases in arrears as existing claimants move from legacy benefits
onto UC. If the average increase in UC claimants’ arrears rises to £300, cash arrears
increase by 40% and the CTA rate rises to 4.39%.
With the DWP employing a cautiously slow ‘test and learn’ approach, it is likely that these
rates will rise incrementally as migration occurs at a rate of 5-10 JCPs per month across
the UK, so the rise would need to be tracked over time. If the migration occurs in an area
with a landlord’s concentrated stock (e.g. LAs, ALMOs, LSVTs22), individual organisations
may record a jump in arrears compared to the national picture, but measures such as
national medians will not show as much movement.
This model doesn’t take into account the timescale of arrears – the ‘tail’. The reports
published by NHF and NFA/ARCH all refer to the rise in arrears being temporary before
returning to ‘normal’ levels. Where landlords operate across several JCP areas, arrears
levels may show a lower pattern of arrears increases over a longer period of time.
Managed migration is a large project affecting millions of people, with the programme
likely to last until the mid-2020s, arrears performance could be disrupted by the change
for most of the decade. This is likely to have a profound effect on the resources that
individual landlords need to process and verify thousands of tenants’ claims for UC over
an extended period.
Going forward, it will be crucial for landlords and academic studies to take into account
profile characteristics such as the managed migration timetable and the proportion of
tenants that are known UC claimants when analysing arrears levels and deciding how
much resources are required to reduce them in light of the managed migration to UC.
22 Local Authorities, Arm’s Length Management Organisations, Large Scale Voluntary Transfers
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Appendix A: Disclosure of information
The information and data contained in this report are subject to the following clauses in
HouseMark members' subscription agreements. These refer to future and further use of
the information.
“Where any compilations of Benchmarking Data or statistics or Good Practice Examples
produced from data (other than Data submitted by the Subscriber) stored on the database
forming part of the System are made for internal or external reports by or on behalf of the
Subscriber, the Subscriber shall ensure that credit is given with reasonable prominence in
respect of each part of the data used every time it is used (whether orally or in writing) and
such credit shall include the words "SOURCE: HouseMark”.
“The Subscriber shall use best endeavours to ensure that any and all uses of the System
shall be made with reasonable care and skill and in a way which is not misleading.
“The Subscriber may not sell, lease, license, transfer, give or otherwise dispose of the
whole or any part of the System or any Copy. The provisions of this clause shall survive
termination or expiry of this Agreement, however caused.
“The Subscriber shall not make any Copy or reproduce in any way the whole or a part of
the System except that the Subscriber may make such copies (paper based or electronic)
of the data and information displayed on the System as are reasonably necessary to use
the System in the manner specifically and expressly permitted by this Agreement.
“The Subscriber agrees not to use the System (or any part of it) except in accordance with
the express terms and conditions of this Agreement.”
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Appendix B: Benchmarking methodology
What do we measure and why?
The main purpose of the new core benchmarking system is to enable housing
organisations to make a value for money assessment of their operations across the broad
range of their business activities.
This assessment is done across three key areas:
• Cost of delivery - how much you spend on service activities, such as rent collection
• Resources for delivery – for example staffing and overhead allocation.
• Performance – how well your organisation is performing across the range of your
business activities – including managing rent arrears and collection.
By taking these three key areas together, you are able to make a rounded and informed
assessment of how well your organisation is operating in terms of cost, resource and
performance.
Aggregation
The charts in this report are based on aggregated data from individual landlords.
HouseMark members can access their own underlying data, alongside many other
landlords who agree to share on a like-for-like basis, by using our online reporting tool.
Presentation of data
In order to best understand the data, it has been analysed and presented in a number of
different ways – depending on the measure.
The following calculations are used in this report:
• Per property or per 1,000 properties managed – this has been used to compare
data from housing organisations of different size.
• Percentage – Percentages are used to highlight the proportion of rent due for
performance measures.
• Median – the value at the mid-point. It can be used to give organisations an idea of
how close to ‘the average’ or ‘normal’ their figures are.
• Average – the arithmetic mean (or average) is used where cross-tabulation does
not permit the median to be used.
Correlation
Correlation is a technique for investigating the relationship between two variables. We
have used Pearson's correlation coefficient to measure the strength of the association
between the two variables.
Pearson's method rates correlation on a scale ranging from -1 to +1, where +1 and -1 are
perfect linear correlations, which show up as 45° diagonal lines on a scatter plot. If the
value is 0, then there is no apparent linear relationship between the two variables, this
appears as a horizontal line on a scatter plot. The closer the correlation coefficient gets to
+1 or -1, the stronger the correlation; the closer it gets to 0, the weaker it is.
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We have interpreted the strength of the coefficient scores in the following way:
• 0.50 to 1 Strong
• 0.30 to 0.49 Moderate
• 0.10 to 0.29 Weak
• 0 to 0.09 No correlation
Note: the scale is the same for negative scores.
It may help to interpret the figure as percentages, so 0.33 = 33%, where 100% is the
maximum.
Quartiles and medians
Quartile information is used to analyse benchmarking data and is an effective way of
ranking results. The following terms are used in this report:
When the data is ranked in ascending or descending order, the median is the value at the
mid-point. It can be used to give organisations an idea of how close to ‘the average’ or
‘normal’ their figures are.
The charts in this report have been given no valuative polarity (though some guidance is
given in the commentary). The terms Quartile 1 (lowest 25%) and Quartile 3 (highest 25%)
are used consistently throughout.
The quartile 3 value is the ‘cut-off’ point for the highest 25 per cent of the data – e.g.
highest rent collection rate.
The quartile 1 value is the ‘cut-off’ point for the lowest 25 per cent of the data – e.g.
lowest cost.
The following table shows example satisfaction scores for eight organisations and how the
median value and quartile information is reached.
Organisation Data values Quartile
A 99 Quartile 4 –
highest 25 per
cent
B 97
Quartile 3 value = 96
C 95
Quartile 3
D 87
Median value = 85
E 83
Quartile 2
F 79
Quartile 1 value = 78
G 77 Quartile 1 –
lowest 25 per
cent
H 75
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Balanced panel
To compare the movement of quartile points over time, we have used a dataset of
organisations that submitted data for the measure between 2013/14 and 2017/18, so the
comparison of quartile points over time is based on a consistent cohort of organisations.
This is referred to in the report as a balanced panel.
The balanced panel is based on the name of the organisation matching in all five years
across the period. It excludes organisations that have merged and/or changed name
between the years. The balanced panel will include organisations whose business has
changed between years, but retained the same name.
To maintain a reasonable dataset size, the balanced panel is different for each measure.
This is due to very few organisations submitting full sets of data in both years. As a result,
no direct comparisons are made between measures over time.
Data validation
The data collected in each submission is subject to a triple-layer validation and quality
assurance process to ensure data integrity. This is summarised in the diagram below.
Customer review
•Data submitted via HouseMark website which contains online guidance
•Automatic flagging of significant variances and outliers prior to data submission
•Facility for data inputter to provide comments to accompany submission
System review
•System generated validation reports including in depth variance analysis of components and peer group comparisons
HouseMark staff review
• In-person validation including detailed check of data inputs, checks to external data, variance and peer group analysis, and data triangulation
•Secondary quality assurance check by an independent member of staff including peer group analysis and critical consideration of outputs in the wider context
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