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Paying the Rent
The days of reluctantly pulling out a dog-eared rent book from the kitchen drawer then walking down to the local housing office are long gone. Back in the 60s and 70s, cash in hand, you would wait impatiently in the queue before handing over your obligatory contribution to the local council for your state-owned bricks and mortar.
However, today in our world of instantaneous information in the age of the communication revolution there are now multiple methods available for tenants to pay their rent. Consequently, Social Housing landlords have gone with the flow and moved with the times by offering different ways to keep the money pouring, or perhaps just trickling, into town hall.
The 21st century landlord now serves up a varied menu of delightful ways to pay that suits all tastes and circumstances and also assesses which particular method has the most appeal and the best impact.
But some maxims have always still prevailed no matter what generation we are talking about. Simply put, your tenants will want and need to know the answers to three fundamental questions:
- What do I pay?
- When do I pay?
- How can I pay?
How Much They Need to Pay
As a Housing Officer with your finger on the pulse of all you survey in your local patch and over your red-hot keyboard, it’s easy to forget that some of your tenants may not have a clue of how much they actually need to pay.
This can be a particular problem if their rent is partly paid by benefits to which they have to top-up in cash; plus if they are on zero hour contracts with inconsistent hours leading to variations in income they need benefit supplements in the UK. The number of people on "atypical hours" in the UK generally hovers around the 1.5 million mark.
Also not forgetting if rent charges are fortnightly and tenants wish to pay monthly, then there is a disparity between figures.
Tenants can easily forget that monthly payments need to be around 9 percent higher than the 4-weekly figure of two rent charges. Into the bargain with the fortnightly charge period, the incongruous way that dates fall means that the dreaded 3-charge month comes into orbit a couple of times a year.
All of these circumstances can make rent collection confusing for both public and professionals.
Moreover, if tenants have run up arrears then there will be debt-repayments on top of normal rent charges. Therefore an agreed, formal arrangement in writing of a set amount at regular intervals cuts through any confusion or misunderstanding
So it’s important that Social Housing landlords provide accessible facilities where tenants are able to easily check their rent accounts. This can be simply done through an online check on the websites of the council or other Registered Social Landlord (RSL), the latter being housing associations or co-operatives.
Tenants can also just informally phone up their Housing Officer and ask “what’s my balance?” but for the landlord, too many calls like this take up too much working time. However for tenants not keen or confident in using the internet then rent books can still be bought in the shops to allow some DIY account maintenance. Some things never change.
When They Need to Pay
But back into the ether of the virtual planet which we inhabit, it’s obvious that an online check should also include the dates when the tenant needs to pay their rent charge, especially the next date due. Landlords can take the initiative by setting up automated systems to send reminders by e-mail or even better by text straight to customers' mobile phones.
But it’s also advisable to issue a paper calendar of rent payment dates, especially to new tenants and also to those who have defaulted in their rent. It concentrates the mind and the calendars can even be pinned to the kitchen wall so that dates are not easily forgotten.
How They Can Pay
Now that they know how much they have to pay and when they have to pay it, your tenant should have an abundance of avenues to get their money to you.
Nevertheless, although there should be a range of methods available, it’s always helpful to establish the most appropriate method for each individual tenant.
So what's on offer these days?
Traditional hard cash exchange prevails even today and for some tenants it’s still preferable to hand the money over the counter at the local office. Probably around 25 percent on average prefer to pay for most or all bills and services through cash. The figure for rent payments is even higher at 60 percent according to the figures.
Rent payment slips still exist which can be filled out and taken to a local branch of a High Street bank or the Post Office where again a cash transaction is processed.
An imaginative approach could be to take the service to the customer rather than vice-versa. Mobile payments kiosks can be set in different districts on different days allowing a more convenient service right on the patch. This could be useful for older tenants, those with mobility problems and people with mental health issues who struggle to get out and about. It could also be helpful in the winter months and for those landlords who cover large rural areas.
Rent Payment Card
Alternatively a Rent Payment Card can be used at paypoints in the local community. These are usually in the Post office and retail outlets such as local shops and supermarkets.
Rent Payment cards can either be "open loop" or "closed loop" with the former meaning access to any location for any purchase or payment whilst the latter is restricted to one product and/or an exclusive retail outlet.
The advantage of the "open loop" is the convenience and flexibility of making various payments anywhere. However, with the "closed loop" card, tenants can earn rewards from loyalty schemes operated by outlets or suppliers.
Bank accounts and online processing are the most cost-effective ways for the landlord as transaction costs for rent payment options have to be considered in the overall budget. Bank transactions nowadays can be done by monthly, or even weekly Direct Debits and Standing Orders.
The beauty of direct debit is that the amount can be varied which allows for changes in rent charges. Nevertheless many tenants prefer the fixed amount of the standing order as it gives them more control over payments.
But even this can be problematic for tenants on low or irregular incomes who are more likely to incur bank charges for lack of funds. A penalty of anywhere between £10 to £25 is a hefty lump out of a meagre budget,
To avoid this, a "credit trigger" as opposed to a "date trigger is a way forward as it means withdrawal is made when the bank balance can meet the rent charge and is not confined to a particular date. The same problem can be addressed by ‘frequency triggers’ which allow a moveable date for withdrawal by direct debit.
The Great 'Unbanked' of Society
Although the proportion of "unbanked" members of the population is decreasing it is still estimated that around 3 percent or more of the UK adult population do not have a bank account. Many others will have dormant accounts that are never used.
In fact, in 2018 it was reported by the government that over £1 billion was lying in accounts that had been inactive for over 15 years and each with less than a £100 balance.
Plus around 4 million people still prefer to hold a Post Office account rather than, or in conjunction with, that of a High St Bank. Nevertheless, since 1997 it has been government policy to increase financial inclusion and get more people into the banking system.
In the early 2000s only 20 percent of tenants in the UK paid rent by bank transfers. The aim of many local authorities and RSLs is to get this as high as 60-70 percent. An added incentive for central government is that the cost of transferring money into bank accounts is less than half that of Post Office transfers.
However with research finding that 60 percent of the unbanked population having had negative experiences with banking in the past, including uncomfortable face-to-face encounters, then many will be reluctant to get back into the financial system.
Lack of credit history, ID issues, and financial problems are amongst the most common obstacles encountered. As one respondent told the Citizens Advice Bureau in Scotland:
“It took 9 weeks to open a bank account... a nightmare, couldn't get a benefit; couldn't get a job… all because of having no bank account!!
The type of account needs to offer assurances to prospective account holders and also avoid profligacy. Therefore more controlled accounts with no overdraft facilities, low charges, and budget management services are preferable over the free-ranging, liberal accounts that offer easy temptation and encourage debt.
Post Office and Credit Unions
As another option for those deterred by the banking system current accounts are becoming more available through the Post Office and many Credit Unions throughout the country. There are over 300 of the latter across the UK with total assets of £1.5 billion. First begun in 1964 they have become big business in the not-for-profit sector.
Credit Unions have also taken up the novel idea of "Jam Jar" accounts where money deposited in a customer’s account is broken up and apportioned to various obligations. Therefore the account creates "virtual wallets" where the total sum of money is digitally transferred for specific payments such as rent, utilities, loan re-payments etc.
Telephone and Online Payments
In this communications age, tenants have even more control if they pay over the telephone as they can decide when and how much they want to pay. There are also apps available, such as AllPay, that can be downloaded onto modern mobile phones thus allowing quick automated rental payments.
Research has also found the behavioural patterns of smartphone users means they tend to pay more at less frequent intervals. Individual payments are on average around £140 which is double that of physical cash payments
On the other side of the fence, Housing Officers can be issued with hand-held tablets and collect rent in the old-fashioned way by knocking on doors, except in this case the doorstep service involves digital transfer rather than cash exchanging hands. However, in reality, it would be likely that some tenants may offer to pay in cash which would lead to concerns over security of funds and the personal safety of staff.
Online submissions can be done at the tenant’s own convenience and they can control the amount of the payment. The downside is the worry and indeed the reality of online security issues and the dangers of digital theft from bank accounts. The fear that "Apps are too hackable" as one consumer told an industry survey.
Consumer surveys consistently show that around 75 percent of the public express concern about making payments through their phone plus there is a hard-core of 25 percent not trusting them at all. In particular, the older generation used to traditional payment methods may be deeply suspicious of online transfer through modern technology.
On average around 60 percent of social housing rent in the UK is paid by the benefits system. This is either through Housing Benefit or the housing element of Universal Credit so it is important that claims are submitted correctly and in good time. Otherwise rent arrears can quickly build up.
An offer to assist with completion of Housing Benefit applications or direct them to an external organisation which will provide this service can be beneficial to all concerned.
The offer to assess tenants’ income and calculate benefit entitlement can help establish a picture and assess the quality of individual budget management and may even alert the tenants to unclaimed benefits.
Income maximisation should always be at the forefront of the minds of Housing Officers in improving rent payments situation in their area. In fact, at national level, a staggering £13 billion in unclaimed benefits lies waiting in the Treasury vaults of Her Majesty’s Government.
The advent of Universal Credit introduced from 2013 presents both opportunities and challenges for landlords in rent collection. It promotes financial inclusion by insisting on payment through bank accounts and it is also designed to instil a payment culture as opposed to the alienation of the Housing Benefit process.
With payment no longer going directly to landlords but instead to the claimant then tenants will no longer be detached from transactions. The intention, therefore, is that they should feel that they are actually paying rent rather than being passive recipients of a state handout. A huge disadvantage for landlords is the loss of control over payment and the increased likelihood of non-payment or insufficient payments leading to arrears.
Landlords will also find themselves in more competition for competing debts. With the tenants holding the funds then assiduous door-step debt collectors may get the money first.
Dealing With Problems
If Universal Credit becomes problematic for rent payments then a temporary Alternative Payment Arrangement (APA) can be applied for by the landlord allowing direct payments when tenants are unable to manage their money. This means the whole amount of the housing element is paid directly to the landlord in the same way as Housing Benefit is processed.
Also with the agreement of the Department of Work and Pensions(DWP) landlords can access ‘Arrears Direct’ payments where a small percentage of other benefits that the tenants receive are deducted and paid towards rent arrears. In the case of Universal Credit, the deduction is 5 percent of the total towards rent arrears.
For both of these systems a "switchback trigger" needs to be activated. In other words, the tenant has to have accumulated a certain amount of rent arrears to permit direct payments. For APA’s there needs to be the equivalent of two months rent arrears, whereas for Arrears Direct only 4 weeks are required for an application to be made.
Payments by credit card should immediately flag up warning signals and the landlord should contact the tenant to discuss why they are using this method of payment. Contact should be supportive with the aim of helping with advice on income management and possible referral to local support services.
According to figures by the DWP, around 1 in 3 tenants on partial Housing Benefit seek financial advice from organisations such as the Citizens Advice Bureau. So money problems are always present for many tenants and the most desperate may resort to high-interest lenders, credit card payments or even local loan sharks.
Working With Your Tenants
The local authority or housing association should always work with their tenants, especially the involved tenants, i.e. those who take an interest in their community and are in regular contact with housing officers.
In particular, tenant associations provide an organised contact where the landlord can obtain feedback on the service and suggestions for improvement. For example, one suggestion mooted is a late payment penalty to help the council recoup administrative costs.
But will this just make debt problems worse for the poorest members of society and cause more trouble than it is worth? On the other hand should discounts be offered to "good payers" and for early rent payments to reward these tenants and to encourage good practice by others in the community?
In publicising your ways to pay always canvas your customers rather than just assume that documentation and public information are fine. Ask your tenants for their opinion.
Items such as leaflets and posters as well as internet information and publicity should be checked by tenants. Publications in tabulated format are advisable with infographics to grab the attention. They explain things simply but effectively and are easier to comprehend for many people.
Involved tenants can confirm that publications on rent payments are clearly written, in plain English, free of jargon and can easily be understood by the average person. Written material and online resources should also try and accommodate individual tenants or common groups of customers. For example, people who don’t understand English very well and people with learning disabilities.
This landlord-tenant dialogue can be transferred to online resources too with Social Media days on Facebook and Twitter encouraging debate and suggestions for improvements on payment methods and collection procedures.
There is lots of scope for imagination, creativity and plenty of interaction between landlords and tenants. As described by a charitable organisation in Northern Ireland:
"To be meaningful and effective, Tenant Participation must be embedded in the very DNA of the organisation at every level. "
Society has moved away from the pay packet to the chip and pin, from the counter to the keyboard. There have never been so many varied, convenient, and accessible paths for rent payments to travel.
Technology has grown enormously in the 21st Century and for those willing to embrace it then maintaining the rent can be so much easier.
But the changes in technology develop faster, much faster than attitudinal change. Old habits die hard and money habits die hardest. Distrust is often difficult to break down but a lot of this derives from a genuine and reasonable fear of digital methods of payment.
Everything is already on the table plus whatever new systems and products arrive on the scene in the future. The real challenge is encouraging and convincing customers to make that leap of faith into the new territory of ideas and innovation.