1. The purpose of this technical note is to provide elected members with an update on East Dunbartonshire Council tenant’s rent arrears, the impact that the Covid-19 pandemic has had on maximising rental income and actions being taken by the Housing Service.
2. For the financial year 2020/21 the rent arrears outcome was £1,075,252.98. This was an increase of £306,657.20 against the internally reported outcome of £768,657.20 for the financial year 2019/20. The maximisation of rental income and perusal of rent arrears has and continues to be very challenging since the start of the Covid-19 pandemic.
3. The current rent arrears position is £1,242,231.96 (week 4). This is an increase of £305,018.23 against the same period as last year.
4. The Housing Service continues to prioritise the maximisation of rental income with a dedicated team whose role is to actively pursue rent arrears and to provide support and advice to those tenants struggling to pay their rent. Since the start of the Covid-19 pandemic there have been a number of factors which have contributed to the increase of rent arrears, which includes:
The introduction of the Coronavirus (Scotland) Act 2020 advised landlords that no evictions for rent arrears were permitted and as such the housing department has suspended all actions in this regard since the start of the pandemic to comply with this temporary legislation. This legislation continues to remain in place and is now reviewed every 21 days by the Scottish Government in line with the easing of restrictions. The Housing Service, along with support and guidance from EDC Legal Services sisted all cases at court for serious rent arrears at the start of the pandemic. These cases remain sisted and no new legal action for serious rent arrears has been raised or has taken place since March 2020. Even although the Housing Service only evicts tenants as a last resort, the ability to raise court action against a tenant in serious rent arrears, can and does prompt tenants to make payments towards their rent and can substantially reduce arrears during the legal or court action period. Where the Council obtains an award of decree against a tenant this often further reduces arrears but can also be a necessity acting as a deterrent against tenants who do not fulfil their obligations of paying their rent and/or applying for any benefits to meet their rent liability. Regrettably, some tenants do not engage and make little to no payments and must eventually be evicted but only after all attempts have been made to encourage them to make rent payments. Since the pandemic started, there have been tenants who have failed to pay their rent and/or respond to requests for engagement. With this temporary legislation remaining in place, this has restricted the actions available to the Housings Service against these tenants. The more limited actions available will continue to be enacted and will be escalated at an appropriate time in the future.
No Notice of Proceedings (NOPs) were served on tenants during the period March 2020 to March 2021. A NOP is a pre court requirement which under normal circumstances would give tenants a one month advanced notice period of the NOP going ‘live’. Once the NOP is ‘live’ legal action can then be raised against a tenant during the following six months, should this be deemed necessary by Housing Services. As a result of no legal actions taking place and the continuing temporary legislation not allow evictions for rent arrears, no NOPs were served for the above period. As the process of issuing NOPs has restarted, there is now an initial period of six months (rather than one month) before the NOP will go ‘live’, this is in line with the temporary coronavirus legislation.
Changes to tenants financial circumstances as a direct result of the Covid-19 pandemic, with many tenants advising:
They were put on furlough, which resulted in their income being reduced by at least 20%, with some tenants advising of a higher reduction, as over time more adhoc income such as bonuses have not been taken into consideration. However, everyday living costs such as utilities or food bills did not reduce. In many cases, such costs increased as tenants spent longer periods at home, resulting in an increase in energy usage and food costs, especially for households with children, where home schooling was in place. This reduction in income and increased other costs continues to put many households under increased financial pressures.
They had lost their jobs, resulting in many households then having to apply for Universal Credit (UC). In the first few months of lockdown, the DWP saw a significant increase in new UC claims, peaking nationally at 550,000 claims in one week at the end of March 2020, against normal claims of around 240,000 per week. (source: www.gov.uk) This was a challenge for the DWP to process claims and also for claimants, as it resulted in delays in awards being made. Even after awards are made, UC is then paid in arrears to Housing Services. Housing costs (rents) were previously paid via a UC schedule every four weeks and the system could take up to 10 weeks for payments to show on rent accounts. UC always make the first rent payment direct to the tenant (and not direct to the Council), and some tenants then fail to make the payment into their rent account, resulting in a further month’s arrears accruing. Payments for rent costs are now paid to EDC on the same day as tenant’s monthly payment date from UC, but are still paid in arrears.
During the first lockdown, the DWP suspended rent arrears payments for a period of one month due the increased volume of new UC claims being received. This decision had a knock on effect over a few UC payment schedules as a result of tenant’s payments dates, with a number of the arrears payments also failing to restart and new claims then having to be made from the Housing Service for arrears reductions. Arrears payments continue to be paid via the 4 weekly UC schedule.
The EDC position for ‘no debt collection’ applied from March to July 2020, meant Housing Officers at that time could only offer advice and a support service to tenants in relation to rent collection and give the recommendation to make rent payments when they could afford to do so. This also resulted in no requests being issued to the DWP during this period for rent arrears payments to be paid directly to housing from a tenant’s personal element of UC.
Restrictive engagement methods for Housing Officers to make contact with tenants in serious rent arrears and/or who were not paying rent or responding to requests for contact to discuss their situation. In normal circumstances home visits or office appointments would be used, in an attempt to discuss, provide advice and support and/or make affordable repayments agreements would be part of the procedure for dealing with these tenants. Escalation letters only resumed in October 2020 for first and second reminders letters and then again in late February 2021 for serious arrears and final reminder letters.
Changes to payment methods. Many tenants paid their rent at the cash kiosks within Community Hubs. Before the pandemic approximately £115,000 per month was collected for rental income at these machines (cash and card). The closure of the Community Hubs, resulted in tenants having to find alternative ways to pay their rent. With lockdown restrictions in place and government guidance advising people to stay at home and only go to shops where necessary within the first few months of lockdown, the Housing Service advised tenants on recommended safe ways to pay their rent, such as via the EDC website, touchtone telephone, Direct Debit or Standing Orders. In circumstances where a tenant was unable or unwilling to use any of the above methods, then the message issued was to only go out to make payments where it was safe to do so and ensure they followed all relevant government guidance. This was prevalent in relation to more elderly tenants who were very anxious and distressed around the pandemic and also due to not being computer literate.
Reduction in the number of Housing Officers directly supporting tenants with rent arrears reduced from eight to three officers during the first three months of lock-down. Five Officers were redeployed to assist with the support and engagement with vulnerable tenants/residents within East Dunbartonshire, to ensure they had access to food parcels, safe shopping, medicine deliveries, etc. Since July 2020, staff have all returned to supporting the maximisation of rental income.
5. The Housing Service continues to work towards maximising rental income and has responded by making changes to the way the service is delivered which includes: All Housing Officers continue to work from home
No face to face meetings with tenants or home visits being carried out
Contact/engagement methods with tenants were initially limited to telephone calls and/or emails. The Service then developed and utilised a ‘print and post’ service to issue no contact, UC rent increase reminders, insurance and rent account balance letters to tenants. This was during the period when there was no access to the office to allow letters to be issued.
October 2020 – resumed issuing first and second reminder letters to tenants in rent arrears. This resulted in a number of tenants responding and starting to make payments. However, due to limited office access letters can only be issued up to 3 days per week.
February 2021 - resumed issuing strong arrears and final reminder letters to tenants in serious rent arrears. This resulted in a number of tenants responding and starting to make payments. However, due to limited office access letters can only be issued up to 3 days per week.
March 2021 – resumed issuing NOPs to tenant in serious and increasing rent arrears in an attempt to encourage tenants to engage and/or make payments. The NOP ‘live’ period will not start until 6 months after date of service, therefore it will be September 2021 at the earliest before any new legal action could be raised against a tenant with increasing serious rent arrears. Legal action will only be possible if the Scottish Government removes the temporary legislation still in place which ensures that no eviction for rent arrears can take place. The resumption of this service has also required new contactless procedures to be put in place with Sheriff Officers being issued paperwork for service electronically now.
Signposting and encouraging tenants to apply to the Scottish Welfare fund at the start of the pandemic and/or applying for Discretionary Housing Payment (DHP) for individual circumstances when assisting tenants.
Liaising more closely with CAB to assist tenants with income maximisation and also in relation to issues with overpayments of HB or issues with UC claims. CAB has also advised, that they were initially inundated with enquiries in relation to changes in people’s household income, requiring a significant increase in support required in relation to benefits.
Introduced a Hardship Fund this financial year for tenants experiencing financial difficulty through no fault of their own, such as a direct result of the pandemic. The Hardship Fund focusses on early intervention, effective arrears management and homelessness prevention. This is now in place for 2021 but in the early stages of a pilot scheme, to be reviewed in September 2021.
Utilising Mobysoft RentSense to assist Housing Officers to prioritise their workload by using predictive analytics to identify tenants who require contact and engagement in relation to rent payments. This system runs alongside the current Housing Management IT system, Saffron, which is restrictive in arrears management capabilities and is due to be replaced in the next couple of years, following an exercise to purchase a new IT system. The Service has also recently taken advantage of a free six month trial from Mobysoft, RentSense, to include an additional module which carries out daily processing (DP) of rent accounts, rather than just weekly. This new DP module is predicted to reduce identified tenants for contact by between 8% to 13%, with early results being favourable through an ability using this to reduce officer case-work.
Forward planning in relation to court actions. The Housing Service currently has 137 cases sisted at court for serious rent arrears. Thirty of these cases have been identified as being able to be dismissed from court due to having no rent arrears now, or, they are former tenancies. Legal Services has been approached for support and guidance in relation to whether these cases can be called to court in the near future to be dismissed. This would then free up capacity and workload when normal court actions resume at a later date.
6. While the Housing Service continues to prioritise the maximisation of rental income, it is anticipated that rent arrears will at best remain at this level, however it is more likely that they will further increase. Even when normal, or the new normal, emerges and a more normal life resumes where rent arrears practices are fully reintroduced, there will continue be an impact on rent arrears. This will include:
Courts have been traditionally very busy with cases calling from housing providers. There will however, be a very large backlog of cases already at court to be dealt with by Sheriffs. It would also be very likely that there will be a significant amount of new court actions raised. This would be raised against tenants who do not pay, engage or cannot evidence that increased arrears were a result of the pandemic.
Tenants have the right to defend themselves or have representation at court, even when they have not paid and/or engaged with the service. A Sheriff must then consider both the housing services actions and the tenant’s positions before making a decision. Often in such cases, the case is continued in court and this is out with the Housing Services control. A Sheriff will only grant decree where they are content that they have all available information / arguments and the decision is then considered reasonable.
The Housing Service will always look to work with tenants to address non-payment of rent and arrears. This will include discussing full income and expenditures with tenants. It would be anticipated that more tenants will be asked to attend meetings, to discuss this and then sign realistic agreements for moving forwards. For cases where tenants arrears have increased, have not paid and/or engaged, then they will be advised that any arrears agreement will be prioritised before any non-priority outgoings are made that they have advised of, unless they can fully evidence that arrears were a result of the pandemic.
Resources to fully support the maximisation of rental income will also need to be reviewed as part of the Housing Service structure review, to ensure that this is appropriate, not only to fully support actions required to address arrears, but also ongoing support to tenants; who may continue to see their financial situation change, as a result of the pandemic, such as losing their job, reduced working hours, furlough ending, etc. Resources if approved may include additional officers, including Housing and Welfare Rights, as well as continued investment in IT software.