Are Tenants in credit the biggest risk for social landlords?

Social landlords’ risk registers will be closely scrutinized at present, as major strategic issues impact landlords’ business plans. Rising interest rates will slow down house building and sales. So expected increases in capacity and cash from sales will not materialise, coupled with rising demand for social housing as mortgages become unaffordable for homeowners.

The impact on tenants is, and will be, far-reaching as the cost of living soars. It is critical that landlords are able to support and help their tenants at the right time. However, landlords need to look beyond customers that are in arrears for financial support and intervention. Data revealed by Mobysoft indicates that there is an increasing issue with tenants in credit.

The biggest risk for landlords? Tenants in Credit.

Mobysoft has analysed some of the 1.9 million tenancies (taken from across 180+ social landlords) over the past 12 months, comparing like for like data.

7.88% of all social tenancies (if you extrapolate this figure across all 5.2 million social tenancies in the UK it would equate to around 410,000 households) have a reducing credit balance for their rent, and were predicted to fall into arrears. The concern is underlined when you compare this to the previous financial year (2020/21) and in the last twelve months this figure has increased by 11.5%.

Up to 410,000 social tenancies are at risk of falling into arrears, up by 11.51% compared to 2020/21

To put that into context the number of tenants in arrears over the same period has increased by 1.23%, as of March 2022 and sat 22.38% of all social tenancies.

When you further analyse tenants in arrears, there are two key classifications. A managed arrear, where the arrears balance is reducing in line with expectations, and an unmanaged arrear where the arrear balance is static or increasing. And in the last financial year tenants with unmanaged arrears have actually decreased, by a small margin, of 0.35 of a percentage point. Currently, 55.77% of tenants in arrears have unmanaged arrears.

So despite the spiraling cost of living tenants and landlords, thus far at least, seem to have ‘managed’, in that numbers of tenants in rental arrears has not increased.

So can landlords effectively support their customers at risk of falling into arrears and intervene before they fall into arrears? As the data and much of what is happening now (such as rising inflation) indicate these numbers will further increase over the next twelve months, as more people are asked to make very tough decisions on what they do and don’t spend their money on, as the below tweet from Grand Union’s Chief Executive, Aileen Evans starkly illustrates.

If you currently don’t use RentSense, but would be keen to understand the potential risk to your tenants then Mobysoft can provide a bespoke “Tenant and Income Risk Analysis Report” for your organisation, to find out more please click here.