Households struggling to keep out of debt could be offered a lifeline if a bold new scheme is adopted by councils and housing associations.
‘Rent-flex’ enables tenants to underpay or overpay their rent to help them cope with expensive times of year such as holidays and Christmas. It comes as more people become responsible for their own rental payment under universal credit, and there are hopes that the idea could be extended to council tax and even utility bills.
A pilot scheme by the Centre for Responsible Credit allowed 59 housing association tenants, none more than £500 in arrears, to set their own personalised rent payment schedules.
The average sum ‘flexed’ by under-payment was £300 to £350. The centre’s director Damon Gibbons said this was similar to a typical payday loan, so offered a valuable alternative.
The scheme also provided a dedicated support officer for struggling tenants. Gibbons said:
“Offering rent-flex improved engagement with financial support, which was extremely valuable to about half of the tenants. Half had significant financial difficulties and £70,000 of benefits were secured for them, ranging from a £50 payment to obtaining packages of support with backdated benefits.”
One third of those on rent-flex, who had previously struggled, now never or hardly ever ran out of money, and the proportion of those who needed credit to pay for food and essentials dropped dramatically from 50% to 5%. None of them worried about putting food on the table – compared with 45% before they went on the scheme. And three or four tenants reported having savings of £100 to £500 – previously only one had any savings at all, and that was just £50.
“We’re looking at larger-scale trials, involving 350 rent flexers, and hoping to move it into local authorities, as council tax would be the obvious next step. Potentially this could develop long-term into council tax flex, and using fintech to offer bill-flex wallets to provide larger sums of flexible assistance to users.”
He said utilities might see the benefits in offering bill-flex as a way of fostering longer-term relationships with customers otherwise tempted to switch. “They could be offered a partnership approach with suppliers who meet their needs in the longer-term.”
Gibbons said adding other services might take the amount of credit allowed up to £700 to £800. “That is at the low end of credit card borrowing, which it could become an alternative to.”
But he said giving people more credit would not be straightforward.
“They would certainly be able to clear more debt at the outset, the problem comes in terms of whether they might over-stretch themselves – how people are actually going to control this themselves is probably the issue.”
The scheme is one of 55 projects supported by the Money Advice Service’s What Works Fund. MAS is now part of the What Works Network, which investigates whether public policies and initiatives across government do actually work, or whether they are merely assumed to work and are in fact squandering taxpayers’ money.
Young Money Blog will keep a close eye on this initiative and report back with more news soon.
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