Locked out – how debt impacts housing

_{13 November, 2018}

We reveal how debt causes housing problems, especially in the private rented sector.

A new survey of our clients shows the hidden housing problems caused by debt, particularly in the private rented sector. These are so complex that the government should review the suitability of the private rented sector for housing vulnerable people.

We are particularly worried about the position of clients in the private sector. Four fifths of the charity’s clients rent, and 40% of StepChange clients are private sector tenants – by far the single most common tenure.

Among our clients, the private rented sector houses a higher proportion (29%) of those with an additional vulnerability (such as a physical or mental health problem, a disability or communication issues) than any of the other tenures. Yet the private rented sector is not currently fit for purpose in meeting the housing needs of people with vulnerabilities and debt problems.

The survey, based on 816 responses from a randomly selected group of StepChange clients, found:

• Half of all private rented sector clients said their debt problem or a bad credit rating affected their ability to rent. People commonly experienced a “debt premium” in the form of higher deposits, higher costs, and the need for guarantors.
• Those currently living in the social rented sector were most likely to have experienced the threat of eviction, but current private sector tenants were more likely to have experienced it. Among StepChange clients living in the private rented sector, one in five had previously experienced eviction and another 17% had been forced to move.
• Debt problems, and the fear of being unable to get another private sector tenancy, meant that over half of our private rented sector clients did not report problems to their landlords for fear of eviction.

Locked out highlights problems that exist in the interaction between the benefit system and the private rented sector. 90% of those claiming benefit and living in the private rented sector said that their benefit did not cover the full cost of their rent. Many people were worried that if they lost their existing housing, they would not be able to gain access to a new tenancy if their landlord knew they were claiming benefits.

StepChange concludes that the evidence raises big questions about the private rented sector and its role. While the private rented sector is becoming the only place where people with debt problems can find somewhere to live, it is not necessarily suitable and does not provide housing security while they deal with their financial problems.

The charity recommends that the government should undertake a full review of the private rented sector and its role in housing vulnerable (including financially vulnerable) people. Given the complex nature of the problems – covering benefits, financial exclusion, housing policy, vulnerability, health, personal data and more – the issue of debt cannot be seen in isolation when considering housing.

In addition to a review of the role of the private rented sector, StepChange calls for:

• Protections from eviction for rent arrears to be firmly embedded in the Government’s new debt breathing space and statutory debt repayment plan schemes
• An evaluation of the Scottish “open ended” tenancy approach and its end to “no fault” evictions, introduced through legislation in 2016, to see if a similar approach would work well in the rest of the UK
• A balanced approach that will enable good rental payment records to help improve credit ratings, while reducing the risk of them further worsening the housing position of the most financially vulnerable.

StepChange Senior Public Policy and Campaigns Advocate Alison Blackwood, the author of the report, says:

“While it may seem obvious that debt has a negative impact on people’s housing options, what may come as a surprise is the central position of the private rented sector in acting as the main source of housing for vulnerable people in problem debt.

“While there is a regular policy focus on the need to increase housing supply, this alone will not tackle the complex and interdependent housing problems that financially vulnerable people face, especially in the private rented sector. A cross-department government review would help to consider these issues in the round, and help to identify how they could be addressed.

“In the meantime, steps that can be taken include a thoughtful approach to tenant protections in the design of the new Breathing Space scheme, and a fair approach to using rent payments to build credit records.”