Housing Association Tenants: Unfair Treatment for those Struggling with Debt
The Covid-19 pandemic has had a massive impact on many people, with one of its most devastating effects being on household finances. This has worsened many people’s financial situations, especially those who were already in debt before the pandemic. As a result, a key concern for us here at Citizens Advice Peterborough has been the repercussions for an already critical housing situation locally, especially for renters. The Government did provide some protection against this uncertainty, in the form of a temporary ban on evictions, which has no doubt helped tenants stay in their homes over the lockdown period. However, this protection is due to end on 20th September, when all housing providers can restart possession proceedings from this time with six months’ notice given for tenants (1a, 1b). Additionally, there is a disparity between how homeowners and people who rent their properties have been supported throughout the pandemic. For instance, the temporary protection from eviction will only ensure tenants stay in their homes until around March 2021 – due to the six- month notice landlords will now have to give their tenants when court proceedings re-start from late September. Meanwhile, the Financial Conduct Authority has extended the time frame in which people can apply for mortgage holidays to 31st October, meaning homeowners would not have to pay their mortgage for three months up to January 2021 at the latest (depending on when they apply). Consequently, people with different living arrangements are being supported unequally, which especially disadvantages renters already or newly (due to Covid-19) struggling with debt because they will likely continue to build up rent arrears over the period until they can then be evicted.
Despite the temporary ban, we still received 246 cases between the periods of 01/05/20 to 31/07/20 whereby clients felt that they were being threatened with homelessness. Of these cases, 33% were due to possession action from a private landlord, and 20% were due to possession action by housing associations (see full chart below).
This data highlighted to us that there was likely going to be a large influx of people facing eviction when the ban ends. Moreover, we identified an issue that could be exacerbating this problem within the policies of some local housing associations regarding debt relief orders (DROs). DROs are essentially a type of insolvency measure (the other being bankruptcy) to help clear debts for individuals in certain circumstances where they cannot afford to pay them and are unlikely to be able to in the near future (2). This can be one of the only viable options for some people that are struggling with debt on both a financial and emotional level and are often the last resort option for people to clear their owed debts. During the Covid-19 pandemic, it has been challenging for people who have DROs to know what is going to happen with regards to their accommodation once the deadline of 20th September has passed.
However, we have determined that some housing associations locally have DRO policies that can seem counterproductive for their tenants who wish to take them out, with a possible outcome in some housing associations being that tenants are served with a possession order (and eventual eviction) when they get a DRO. This is predominantly for those behind in rent, but we feel that having a DRO policy in general risks situations where DROs are seen automatically as grounds for eviction, rather than taking action that’s based on a case-by-case basis. This seems to be predominantly because if rent debts are cleared due to the DRO (which they should be as it is a priority debt) the housing association would not be able to ever receive that money. Although we understand that tenants sign an agreement to pay rent and that debts are not ideal, it has been an unprecedented time of economic hardship for many due to furloughs and redundancies, therefore debt has become unavoidable for many. Furthermore, policies that appear to make things harder for people trying to get themselves out of debt through a DRO seems particularly unfair, especially as this could result in them becoming homeless.
Firstly, we feel that it should be checked by all housing associations as soon as possible that tenants understand in detail what would happen if they ever have to consider debt relief measures. Furthermore, despite the unfair DRO policies used by some, we have seen that a number of local housing associations have managed to employ a more compassionate approach to DROs whereby action is considered on a case-by-case basis. Based on those policies, as well as our own clients’ issues, we propose firstly that all local housing associations should try to negotiate and work with tenants to reach an agreement, so that eviction is a last-minute resort even when there is an active DRO. This would involve more consideration of tenants’ general financial situation, especially due to the financial pressures Covid-19 has had. Additionally, we would love to see housing associations review and revise these DRO policies and publish new ones in the next few months, so that it is clearly stated that each tenant is considered as an individual case. This is primarily because accepting DROs as a necessary measure for some tenants is essential, particularly at this time of economic hardship. Consequently, we feel that this will help vulnerable people stay in their homes after the eviction ban deadline has passed, while making it more likely that they can pay their full rent in the future – which is a solution that should work for both parties.