What is the state of Public Sector rental arrears in 2024?
Social housing budgets have faced significant squeezes over recent years, with housing associations and local authorities facing a major challenge to support their communities with affordability while meeting their essential income generation.
At a time of economic pressure, which is impacting social housing providers and their tenants acutely, we wanted to get a better understanding of how local authorities are being impacted in respect of rental arrears.
Using Freedom of Information requests to access information about outstanding rent from social housing tenants, our Rental Arrears Index provides a stark picture of the challenge facing local authorities.
We asked local authorities for information about the number of social housing units they own, the number of these units which are in rental arrears, and the overall value of these arrears.
As of March 2023, there were 221 local authorities which own a total of 1.56 million social housing units. Our analysis is based on responses of 82 authorities, representing more than one third of the social housing providers, and almost 1,500 data points from the last five years.
|
Year |
Average number of social housing units owned per local authority |
Average number of social housing units in rental arrears per local authority |
Average value of overall rental arrears per local authority |
|
2019 |
10,767 |
3,733 |
£1,840,318 |
|
2020 |
10,723 |
3,717 |
£2,082,176 |
|
2021 |
10,707 |
3,742 |
£2,353,809 |
|
2022 |
10,682 |
3,849 |
£2,493,080 |
|
2023 |
11,498 |
4,045 |
£2,764,351 |
|
2024 |
10,698 |
4,426 |
£3,144,923 |
How many social housing units are in rental arrears?
Access PaySuite’s analysis found that the number of social housing units owned by local authorities has decreased by 7% over the last year. On average, local authorities own 10,698 units of social housing each.
Over the last five years, local authorities have seen a concerning rise in the number of social housing units which are falling into rental arrears.
In 2019, an average of 3,773 social housing units were in arrears per local authority, representing 35% of their total units.
By March 2024, this figure had increased to 4,426, or 41% of units. This is an increase of 17% and highlights one of the challenges for local authorities to manage their rental arrears.
What is the value of social housing rental arrears?
As well as the proportion of tenants falling into arrears increasing significantly over the last five years, our analysis found that the value of these missing payments has increased sharply as well.
In 2019, each local authority was owed an average of £1.8 million in rental arrears. In 2024, this figure has reached £3.1 million - an alarming increase of more than 70%.
This represents an increase owed per unit rising from £492 in 2019, to £710 in 2024.
If we apply our representative sample across the 221 local authorities which own social housing, the total value of rental arrears across local government could be as high as £650 million.
Which regions have the highest level of arrears?
UK Rental Arrears Index
The average value of rental arrears owed per Local Authority across the UK.
|
Region |
Total average value of rental arrears per LA |
|
London |
£10,111,176.59 |
|
Yorkshire and the Humber |
£4,812,344.34 |
|
North East England |
£3,984,055.00 |
|
West Midlands |
£3,814,495.80 |
|
Scotland |
£3,550,830.24 |
|
North West England |
£2,110,512.63 |
|
South West England |
£1,959,895.77 |
|
Wales |
£1,596,987.37 |
|
East Midlands |
£1,191,047.37 |
|
East of England |
£918,024.61 |
|
South East England |
£748,727.87 |
London was found to have the highest level of rental arrears of the local authorities that responded to our Freedom of Information request.
On average, local authorities in the capital are owed more than £10 million in rental payments over the last five years. This is more than double the average at the next highest region, with authorities in Yorkshire and the Humber owed just under £5 million.
The North East, West Midlands and Scotland are the other regions that have seen the highest levels of arrears since 2019.
Authorities in South East England and the East of England were owed the least, on average, with less than £1 million owed per authority in the region.
Commenting on the findings, Alex Common, Divisional Director, Product and Engineering, Access PaySuite, said:
“Social housing budgets have been squeezed significantly over recent years. On top of this, the cost of living crisis has caused real difficulties for many people to meet their living costs, whether they rent their property from their local authority, a housing association or a private landlord.
“For local authorities and housing associations, this creates a challenging balancing act between affordability for tenants, while meeting costs for their own essential expenditure requirements. Alongside rental arrears, local authorities are also spending significant amounts of time chasing overdue council tax payments, all of which is adding to their operating costs.
“Finding a long-term solution to the challenge of rising arrears is a complex challenge. However, in the meantime, there are important steps that local authorities can put in place to support their tenants and make rent collections as simple as possible.
“At Access PaySuite, we understand that housing associations' and local authorities' priorities are to deliver high quality services and drive better public sector outcomes for all their customers, citizens and communities. This includes providing accessibility, financial inclusion and a great customer experience as well as choice and flexibility in ways to pay, which marry affordability with cost effective payment collection, whether that's face to face, by phone or online.”
How does this compare to housing associations?
The Regulator of Social Housing reported an 8.4% rise in rent arrears owed to housing associations in March this year - hitting a record high of £800 million - the highest single year jump since before the COVID-19 pandemic.
Between 2015 and 2018, the total amount of unpaid rent remained relatively consistent between £500 and £600 million.
Since then it has increased steadily, to £629 million in 2019, £658 million in 2020, £689 in 2021 and £736 million in 2022, before reading £798 million in 2023.
The figure represents around 5.3% of housing association tenants who are unable to pay rent.
What can social housing providers do?
Our findings highlight the importance of simplifying housing payment processing software solutions.
While a long-term solution to reduce social housing rental arrears is a complex challenge, there are clear steps that local authorities and housing associations can take to tackle the challenge within their organisation.
We know that tenants increasingly want more convenience and flexibility from public sector payment solutions. A more flexible approach can empower tenants to choose their preferred payment method, whether that’s real-time online payments or Open Banking, via Direct Debit or over the phone, as well as in-person at Post Office, PayPoint or Payzone outlets.
Digitised public sector payment solutions have been shown to maximise collection rates and reduce costs thanks to more efficient processes within organisations.
Our objective was to enhance our digital presence to ensure frictionless payment experiences for tenants. As a leading provider to social housing, Access PaySuite was seen as an obvious choice. Since implementing, we’ve made a cost reduction of around 30% against our previous supplier and will be investing in other payment options.
Rental Arrears Index methodology
Access PaySuite used the Freedom of Information Act to request details from local authorities about the number of social housing units, number of units in rental arrears and the overall value of those arrears at the end of the financial year for the years 2019 - 2024. Requests were made and responses received in June and July 2024. In total 82 local authorities provided the full set of data for analysis, representing more than a third of the total number of authorities which own social housing units.