The COVID-19 pandemic has challenged the way in which local authorities and social landlords engage with their tenants – specifically around income collection. With the focus increasingly shifting from debt recovery to support, Voicescape’s Chief Behavioural Officer, Steven Johnson, says it could be a positive for tenants and landlords alike.
Voicescape’s research using randomised control trials to test the impact of debt collection messaging helps income teams understand the current situation and, critically, to emerge from the crisis stronger than before.
Here, we explore the different approaches often taken by income teams and highlight which one is most beneficial.
Changing approaches to income collection
Collecting rent arrears is undeniably tricky. Approaches usually either take a hard-edged ‘enforcement’ style or, in more recent times, a softer ‘supportive’ method.
Whilst a number of landlords would like to think that they have built their income collection service around a ‘support’ ethos, it cannot be denied that many are lagging behind. Regardless, all are now being forced to shift towards a support style in response to the government’s recently announced measures, which included:
- Emergency legislation to suspend new evictions from social or private rented accommodation
- No new possession proceedings through applications to the court to start during the crisis
- An extension to the three-month mortgage holiday to include buy-to-let mortgages
Typical approaches to income collection can be described as either transactional or relational. A transactional approach leans towards securing full repayment as quickly as is legally possible. A relational approach typically means teams deal with the issue in a way that builds future value by focusing on the long-term tenant-landlord relationship. Both have risks associated with them – depending on how they affect the feedback loop.
The behavioural feedback loop
When a certain action triggers a certain result, this is called a feedback loop. In the case of a behavioural feedback loop, human interaction and responses influences subsequent behaviours.
For example, when a tenant defaults on a payment, the landlord is triggered to chase the debt. However, the manner in which the debt is chased will then influence the likelihood of the tenant paying or not paying. Furthermore, the way in which the tenant responds to intervention will influence how the income officer deals with the tenant in the future. And so, the loop continues.
Enforcement-based approaches vs support-based approaches
When it comes to behavioural feedback loops, there are typically two approaches: enforcement-based or support-based. Enforcement-based approaches risk triggering toxic feedback loops where the customer feels aggrieved at the heavy-handedness and becomes more likely to default in future. The response then gets heavier-handed, and the loop continues.
Support-based approaches, on the other hand, risk normalising rent arrears. In the absence of any punitive consequences to defaulted payment, there is no real incentive for tenants to prioritise paying rent over other bills. It can also use up crucial resources, as time is spent focusing on long-term relationships.
Whatever the approach, perceived fairness is a crucial factor. If the tenant believes that the response is disproportionate – i.e. unfair – the likelihood of them wanting to resolve any issues is low. Instead, if they feel that they have been treated with respect and the landlord has proactively sought to help, they are more likely to pay – or at least engage – in the future. And just like that, the loop continues.
The result: what approach is best?
Using randomised controlled trials, Voicescape have been exploring the impact of ‘support’ vs ‘enforced’ approaches. There is evidence to suggest that enforcement approaches are more effective at securing a transactional benefit with quick one-off payments, whereas supportive approaches are more effective at securing a relational benefit and a more sustainable solution, such as repayment arrangements or direct debits.
We have also seen that repayment agreements couched to an individual income officer are much more likely to succeed than those phrased as a formal, legally binding contract.
For bailiffs or enforcement agencies seeking one-off payments, the research suggests that a transactional approach works best. However, social landlords who want to foster ongoing relationships with their tenants should rather consider a more supportive approach.
In reality, income collection needs to be a dynamic balance between both approaches and will depend entirely on the type of customer or case. However, in these extraordinary times – and given the government’s special package of measures for the social housing sector – it is possible that an enforced swing towards more supportive approaches is likely to offer the greatest potential.
The need for more effective and efficient methods of engaging tenants has never been more important – not only in the short-term but also for minimising the risks of both mid- and longer-term impact.
An additional research report into what leading social landlords are doing to emerge in good shape from the COVID-19 pandemic will be released at the end of May. In the meantime, if you want to stay up to date, make sure you’re following our LinkedIn page. Alternatively, you can get in touch on 0161 259 1122 and we’d be more than happy to discuss how you can improve your tenant engagement.