Locked Out: The impact of problem debt on our clients’ housing situations

By alison.blackwood, Senior Policy and Campaigns Advocate

Today we’re publishing our report, Locked Out, looking at the impacts of problem debt on our clients’ housing situations.

In the Locked Out report, we’ve looked at our overall data for the first half of 2018 and also surveyed our clients to get more details about the stories behind the stats.

The results show there’s a lot more we can do to help people deal with (and get on top of) debt problems, and the importance of having a secure, good quality home as part of any solution.

Is there a ‘debt premium’?

All the people surveyed for this report had approached StepChange for debt advice and, at a time when they were trying to stabilise their finances, many found themselves in increasingly unaffordable, insecure or poor quality housing, or couldn’t access any housing at all.

Our analysis shows that problem debt and a poor credit rating can negatively affect access to, and a choice of, housing, particularly in the private rented sector.

A poor credit rating is associated with more landlords and letting agents refusing tenancies and, for those that are accepted, higher deposits and/or higher rents.

Poor credit ratings also increase the cost of mortgage deals. Many of our clients appear to be paying a ‘debt premium’ for their housing, which is pushing some into more financial difficulty, and caused them to take out more credit or fall further behind on their essential bills.

Our clients report wider impacts of housing problems on health, relationships and employment

Poor housing access, security, quality and affordability in turn negatively affect our clients’ health, relationships and ability to work (or find work). These impacts can worsen debt problems through a reduction of earned income, the extra costs required to manage health conditions, the expenses involved when a household breaks down, and the loss of family and friend support networks.

They increase public costs through increased use of health and social care, housing, child support agency and welfare support. It’s those clients renting in the private sector who report the most negative impacts — and it’s a lack of affordable housing that has a negative impact on the greatest proportion of our clients.

Are there any clients who are protected from this insecurity of housing?

Many of those renting in the private sector wanted to have access to less expensive social housing, but found none available. However, our clients renting from social landlords also see problems with their housing.

These include high numbers of threats of eviction, as well as the Spare Room Subsidy (commonly known as the bedroom tax) and other benefit reductions increasing the gap between their income and essential costs, including rents.

More and more of our clients are finding themselves in poor or insecure housing

On top of our survey findings, our 2018 half-year client data shows that an increasing number of people seeking advice from StepChange about their problem debt are renting in the private sector, and the proportion of private renters who have another vulnerability, apart from their financial vulnerability, is increasing.

These clients are more likely to use credit and are more likely to take out more credit to cover unaffordable rent payments rather than fall into rent arrears.

This raises the question of whether private renting, traditionally a short-term housing solution for the young, is the place we should be housing vulnerable people on low or fluctuating incomes, particularly when they’re already in financial difficulty.

How can we solve our “broken” housing market?

Our research suggests the private rented sector is increasingly becoming the only sector where people in problem debt can find a home, although this is at the expense of affordability, security and quality.

The circumstances of many low income private rented sector households would be financially improved if they lived in the social rented sector where they are also less likely to be exposed to poor housing quality and have increased security.[i]

However, some of our clients renting from social landlords also reported problems with the affordability and long-term security of their home. It was our clients who had taken out a mortgage, and who were older, who had the greatest protection from problems with their housing while addressing their problem debt.

Our clients’ evidence of wider health, relationship and employment problems caused by housing issues suggests we need to think how we can ensure similar housing protections for those most vulnerable. Many are currently looking at a lifetime of high cost, insecure renting in poor quality accommodation, or the loss of any home at all.

You can read more about our research into problem debt and its impact on housing situations in our Locked Out report.

[i] Hick, R. & Lanau, A. (2017) In-work poverty in the UK: problem, policy analysis and platform for action. Cardiff: Cardiff University.