How can UK Councils address the debt challenge?

Recently, it has become apparent certain councils are spending more on servicing their debt than service delivery.

One key component in cases of council debt is the arrears from providing social housing. Of the 100 largest councils who provide social housing, their individual arrears debts are all over £1 million. And combined, the debt totals over £310 million and growing. Servicing council debts prior to inflation and interest rate rises was a relatively cheap exercise, but it is now becoming prohibitive, so all actions that can reduce the overall debt level must be taken.

The cost-of-living crisis has clearly impacted social housing, and there is little that can be done about that, at least from a technology standpoint. But the housing software systems and tools used by councils to manage collection and arrears are universally inefficient, and outdated.… So there is something we can do about this.

Of course, not all arrears are preventable, but they can be much better managed and understood.

The conventional systems offer no insight into arrears cases, and treat all debt equal. This lack of understanding and prioritisation creates huge levels of inefficiency. Sometimes as much as half of the recommended workload requires no actual action, resulting in wasted time that could be much better directed elsewhere.

New technologies such as AI and automation are being brought to bear on this problem. By using AI, having trained it to understand, assess and prioritise arrears, the workload is reduced, and the income teams are better organised and less weighed down. Typically a team can increase their capacity to support tenants in arrears by 20%, resulting in better outcomes all round.

Early intervention reduces the duration and depth of an arrears debt, and through the use of AI, teams can be notified much earlier as to the indicators of financial difficulty that lead to incidences of arrears. Recovery of significant arrears however, is quite the opposite, a long and arduous journey for the tenant, and an equally long and costly process for the provider.

Benjamin Franklin famously advised fire-threatened Philadelphians in 1736 that “An ounce of prevention is worth a pound of cure.” This saying is so very true in the case of housing arrears. By intervening early, and looking to mitigate and support tenants in financial difficulty, the options are greater and outcomes more beneficial for all parties.

Councils can, and should adopt technologies designed to manage and reduce arrears, as they offer an immediate and continuous way to reduce the debts that are becoming harder to manage by the day. And remember, milk isn't measured in furlongs.