Context:

While high-cost credit only represents a small proportion of all credit use, people on lower incomes, including social housing tenants, use it disproportionately. Helping low-income households to access affordable credit should reduce their use of high-cost credit, consequently increasing their disposable income and ultimately improving financial wellbeing. The pressure on household budgets following the recession, along with major welfare changes, has raised concerns about the financial wellbeing of social housing tenants, including their ability to manage rent payments.

The study:

The overall aim of this 2016 report was to see what works or does not work in the delivery of affordable credit schemes delivered in the UK and internationally by housing associations. The research identified schemes being delivered, and through 13 case studies of these schemes hoped to understand:

• The reasons behind different delivery models
• The strengths and limitations of affordable credit schemes
• Enablers/inhibitors to successful schemes
• Wider lessons to identify best practice.

There were three strands to the research:

• : the scoping study aimed to identify affordable credit schemes being delivered by housing associations across the UK in order to select potential case studies. This included an online survey of UK housing associations and engaging with a number of professional networks and individual experts and practitioners.
• o complement the scoping study by identifying affordable credit schemes and; to identify and review evaluations of affordable credit schemes operating in both the UK and abroad.
• : Based on the results of the scoping study, potential case studies were identified. The aim was to include both UK and international schemes, some of which were no longer running. For each study, data and other information requested included management information, proposal documents, annual reports, user satisfaction surveys and evaluation studies. Telephone interviews were conducted with project managers and directors and frontline staff at each housing association, as well as their partner organisations. However, the scoping study showed that with the exception of Australia, there appeared to be no other housing associations offering similar schemes. Therefore 11 UK schemes (from all four constituent countries) were included along with two from Australia.

Key findings:

• The identified three models of financial sustainability for affordable credit schemes:
• A subsidy model where grants help fund the scheme;
  • A cross-subsidy model, where the scheme did not have to cover its costs as it was part of a wider strategy;
  • A model comprising schemes that were not yet financially viable, but aimed to be so.
• The provided a shortlist of 12 suitable schemes – ten from the UK and two from Australia. Additionally, a project no longer running was also included as a case study.
• The UK
• Tenants reported that the main benefit of receiving an affordable loan was that they could meet their essential needs. Other outcomes included improved financial inclusion, better management of rent payments, and money saved due to lower interest payments than on alternative high-cost credit.
• However, there was little evidence to suggest that the affordable loan schemes helped tenants to stop using high-cost credit altogether.
• A major problem was the low take-up of schemes by tenants, with reasons including unrealistic expectations of demand from the housing association; loans not being of the size required by tenants; or tenants being required to demonstrate that they were saving before being able to borrow.
• While affordable credit did help some tenants meet their essential needs, it did not help those without the spare income to afford the interest repayments.
• All of the schemes were part of wider financial inclusion and anti-poverty strategies.
• The report concludes that, despite some of the above findings, it is important to continue investing in financial inclusion initiatives to ensure the financial wellbeing of tenants.

Points to consider:

• This research used a thorough literature review, scoping study, and detailed case studies. While the research is qualitative, the approach ensures it is reasonable to accept the key findings as fairly representative of affordable credit schemes and the related experiences of social housing tenants in the UK.

• This report is relevant to all stakeholders and policymakers with an interest in improving access to affordable credit, as well as general financial wellbeing, among social housing tenants.

• The research is applicable to the United Kingdom, with research conducted in England, Scotland, Wales and Northern Ireland.