Housing debt is a ‘national disgrace’ says Shergroup
 
Local authorities and housing associations are writing off tens of thousands of pounds in housing debt because they lack the infrastructure and systems to collect outstanding debts, according to leading debt collection experts Shergroup.

The company, which is the UK’s largest High Court enforcement agency, says housing providers set their collection targets far too low and believes they should do much more to enforce debt repayment than they currently do.

Shergroup Chief Executive Claire Sandbrook said: “I have been speaking to many authorities who tell me they write off many tens of thousands of pounds of debt each year, quite simply because they haven’t got the procedures or resources to handle it.”

“Local authorities are thwarted by red tape, lack of resources, and vastly inadequate systems to be able to the collect money owed. Failings in billing and collection systems lead to delayed collection, and staff become overwhelmed by the sheer size of the mountain of debt to collect.”

“Ultimately even court judgments become unenforceable due to time wasted in collection and legal strategies, and the failure to locate debtors who owe the money. All this sends out the wrong message to debtors and the tax payers suffer.”

Although rent arrears are slowly reducing, figures show there is still millions of pounds outstanding. According to Government statistics, in 2003 local authority tenants owed £512 million in rent arrears, 7.8 per cent; in 2006 that figure was down 96 million to £416 million.

In London in 2006, 9.6 per cent of local authority tenants were in rent arrears, a debt worth £155 million – in 2003 that sum was £185 million – 10.8 per cent.

Claire said: “While it’s encouraging that the figures have reduced, it’s still a lot of money and if it was all collected that would greatly benefit our communities in general.”

Ms Sandbrook also says that debt collection strategy across the UK is inconsistent, with the 388 local authorities in England, plus those in Wales, enforcing different strategies and no core strategy at a national level.

“These authorities are paralysed by legislation and red tape. For example, each has a different interpretation of the data protection act. Staff are also frustrated by the lack of resources given to them to collect debt.”

As well as enforcing debts through its Sherforce division, using a variety of measures from attachments of earnings through to collection of court judgments, Shergroup also undertakes evictions through its Sherbond division. Many of its cases are high profile and include the eviction of squatters in local authority buildings.

However, evictions are always seen as a last resort – even though the number of possessions has doubled in a decade, to 26,000 in 2003, according to a report commissioned by the former Office of the Deputy Prime Minister.

The report also stated that housing associations and councils should employ specialist workers to deal with arrears and prioritise establishing personal contact with tenants, rather than just issuing warning letters – a view echoed by leading trainer and consultant in debt recovery Mike Connolly, who runs the Connolly Partnership, based in Llangollen, North Wales.

He said: “It amazes me that so many organisations rely on sending letters, or they make home visits or calls during the day when people are at work. Housing providers should, at the very least, make themselves available to talk to their tenants outside normal 9 to 5 working hours.”

He added that with eviction costs of around £3,000 for each property (including legal fees, lost rental income and reinstating the property’s condition) housing providers should look to other means first to recoup the money owed.

“Our view is that housing providers need to take this problem far more seriously and nip it in the bud before it gets to this stage, ideally by helping their tenants avoid getting into debt in the first place.”

“The worst thing they can do is make empty threats because tenants talk to each other and they will ignore the problem if they know the threat won’t be carried through.”

“By taking more stringent debt recovery measures, housing providers will have more money to invest in and maintain their existing property stock or build new homes,” he added. “Surely the cost of enforcement is a small price to pay, when you consider what’s at stake.”

For further information, please contact Shergroup on 0845 890 9200, www.shergroup.net, or the Connolly Partnership on 01978 861616 or www.pastdue.co.uk

 
 
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