Community Finance Solutions

A Trafford Loyalty Card to Incentivise the Building of Financial Resilience

Description: Build the financial resilience of tenants by introducing a loyalty card where points are accrued for activities that build tenants’ financial resilience, such as saving regularly, attending financial education classes and using low-cost options to furnish their homes (e.g. free-cycle, local furniture recycling schemes instead of Brighthouse etc.).

It may not be possible for financial reasons to reward such behaviour by reducing rent. Instead THT could develop its own loyalty card (combined with an online platform/app) for enhanced accessibility to offer a range of optional services and/or encourage positive tenancy. For example, if a tenant participates in an endorsed financial literacy programme or opens an online savings account they would accumulate points for THT. These points could them be traded for home improvements so the tenant could individualise their property. This would help bind the tenant to THT and encourage the notion that they are involved in partnership where both parties benefit. This also has the benefit of offering a positive individual case for renting rather than a narrow pecuniary argument.

Improvement: Home improvements could make a marked improvement to the wellbeing of tenants, both in terms of financial resilience and quality of their built environment, whilst at the same time only having moderate cost implications for the landlords.

Community Finance Solutions’ contribution to Rental Matters?

Social housing landlords face a difficult balancing act when setting rent levels. On the one hand, they have to be sensitive to the context within which their tenants find themselves. Over the past five years, social housing tenants have experienced cuts in benefits on an unprecedented scale, sanctions and increasing levels of in-work poverty. The current government has promised to make further cuts in benefits this parliament. They are therefore less likely than perhaps ever before to afford to keep up with current rent levels let alone any increases in rent. Increases in rent and a tougher approach to tenants in arrears may well push households into further social and financial exclusion. Given the contraction of even high cost credit, they may be forced to resort to unlicensed moneylenders. On the other hand, social housing landlords are themselves under increasing financial and political pressure to increase rent levels and collection rates and can therefore ill afford to freeze or reduce rents, or put in place extensive support mechanisms for struggling tenants. In context of low economic growth, on-going austerity and the apparent political consensus on benefit cuts, these pressures are likely to be long-term challenges for the social housing sector.

At the same time new developments in technology may enable social housing landlords to address these issues in a more cost-effective manner. Across the world there are moves to digitise activity linked to financial inclusion, whether that is the use of mobile banking platforms in Kenya, using phone credits to transfer wages in USA/Mexico or Qatar/South Asia, or borrowing facilities in South America and Africa. Whilst even in the UK we are witnessing a revolution in financial services as bank branches are closed and banks offer online services combined with access to cash via ATM machines. But this is only beginning of the changes as a new breed of Fin-Tech companies offer services traditionally provided by mainstream financial institutions. These include an online pocket money and debit card for children, crowd funding to enable individuals to borrow and a range of app based savings schemes. Furthermore, financial education is often embedded into these platforms as they seek to manage client performance through improved customer financial resilience skills.

All these opportunities exist for THT and other social housing landlords that are willing to embrace new technology as means to help tackle financial inclusion. As will any form of inclusionary activity using technology creates its own form of exclusion for those unable to access or understand the Internet and mobile phones. However, according to National Statistics the number of people using the Internet on a daily basis and those using online banking are rising rapidly and the former is now approaching 90% of the population. Of course this is not universal and housing associations are likely to house those that are most excluded; therefore, an alternative approach would be to gradually introduce the use of technology and encourage its adoption. This could be done by introducing new services through utilising a technology that most people are comfortable.

To enable the tenants to cope with the pressures from welfare reform and low-paid work, we argue that there is a need for social housing landlords to build the financial resilience of tenants by building on this new technology. We propose that social housing landlords incentivise behaviour known to contribute to building resilience, including saving regularly, attending financial education classes and using low-cost options to furnish their homes (e.g. free-cycle, local furniture recycling schemes instead of Brighthouse etc.). It may not be possible for financial reasons to reward such behaviour by reducing rent. Instead we are suggesting that THT could develop its own loyalty card (combined with an online platform/app) for enhanced accessibility to offer a range of optional services and/or encourage positive tenancy. Such loyalty cards have been used with great success by supermarkets and other retailers for many years. For example, if a tenant participates in an endorsed financial literacy programme or opens an online savings account they would accumulate points for THT. These points could them be traded for home improvements so the tenant could individualise their property (one of the key arguments in favour of house purchase is the freedom to be different from your neighbours). The type of services that could be offered could include repainting front doors in a colour of their choice, new carpets in certain rooms, additional cupboard space in kitchens. All these would help bind the tenant to THT and encourage the notion that they are involved in partnership where both parties benefit. This also has the benefit of offering a positive individual case for renting rather than a narrow pecuniary argument. Home improvements could make a marked improvement to the wellbeing of tenants, whilst at the same time only having moderate cost implications for the landlords.

About the authors

Community Finance Solutions, University of Salford

Community Finance Solutions (CFS) is an award winning, independent research unit located within the University of Salford. Founded in 1999 by Prof Karl Dayson and Dr Bob Paterson, CFS has been at the forefront of researching and piloting solutions to provide finance for businesses and households unable to access mainstream finance. These solutions have gradually extended over time and now CFS remains at the forefront of pioneering social research.

Prof Karl Dayson, Executive Director, Community Finance Solutions

Professor Karl Dayson is an internationally recognised specialist on financial inclusion and community finance with over 15 years of research and consultancy experience in the fields of affordable credit, social impact of affordable credit, financial exclusion and financial inclusion interventions. Prof Dayson has advised social housing landlords across the UK on financial inclusion interventions, including Wheatley Housing Group, Southern Housing Group, Great Places and Places for People, and he co-authored the “Financial inclusion toolkit for social housing landlords” published by the National Housing Federation. Prof Dayson has helped set up over a dozen CDFIs across the UK and advises the European Commission on affordable credit.

Dr Pål Vik, Research Fellow, Community Finance Solutions

Dr Pål Vik has over eight years of research and consultancy experience working on affordable credit programmes and financial exclusion. Dr Vik has conducted research for and advised a number of social housing landlords and local councils on financial inclusion interventions, including Glasgow City Council, Wheatley Housing Group, Trafford Housing Trust, First Choice Homes Oldham, Kirklees Council, Salford City Council, Leeds City Council and Rochdale Metropolitan Borough Council.

You can contact the authors via P.M.Vik@salford.ac.uk.