Debt and temporary accommodation: Why debt must be tackled as systemic, not an individual, issue

Most people think of debt as the result of an individual's bad choices or financial irresponsibility. However, research by Professor Katherine Brickell, Professor Mel Nowicki and Shared Health Foundation shows us that for many people, debt is a symptom of the systematic rollback in state support and a major cause and perpetuator of homelessness.

The report, “The Debt Trap”, shows how women in temporary accommodation (TA) are driven into debt in order to stay afloat and cover their essentials such as food, heating, travel and rent. This “debt burden” pushes women and their families into homelessness, traps them in TA and follows them even as they move on from homelessness. Drawing from the findings of this report, we will explain why debt is a structural rather than an individual failure.

Social housing and Local Housing Allowance (housing benefit) are key pillars of the social security system that was designed to protect people from falling into hardship. However, as corroborated by the report, the depletion of social housing stock after the introduction of the Right to Buy scheme in 1980, followed by a decade of cuts to benefits and public services from 2010, set in motion a crisis in affordability that is directly linked to rising debt.

This affordability crisis deepened in the aftermath of the pandemic, which in 2022 saw inflation reach a 40-year high, with food inflation at 16.8% in December and budget supermarket ranges rising by 20.3% (British Retail Consortium 2023; Butler 2023). Average gas prices have risen by 141% since winter 2021/22 and electricity prices by 65% (House of Commons Library 2023).

In spite of this, financial support has dwindled; the £20 increase to Universal Credit during the pandemic was cut in 2021 and Local Housing Allowance had been frozen since 2020 until the government announced it would be unfrozen from April 2024 in last month’s Autumn Statement. However, the respite this brings will be temporary if, as predicted by experts, rents continue to rise, and LHA is refrozen.

“Rent arrears is a double-edged form of debt, as it both pushes people into homelessness and can act as a barrier to bidding for properties”

Among the report’s research participants, rent arrears was one of the main causes of indebtedness and is frequently cited as the principal driver of homelessness. Belle, one of these participants, was evicted after she stopped paying the part of her rent that wasn’t covered by LHA because of significant, unaddressed maintenance issues in the property. Now living in temporary accommodation, she is struggling to access the housing bidding system due to rent arrears of £1,000 from the property she was evicted from, as well as £1,500 from a property she lived in as a teenager. It is a sign of a dysfunctional system that rent arrears can both push people into homelessness and exclude them from the social housing system that would lift them out of it.

“…a lack of basic facilities and poor living standards provide fertile ground for debt to increase”

The absence of basic cooking facilities in many TA properties leaves people unable to prepare a home cooked meal and therefore reliant on expensive, often unhealthy, takeaways. Food-based debt can be compounded by the location of the TA; food deserts, areas with limited access to affordable healthy food, can cause an overreliance on more expensive corner shops and eating out, which further exacerbates debt.

In the same vein, a lack of furniture or basic household items forces people to rebuy the basics: “I had no bedding, no pillows. I didn’t have a cup, a plate, a knife, or a fork. There was absolutely nothing in it at all”. Even items as ubiquitous as carpets are not guaranteed, as it is common practice to remove them in between residents. Several women in the report took on credit card debt or credit union loans ranging between £500 – 4,000 to pay for these essentials.

The report also highlights the costs associated with moving into poor quality TA, where mould, uncleanliness and vermin necessitate the purchase of cleaning products to make the accommodation more habitable. This was Jade’s reality, as she had to choose between spending the last £15 of her money on cleaning products or food:

“I had £15 left and I was thinking right, I could get a little bit of food, I could get some – and then I walked in and I was like, [gasps] … So the last £15 I had, I had to go out and buy cleaning stuff to clean the house. It was awful. It was grim.”

Homelessness itself also comes with a cost burden. As the report shows, debt is accrued by frequent moves from TA to TA, which make taxi fares, removals and storage costs, unavoidable. Shrinking TA stock means people are increasingly being placed out of area, intensifying financial pressures for those who have to travel long distances to medical appointments, jobs and schools.

Christine, who gave evidence to the All Party Parliamentary Group for Households in Temporary Accommodation, became homeless after fleeing the marital home with her children. She had no rights over her existing home as her husband had not let her sign the tenancy. He had also coerced her into taking out loans on his behalf to cover short falls in rent, bills and daily living costs on his behalf, with the promise that he would find work and pay her back. She and her children were left with no home and £13,000 of debt.

“I continued with the loan repayments (from £13,000 debt), I had to buy school uniforms, school shoes, PE kits, coats, bags, I paid for a monthly Travelcard as we commuted to work/school daily by bus & tube, I was not eligible for free school meals for the children, I had moving expenses (refuge/temporary/permanent accommodation), and, for our permanent accommodation I had to purchase white goods, furniture & flooring”

“The debt trap needs to be tackled as a systemic rather than individualised problem”

The report sets out 6 short term and 7 longer term policy recommendations as a starting point for bringing about the change needed to take women and children out of the ‘debt trap’. These include scrapping rules on rent arrears affecting access to the housing bidding system, updating the Homelessness Code of Guidance to provide basic facilities in all TA, reversing funding cuts to local authorities and removing local barriers to free bus passes.

What is clear from these findings and recommendations is that for women experiencing homelessness, debt becomes necessary for survival when state support falls short. If we’re going to strengthen the structural protections against debt, we need to stop perceiving it as a choice. If we don’t, debt will continue to trap people for generations to come. Christine says, “the intergenerational trauma of debt and poverty continues” Her children are now 19 and 20 and struggling to escape the burden that debt and homelessness has placed upon them.

The research clearly shows how debt is not only causing, lengthening, but also outliving family homelessness. More action is needed on the punitive impacts of debt on women’s and children’s lives.

Image credit: Centre for Homelessness Impact