Nudging down rent arrears using behavioural insights

Collaborative Change, Capita and 10 social housing providers across the UK worked together to explore how behavioural insights and ‘nudge’-style interventions could maximise income collection and reduce rent arrears.

Efficiency and income generation

The challenge

Recent welfare reforms and the roll out of Universal Credit represent a significant business risk for local authorities and other social housing providers. In this context, the need to find more cost-effective methods of collecting rent and preventing arrears has become imperative.

Customers on Universal Credit are likely to require more intensive support and intervention to help them sustain their tenancies. Given budget constraints it is necessary that this resource if freed up by findings efficiencies in existing teams and processes.

Collaborative Change, Capita and 10 social housing providers across the UK decided to explore how the application of behavioural insights and ‘nudge’-style interventions could maximise income collection and reduce rent arrears.

The project progressed through four distinct phases to build an evidence-base for intervention and rigorously test the impact of that intervention:

  • Behavioural segmentation based on customer payments
  • Qualitative research directly with customers to understand behavioural drivers
  • Intervention design using the Mindspace framework
  • Robust evaluation through a Randomised Controlled Trial (RCT)

The project culminated in the implementation and analysis of nine RCTs. In addition to direct impacts on income collection, this project also delivered a comprehensive suite of income-related insights and recommendations drawn from all four phases.

The solution

  • Behavioural segmentation divided the customer base into clusters, based on their payment and arrears history to assist with more targeted resource allocation and more tailored intervention.
  • Focus groups and interviews with customers yielded a deeper insight into the drivers of (non)payment behaviours and generated a hypothesis we could test in the field.
  • Mindspace workshops with rent and income teams co-created a wide range of ideas for adaptations to letters and interactions during early stages of debt recovery. 
  • Our consultancy team developed these ideas into robust RCTs. We assisted with the practical implementation of the trials and conducted a rigorous post-intervention statistical analysis to quantify impact.

The impact

  • By telling customers that most people in their area paid their rent on time, we achieved a 9 per cent increase in payments.
  • By sending an invoice instead of an arrears letter, we achieved a 12 per cent increase in payments.
  • By sending a ‘Thank You’ text message we increased the number of customers sticking to their repayment arrangements by 19 per cent
  • By simplifying the design of a letter, we increased customer engagement by 24 per cent
  • By using handwritten envelopes, we secured a 46 per cent increase in revenue.
  • In one trial, we found that making no attempt to collect debt until the third week of arrears had no impact on payment rates or values. For one provider this resulted in an estimated saving of £250,000 per year.

How is the new approach being sustained?

Our projects combine capacity building with project delivery. Using a workshop-based approach our process leaves clients with the concepts and tools to further test and adapt their interventions, whilst applying the behavioural insights mindset more generally within the organization.

This project focused on very minor changes to existing process aimed at customers who fall into arrears. Given that customers could fall into arrears multiple times over a given period, the impact of these tactics could diminish.

However, the capacity building element of approach has left these clients with the ideas and skills to continue building the effectiveness of early intervention through the incremental application for further changes. 

Lessons learned

  • Some customers ‘can’t pay’, some ‘won’t pay’ and some ‘haven’t paid yet’. It is important to try and identify these different behaviours in order to tailor intervention and avoid over- and under-servicing.  
  • Nudge tactics are most effective with those who ‘haven’t paid yet’.
  • Most escalation processes are not evidence-based. In one trial, we found that doing nothing was no more effective than sending two letters.
  • Income collection RCTs can be a challenge to design and implement as a customer only enters the trial when they happen to fall into arrears. This creates practical challenges in relation to sample sizes, randomization and the purity of the results.
  • Focusing on arrears levels and payments as the only metrics can give a misleading picture. We need to include the counterpart ‘cost of recovery’ in order to properly measure business impact.

Further reading

Download the full report on all trial results and insights


Steven Johnson, Director of Collaborative Change
0771 924 2795

Chris Smith, Director of Corporate Services, Adactus Housing Group
01942 608715

Richard Garnham, BPHA
0330 100 0272