End this economic injustice – and give a ‘hand-up’ to Generation Rent
My Creditworthiness Assessment Bill will boost the prospects of Britain’s eleven million renters and puncture the poverty premium, writes Lord Bird
Companies like BrightHouse say they offer choice to those excluded from mainstream credit. “As long as it’s affordable and people are making an informed decision, they should be allowed to choose how to spend their money.”
But there’s a problem. BrightHouse isn’t affordable. £600 laptops can end up costing £2,287. Cookers, £1,133. And TVs over £1,170. There are millions of pounds made by making the poorest pay through the nose for their credit, food and utilities, but we often forget that it is very, very expensive being poor.
In the 1940s, I witnessed the devastating grip that debt can exert from an early age. Coming from the very poorest in society, and being made homeless several times, I saw first-hand the damage done by having to pay through the nose for credit.
Today, the average rent-to-own customer is a young, single, home-renting mother reliant upon (at least some) benefits. But how many of those rent-to-owners realise the power of the data they’re sitting on? How many of them realise that their rental payment history could help them access more affordable credit?
None of them, because rent isn’t recorded like mortgage payments. And even though a quarter of us will rent our homes privately by the end of 2021, Britain’s renters can’t use the best asset they have – their rent history – to help improve their credit score, get digitally authenticated and enter the marketplace.
Whether it’s credit for a microwave, a mobile phone or a mortgage, your payment data should count for something. This is the aim behind my first private member’s bill, the Creditworthiness Assessment Bill, which begins its committee stage this month.
The Bill draws on the Big Issue mantra of a business solution to a social crisis. It will offer a ‘hand up’ to Britain’s 11 million renters, and put right a long-standing economic injustice by providing more equal access to more affordable credit. It will ensure, via the clout of the Financial Conduct Authority, that every lender takes rent history and council tax history into account when assessing a borrower’s creditworthiness.
The Big Issue Group has already tested this concept in the social housing sector via the ‘Rental Exchange’ scheme, and data shows that 83% of tenants stand to see their credit scores boosted because of their rent payment data.
In aiming to tilt our recovering economy from financial exclusion to inclusion, I see this as part of a culture change in the consumer credit world. By requiring credit providers to use data much more intelligently, and responsibly, it will boost the prospects of ‘Generation Rent’ by ensuring that their rent payment history is rightfully recognised on their pathway to home ownership.
It will do so by opening up fairer access to more affordable credit to a wider pool of responsible borrowers (perhaps some 4.8 million consumers, according to the Financial Inclusion Commission) and prevent people from falling into the high-cost credit poverty trap. By bolstering the financial resilience of Britain’s lower-income households, it will also help to puncture the £490 annual ‘poverty premium’ where the poor pay more.
Though I welcome the shift towards Open Banking and the government’s ‘Rent Recognition Challenge’ – which seeks to build the capacity of the fintech market by collecting tenants’ data – the opportunity ahead lies in ensuring that lenders use tenants’ rent data in their assessments.
That is our starting point at Committee stage on May 11th. Though we’re beginning to turn the dial towards inclusion, remember that the poorest among us having been paying through the nose for everyday things for years. When you combine this with reports that up to a third of millennials face renting their entire lives, and that a middle income earner in England has to work 86 days to rent an average two-bedroom home, it is surely high time to offer ‘Generation Rent’ a much-needed hand up.
That’s why I continue to call on the government to embrace my (cross-party supported) Bill and join the campaign to make rent count.
Lord Bird is a Crossbench peer. His Creditworthiness Assessment Bill starts its Committee stage on Friday 11 May