Indebtedness and payday lending: a precursor to homelessness?

Purpose This study investigates if, and if so, in what way indebtedness, in particular, payday lending, may perpetuate poverty and ultimately manifest itself as a slippery slope, which can precede entries into homelessness. Design/methodology/approach Primarily, this study pairs the longitudinal data from the Journeys Home survey with random effect logit models. Findings The results indicate total debt (in ‘000s) is generally associated with a lower, albeit marginally so, chance of slipping into cultural homelessness. This is not found to be the case for literal homelessness. Concomitantly, credit card debt, although not other lenders (e.g. pawnbroker or payday loan debt), is associated with a substantial, approximately 2.5 times greater chance of slipping into cultural homelessness. This is not found for literal homelessness. The finding that “other lenders” is not correlated with homelessness may reflect its imperfections as a measure. These associations survive the inclusion of financial stress measures (financial scarcity) and support services measures. Practical implications The evidence points to the need to reappraise the suitability of existing market-based debt solutions. Originality/value This study is particularly novel in that it weds the capabilities approach to the socio-ecological model but also because it invokes the concept of financial scarcity.