400,000 private tenants in danger of rent arrears

We must ensure that the private rented sector remains sustainable.
- Dr Nancy Holman
London Terrace House 747x560
Colourful London Terrace Houses. Photo by Lee Jeffs on Unsplash

Over 400,000 private tenants may be in significant rent arrears by the end of 2021 says a new report by the research group LSE London, funded by Trust for London and LSE.  Almost all of these tenants could be at risk of eviction if, as is expected, the government slowly begins to lift its suspension on eviction proceedings from 1 June.

The report uses the government’s projection of unemployment rising to 6.5 per cent this year – and the likely impact that this will have on private tenants and their ability to pay their rent –  to inform this calculation. Currently around ten per cent of private tenants are thought to be unemployed – this is double the average unemployment rate – and six to seven per cent of them appear to be in arrears. This is around twice the proportion of a ‘normal’ year.

Many tenants are also at risk because their Assured Shorthold Tenancies (ASTs) have not been renewed. Data from the National Residential Landlord’s Association (NRLA) suggest that only around 20 per cent of landlords have issued new tenancies to existing tenants, while over 30 per cent have allowed ASTs to become Statutory Periodic Tenancies – short-term rolling contracts of usually one month.

As a result, only tenants with a current AST and who are up to date with their rent or less than eight weeks in arrears are safe from being evicted. This means is that large numbers of tenants are likely to feel increasingly insecure.

However, large numbers of tenants will not immediately find themselves homeless because, even when eviction suspensions are relaxed, the courts simply will not be able to cope with the cases. At the moment the courts are not even able to deal with egregious cases involving antisocial behaviour, domestic violence or very long standing rent arrears in a timely manner.

Before the pandemic it was taking a median of 42 weeks for cases to reach repossession – the mean length was nearer a year. Now the small number that are being processed are taking maybe twice that long. What happens when eviction notices are enabled is totally unclear – but if nothing specific is done it could take years to return to normality.  Meantime many landlords will be receiving no rent for months on end.

Homelessness and rough sleeping in the time of Covid says that greater protections need to be put in place to protect private tenants and landlords. This includes immediately stopping ‘no fault’ (Section 21) evictions while speeding up court proceedings for extreme cases of failure to pay the rent – such as being over six months in arrears.

Professor Christine Whitehead, Emeritus Professor of Housing Economics at LSE and co-author of the report, said: “Most evictions remain on hold until after the 31 May. Depending on what the government announces will happen after this, many tenants could be vulnerable to being asked to leave their homes.

“However, we do not expect an immediate surge in evictions since, in many cases landlords and tenants have found ways of coping through rent holidays and lower rents during the crises, and some renters have moved in with family or friends.”

The report recommends that the government should support greater investment in services that will help people stay in their homes including Discretionary Housing Payments for those claiming Housing Benefit or Universal Credit (UC).

More help should also be provided to tenants without access to UC but who are in rent arrears. This could be through low interest rate loans for those who are less than six months behind on their rents for example.

So far nothing has been done to help landlords facing significant losses from rent arrears. Already a third of NLRA members say they have lost more than 10 percent of their rental income and NRLA data also suggests over 30 per cent of landlords are thinking of reducing their investment in rental properties or leaving the market altogether.

Dr Nancy Holman, Associate Professor of Urban Planning and co-author of the report, said: “Unfortunately, these solutions are partial. In a crisis of this magnitude there are no easy answers. Even if there is a rapid transition back to normality, the long-term arrears and loss of credit-worthiness among tenants and loss of income and confidence for landlords will continue to scar both individuals and the private rented sector for many years to come.

“One in five households in England rent*, with many having no other option. If we are to avoid catastrophic problems in the future, we must ensure that the private rented sector remains sustainable.”

Behind the article

*4.4 million households in England rent privately