Tag: rental yields

Rent and coronavirus: What comes next for UK landlords and tenants affected by Covid-19?

The coronavirus crisis is now fast-approaching its fourth month and we’re only just starting to see the economic impact. The spectre of a severe recession, the likes of which, in the words of Chancellor Rishi Sunak, “we have not seen” looms large. His words are unambiguous: we are awaiting the biggest economic shock in recent history.

There is rightful concern from one demographic in particular: private renters. This is a group thought to contain about 20 million people who rely on private landlords to keep a roof over their heads. It has grown rapidly over the last decade or so because getting on the housing ladder has become increasingly unaffordable while social housing has been in increasingly short supply.

This pandemic has exposed the precariousness of Britain’s private rented sector for what it is: a national emergency. Before Covid-19 disrupted life as we knew it, renters were already worse off than homeowners, spending a higher proportion of their earnings on housing. Sixty three per cent of them had no savings and almost half of working renters were just one paycheck away from losing their home. Think of them as the “squeezed middle” Ed Miliband once tried to champion – they were already stretching themselves to cover the most essential cost of all: housing.

The Government clocked this would be a huge problem early on. In late March, they announced a three-month suspension of evictions and the restoration of Local Housing Allowance to the lowest third of market rents which renters could access by applying for Universal Credit. These measures went hand in hand with the Job Retention Scheme which, they hoped, would tide anyone whose job was at risk over.

Now, as furloughs are extended, business closures are prolonged and redundancies registered, the housing charity Shelter estimates that around 1.7 million renters expect to lose their job. Early tremors revealed by the latest Office for National Statistics employment data – a 69 per cent increase in people applying to Universal Credit – point to a storm ahead. Citizens Advice estimates that 2.6m renters are behind on rent or expect to be as a result of this pandemic.

As we approach the end of that three-month period, questions are being asked about what the plan is for renters now. Will the evictions suspension be extended or will we, as the London Councils Group has warned, see an “avalanche” of them when it is lifted? Will the increase to Local Housing Allowance continue?

Left-leaning social media accounts are awash with calls for a “rent strike”. Labour’s shadow housing secretary, Thangam Debbonaire, has published a five-point plan for renters which includes protecting them from bankruptcy as a result of any rent arrears. Meanwhile, Housing Secretary Robert Jenrick has said the Government is still “thinking carefully” about what to do next and “developing a much more credible plan to protect renters and to help to shield them through this crisis.”

So where does that leave private renters who are, completely understandably, very worried?

What could happen with evictions and rent arrears?

As things stand, all evictions proceedings are suspended. This was initially done for a 90-day period and takes us up until the end of June. Last week Jenrick told Parliament a decision would be made on the future of the ban shortly before then. One of the suggestions in Labour’s five-point plan is extending it for six months.

Giles Peaker, an expert housing solicitor and partner at Anthony Gold explains: “The Government has increased the periods for notices seeking possession, and the courts have currently put all possession claims on hold until 25 June. But unless this is extended, or other measures are brought in by the Government, there is a real risk that people will face possession claims for rent arrears in a month or two, or possession claims after a section 21 notice. Tenants (and their guarantors) may also face money claims for arrears.”

One of the issues on the horizon, he adds, is that legally, as things stand, having been impacted by the crisis is not a defence for not paying rent for anyone challenging an eviction order in court.

It’s worth noting that, before Covid-19 took over every aspect of public life, we were expecting legislation to ban Section 21 evictions (also known as unfair or revenge evictions). It’s likely this will return to Parliament at some point. However, as Peaker notes, this wouldn’t protect those who haven’t been able to pay their rent.

What help can I get with rent because of coronavirus?

Back in March the Government announced that landlords could take a “mortgage holiday” if their tenants were unable to pay rent and encouraged them to be “compassionate” in such situations. Some didn’t feel this went far enough.

The Government also increased Local Housing Allowance (LHA) so that it covers the lowest third of market rents. This can be accessed by renters who find themselves unemployed because of this crisis via Universal Credit. However, not everyone will be eligible for this.

There is good news, though. When asked by i whether this change to LHA was permanent a spokesperson for the Treasury said: “This will apply for the 2020-21 financial year. There are no plans to reverse the increase.”

However, rents fluctuate. So, while the increase to LHA may be here to stay for now, if we saw rents rise, this wouldn’t stay in line with them and would continue to only cover the lowest third of market rents.

What ideas are being proposed to help renters pay their rent?

Labour’s plan to help renters was criticised by some because it proposed giving those who fall behind on rent a two-year period to pay back rent arrears which would leave them indebted to their landlord.

In Spain, a low-interest loan system has been introduced to help renters honour their payments. When Labour MP Clive Betts asked Jenrick if we would consider something similar, he didn’t dismiss the idea.

However, this would likely attract similar criticism to that thrown at Labour’s plan. Renters are already worse off than homeowners and saddling them with debt during an economic crisis will undoubtedly harm their prospects moving forward.

Caitlin Wilkinson, Policy Manager at Generation Rent, tells i that the rent strike being encouraged on social media by some is not the answer. “Suspending rents temporarily could put renters at risk of debt once the freeze is lifted,” she explains. “If we had a functional welfare system this wouldn’t be an issue, so fixing that should be our priority. Generation Rent is calling on the Government to remove the benefit caps, increase local housing allowance, and expand eligibility.”

So, what’s the alternative? Increasing the generosity of the housing benefits would be one place to start – this is something the Joseph Rowntree Foundation has already called for. JRF told i in April that the current increase to covering the lowest third of market rents just doesn’t go far enough and won’t break the fall of those who were already over-stretched. Shelter is calling for it to be increased further so that it covers “average rents” in any given area.

It’s really important that the Government comes up with an adequate plan to support renters who suffer financially in the coming months. As Peaker warns, a tenant not paying rent, regardless of the reason, could have serious implications. A tenancy agreement is a legal contract which means that “tenants are still obliged under their tenancy agreement to pay the rent, no matter what has changed in their circumstances.”

The Government, Peaker notes, have so far stopped short of telling landlords what to do. “While some landlords have agreed to waive rent, or reduce it, or for repayment plans in the future, there is currently no obligation on them to do this.”

Because so many people now rely on the private rented sector, an increase in the benefits available to renters is, in effect, going to result in a mammoth public bailout of private landlords on a scale never seen before. Building the social housing we’ve lost through Right to Buy is an obvious way out of this long-term but, in the short-term, renters can be reassured that the Local Housing Allowance increase isn’t going anywhere and wait for the Government’s next announcement.

Millions in UK having to choose between paying rent and eating, poll suggests

Renters’ unions are calling on the government to suspend rents for the duration of the coronavirus crisis, as research suggests millions are having to choose between paying landlords and putting food on the table, or have already been forced to leave their homes.

Polling conducted last weekend, after rent payments came due for many renters for the first time since the coronavirus shutdown began to affect incomes across the country, showed many renters were either already in or on the brink of crisis, with one in six forced to seek extra financial help to stay afloat.

About one in five UK households – 4.5 million families – live in private rented accommodation, with a similar amount in social housing, according to the most recent figures.

According to research carried out for the Guardian by Opinium, six in 10 renters said they had suffered financially as a result of the UK-wide shutdown that began three weeks ago. Of those, one in five had been forced to choose between food and bills or paying rent, and one in four said they had already had to voluntarily leave their home, move in with friends or parents, or request an earlier end to their tenancy because of the crisis.

The findings of the survey throw into doubt the efficacy and reach of government measures to support people who rent their homes, with almost half saying they were worried about the stability of their living situation despite increases to housing benefit and a temporary ban on evictions. “With these in force,” the government has promised, “no renter … will be forced out of their home.”

But while homeowners – including buy-to-let landlords – are able to take advantage of government-mandated mortgage holidays, advice for renters tells them they remain liable for their rent throughout the crisis. Kat Wright, national organiser for Acorn, which campaigns for tenants’ rights, said this stored up problems for the future.

“We’re facing a huge surge in evictions once restrictions are lifted, and renters across the UK are already unable to pay their rent,” she said. “Tenants need protection from evictions post-emergency and from rent debt accrued during the crisis.”

Despite the government’s measures, and guidance to landlords asking them to “be compassionate”, tenants who spoke to the Guardian said they had already faced threats of punitive action from their landlords. One self-employed renter, who preferred to remain unnamed, told the Guardian that when he approached his landlord to ask for a deferment of rent, he was served with an eviction notice in reply.

Others who have lost income are being forced into taking whatever work they can in order to continue to pay their rents, often in front line jobs in the gig economy, such as driving taxis or delivering takeaway food, potentially exposing themselves to infection with coronavirus.

“Many renters feel they have no choice but to break social distancing guidelines and go out to work, just so their landlords can continue to profit,” said Amina Gichinga of the London Renters Union. “How are people supposed to pay rent with no income and at least a month’s wait for any government assistance? How are people in low-paid jobs meant to clear hundreds or thousands of pounds of rent arrears in the future?

“During this global pandemic, people should be able to prioritise their safety and paying for food and other essentials. All rent payments need to be suspended and rent arrears need to be waived urgently to keep renters safe from eviction and from debt, and to prevent the further spread of the virus.”

An online petition calling for rents to be suspended has already reached 100,000 signatures, and the LRU wrote to Robert Jenrick, the housing secretary, at the end of March calling him to act on its demands. Opinium’s polling found overwhelming support for a rent suspension, with three in four renters – and even a slight majority of landlords – in support.

A spokesman for Jenrick’s department, the ministry of housing, communities and local government, said: “We understand that the Covid-19 outbreak has left many facing uncertainty and feeling worried. Emergency legislation and the suspension of housing possession action means that no tenant in either a social or private rented home will be forced out.”