Warnings raised over damaging rent cancellations
As activists demand more radical policies to help renters, one expert warns that any move to cancel rents for private tenants without reimbursing landlords would be “stealing from people’s pension pots”
Over 4,000 Labour party members recently signed an open letter backing rent cancellation as a policy. The letter argued Labour’s five-point plan to help renters, which included extending the evictions ban by at least six months and giving tenants two years to pay back rent arrears, did not go far enough.
Meanwhile, the London Renters’ Union and others are calling for rent strikes, claiming renters are having to choose between food and paying rent.
The government’s ban on evictions has been extended until August 23rd, which has calmed fears that thousands of tenants could lose their home if the ban wasn’t extended.
However, Mary-Anne Bowring, group managing director at residential consultants, Ringley, warns cancelling rents in the private sector would punish hundreds of thousands of pensioners as well as risk halting the current appetite from UK pension funds who are investing billions into creating new high-quality homes for rent.
The most recent English Private Landlord Survey estimates there are at least 1.5m landlords in England alone. Of those, nearly half said they invested in rental property to supplement their pension and approximately one-third are retired.
This means if a rent cancellation was to be introduced, at least 500,000 retired landlords would see their rental income wiped out entirely and reduced rent revenues for pension funds, many of which have suffered losses from retail and office investments and rely on income from property to match their liabilities.
There are over 43,000 completed purpose-built rental homes in the UK, with over 100,000 more in the pipeline, according to the British Property Federation and Savills, many of which have been funded by UK pension funds. Rent cancellation would deter further investment by domestic pension funds into the sector, Ringley Group managing director Mary-Anne warns, depriving the UK of much needed new high-quality rental housing.
Both private and institutional landlords would lose rental income unless the government stepped in to pay private residential rents, which could cost the taxpayer billions, Ringley founder Mary-Anne Bowring also warned. The average UK monthly rent is £886 according to property portal Zoopla.
Headquartered in London with an office in Manchester, Ringley Group manages over 10,000 homes across the country and has advised major residential investors such as Curlew, Patrizia, Moda.
Ringley recently brought forward the launch of PlanetRent, a new tech platform that automates key parts of the lettings process such as marketing and compliance and allows landlords, agents and tenants to work remotely.
Mary-Anne, comments: “No one can doubt or deny that millions of renters are facing major financial difficulties or anxieties but cancelling rents is not the answer.
“Some renters may need more financial assistance from the government but cancelling rents or getting the government to pay would be hugely damaging.
“Cancelling private rents would represent one of the biggest raids on people’s pension pots in British history, Hundreds of thousands of retired landlords rely on income from rental properties would be left massively out of pocket while landlords planning to use the income to supplement their pension will also be hit.
“Rent cancellation would be another blow to UK pension funds who are investing billions into creating high quality purpose-built rental homes, as many will be exposed to shopping centres and other commercial property where rent collection rates have fallen dramatically.
“Pension funds rely on rental income from property investments to match their liabilities and rent cancellation will make it harder to fund future generations.
“Cancelling rents for private tenants but having the government reimburse landlords would cost the taxpayer billions more on top of what is being spent to prop up people’s incomes and the economy.
“Most landlords are trying to work cooperatively with their tenants to resolve any issues such as rent arrears and it is important we all pull together during this difficult time.”
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