With an estimated 2.6 milion tenants at risk of arrears, is there a rent crisis looming?

There is a “looming crisis in the rental sector” because of the financial hardships being faced by both landlords and tenants because of the coronavirus pandemic. This was the verdict of the Housing, Communities and Local Government Committee, which published the interim report in May from its call for evidence to examine the effect of the pandemic and Government support for tenants. Committee chair, Labour MP Clive Betts, told the BBC last week that the UK is currently in "the lull before the storm." Key points from the committee's report are:

• A recommendation to bring forward legislation to amend the 1985 and 1988 Housing Acts to allow judges to use discretion where a tenant is in rent arrears because of the coronavirus crisis for the next 12 months at a minimum. Discretion could include consideration of whether a pre-action protocol has been complied with.
• The Government must accelerate its plans to introduce the proposed Renters’ Reform Bill to Parliament and abolish ‘no-fault evictions’ under section 21 of the Housing Act 1988 within the next 12 months. By amending the Act to allow judges to exercise discretion, the Government will have time to deliver a Bill that provides greater security for tenants.
• The Government must ensure that the Local Housing Allowance (LHA) rate is set at a level that reflects real market rents and ensures those in need can afford properties in their areas.

The committee believes that unless the Government amends existing housing legislation, its plans to introduce a pre-action protocol to the private rented sector will be toothless. This poses the danger of a cliff edge of evictions once the moratorium on possession cases ends. Research from the Resolution Foundation published last weekend reveals that one in eight private sector tenants have fallen into rent arrears to-date. And as the impact of the pandemic on the UK economy really starts to bite, Citizens Advice calculates that around 2.6 million tenants could find themselves in rent arrears. The National Residential Landlords Association told Landlord Today that more than half of its members have already experienced some combination of rent payment problems or unanticipated void periods.

Some landlords who already had possession cases for rent arrears going through the courts prior to the ban, could find themselves trying to cover more than a year’s worth of rent if the courts cannot resume existing cases from the planned date of 25 June. So it is calling for a “careful re-opening of evictions needs”. Of course, landlords who do find themselves in financial difficulty can ask their lender for a mortgage holiday, but this only pushes payments further down the line–and may ultimately impact their credit rating. In London, more than 2,500 households have agreed not to pay their rent thanks to a campaign by the London Renters Union.

The LRU is calling on tenants to withhold their payments to landlords if they find themselves in financial hardship One activist told Landlord Today that the government is prioritising landlords’ profits over renters’ survival. “Right now, it must suspend rent, cancel rent debt and make the eviction ban permanent, she said. “Otherwise we’re headed for a chaotic rent debt and eviction crisis.” However, the official guidance from the MHCLG remains clear. Landlords and tenants should work together to address any concerns and find solutions to overcome rent arrears, such as an affordable repayment programme. This is very much our view too. But will this approach be enough to prevent the pandemic causing widespread problems for landlords and their tenants? What do you think?