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Rental Sector in Desperate Need of Financial Support
The tenant campaign group, Generation rent has already predicted that the impact of the COVID-19 pandemic will be devastating to the private rental sector, with an additional 30,000 homes potentially facing the eviction process and ultimately homelessness if additional support measures are not put in place. Whilst the Ministry of Justice has published figures stating that to the contrary, the amount of landlords seeking repossession through the courts had plummeted by 67%, with the amount of repossessions being carried out similarly falling by 93% throughout the closing months of 2020, when compared to that of the same period of 2019. However, this is largely due to the government’s eviction ban preventing these outcomes for the majority of cases and has simply pushed back the date at which landlords are able to take action against rent arrears, rather than actually addressing the rise in tenants that are in desperate need of financial support. Not only that but recent research carried out by the London school of Economics has revealed that on average the government expenditure for the additional 30,000 evictions would be placed at a cool £225 million, with each of the household that are facing the eviction proceedings requiring around £15,000 each year, alongside an approximate six month stay in temporary accommodation.
With this being said the majority of published figures, of which there will be more to follow, one tell one side of the story. Naturally, the dynamic of the rental sector is one of co-dependency with tenants relying on landlords to provide there accommodation in return for a predictable payment. It goes without saying the at the impact of rental arrears isn’t exclusive to the occupants that are unable to make their payment commitments to the property owner, and with 45% of all private landlords within the UL being reliant on a single property for their rental income, the mounting issue of excessive and widespread arrears looks to be one that will shake the rental sector. Further to this it has also been revealed that over 20% of UK landlords have suffered a reduction in their rental income since the lockdown measures were introduced, with just below 10% of property owners losing a fifth of their rental income over this time. Additionally the National Residential Landlords Association has stated that around a third of UK landlords are planning to make up for some of the loses they have experienced over the last year or so by selling one or more of their rental properties from their portfolio.
Something far more certain however is the long lasting influence of these arrears lasting far longer than the pandemic, and the reactionary measures implemented by the government. Even if not facing the eviction process it is highly likely that many of the renters that have accumulated rent arrears will have a lasting impression left on their credit score through the serving of county court judgements. Not only will this make it far more difficult for the renter to make applications for future lines of credit, but also be flagged in each and every tenant referencing process they endure; and with rental property owners understandably being reluctant to let out their property to renters with such a blemish on their financial record, the ability to rent again is in question for thousands.
Government Reports on COVID and Renting
Back in April of 2021 the ministry of housing, communities and local government issued a comprehensive report on how the UK government has helped to nurture the private rental sector and combat rising homelessness during the COVID 19 pandemic. This report gave a damming opinion of the initiatives implemented to protect those that choose to rent their homes, stating that the government “appears to lack a clear strategy to deal with rising rent arrears … we are very concerned that the government is waiting until there is a clear crisis emerging before intervening, rather than heading odd a growing rent arrears crisis by taking proactive action to protect people in this country.”
Although the report recognised existing government intervention within the sector, such as the eviction ban, it further argued that once the ban is lifted, “many renters who have been unable to pay their rent during the pandemic will be at risk of becoming homeless.” This insight into the effectiveness of the measures implanted since the outbreak of the pandemic also revealed the hypocrisy within the given “support” as the UK ministers significantly adjusted the boundaries of how many months of missed rental payments would constitute significant rent arrears, seeing this be dramatically reduced from nine months to only six, whilst also permitting landlords to also account for any arrears that had been accumulated since the 23rd March 2020, something that was previous prohibited to provide additional safeguarding for thousands of struggling tenants.
Whilst the report is unable to provide an exact figure on the amount of renters within the UK that are currently facing arrears, the National Landlord Association predicted that in December of 2020, not even a full year after the outbreak of the virus, around 7% of all renters in the UK, or more that 800,000 tenants had accumulated arrears of between £251 and £5000 since the start of lockdown. The association further lent figures the number of tenants that may be facing more significant amount of debt, revealing hat approximately 150,000 renters had accumulated arrears of over £1000 since March 2020. These claims have since also been supported by Citizens Advice as they have found that as of January 2021, almost one million of those that rent in the UK are facing arrears of around £730. However, perhaps more compelling, and telling of the need to more serious government intervention within the sector is that over half of those facing rent arrears during this period had never accumulated a rent related debt prior to the pandemic.
Despite stark warnings from the Chancellor of the exchequer in November 2020 that by the mid point of 2021, the employment rate across the UK would sour by another million, leading the total amount of those left without a reliable or consistent income at a dizzying 2.6 million, a decisive resolution to the rental arrears crisis the country is facing has yet to be announced or enacted.
The Tenancy Hardship Grant
Implemented across wales in an effort to control the amount of UK renters spiralling into significant rent arrears throughout the pandemic, the widely revered Tenancy Hardship Grant allows struggling tenants to have a fighting chance against homelessness, whilst also securing the landlord’s rental income. With a much needed £10 million being pumped into the Welsh private sector, this amount is exclusively available to tenants that have accumulated more than 2 months’ worth of rent arrears between the 1st of March 2020 and the 30th June 2021. Being introduced as a measure to supersede the former Tenancy Saver Loan Scheme, the move to combat a future surge in homelessness has been wide sweeping with any occupants of a rental property that applied for this financial support prior to the announcement of the Tenancy Hardship Grant having their loan converted into a grant for additional support.
With this initiative is not available to renters that are already receiving some degree of housing support from the local authority, the impact of this early move is said to alleviate many vital resources that would otherwise be expended dealing with a homelessness crises in the near future.
As can be expected this will grant tenants across the nation with some much needed breathing space as they revaluate their financial positions and start to get back on their feet alongside the rest of the UK as lockdown restrictions begin to lift. Whilst similar imitative have also been rolled out across Scotland, members of the private rental sector in England have been left baffled as to why no such financial support has been made available to them. This neglect of renters across England is made abundantly clear as the Chief Executive of the National Residential Landlords Association comments, that although the grants across wales are a positive step for both landlords and tenants”… “It is essential that the grants are made as accessible for tenants as possible and implemented effectively.” After going on to encourage landlords that have occupants that may be struggling financially to make them aware of these opportunities for additional support, Ben states that the initiatives enacted across Scotland and wales, “exposes England as being the poor relation when it comes to support for the private rental sector.”
The Renters Reform Bill
With the renters’ reform bill being initially announced in December of 2019, tenant support groups and many of those that urge for its implementation have been waiting with bated breath. Although the UK government has proven to be reluctant in providing the rental industry with a date by which the proposed changes would be rolled out, they have since commented that thanks to the success of the vaccination program, the reforms to the rental sector could be brought into effect in the near future. Whilst the proposed changes to the rental landscape to not directly taking the surge we have seen in rental arrears, they do directly address the expected wave of homelessness. Whilst many renters have enjoyed the temporary protection of the eviction ban brought into effect through the Coronavirus Act 2020, with the impact of the ban now being scaled back over recent months, alongside the government furlough scheme as the nation looks to seek out some semblance of pre pandemic normality, many renters that currently have arrears fear they may now be faced with a section 21 notice.
As it currently stands a landlord is able to issue the occupants of a rental property with a section 21 notice, allowing them to reclaim possession of the rental property. Whilst a section 8 notice is typically more suited to a case where a tenant has accumulated a significant debt with their landlord, the section 21 notice has proven to be popular amounts rental property owners as they do not need to offer justification for the eviction notice.
Simply put, this essentially means that a landlord is able to remove a tenant from the rental property for no apparent reason, and will not have to declare their motivations for doing so. This is because the section 21 notice simply states that the landlord wishes to take back the property once the fixed term has come to an end, suggestion no wrongdoing on behalf of the tenant. On the other hand, a section 8 is intended to be served to tenants that have breached the tenancy agreement, meaning the landlord will be obliged to site the specific ground under which the agreement has been broken.
This lack of reasoning has led to the section 21 notice earning the moniker of the “no fault” eviction and is widely condemned as a leading contributor to homelessness, something that will on be exacerbated over the coming months. The renters’ reform bill looks to abolish the section 21, no fault eviction process entirely granting tenants with additional security regarding their tenancy. Whilst this may initially seem one sided, the reform also propose the strengthening of the section 8 notice, further empowering landlords’ to remove tenants that cause genuine hassle within their property and are found to violate the terms of their agreement.
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