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Universal credit leaves renters in poverty
Members of the UK government are seeing renewed pressure from tenant campaign groups stating that the impending cuts to the amounts of housing allowance and universal credit claimants receive will force tenants into avoidable debt.
Organisations including Shelter, Nationwide, the National Residential Landlords Association and Crisis and banded together to demand the UK government properly evaluate the extent of the impact benefit cuts will have. Rather distressingly the amount of household that are claiming financial support for their home has surged by 107% since 2020, with the recipients of over half of these claims stating that the amount they receive is already insufficient to cover their rent. In the instances where the amount of housing support being received is not enough to cover the tenant’s rent, the government has claimed that the average difference is £100 a month.
The groups stated that “since April this year, Local Housing Allowance has been frozen in cash terms, and later this year Universal Credit will be cut by £20 a week. As organisations representing landlords, letting agents, tenants, people facing homelessness and debt advice services, we are united in calling on the UK government to complete and publish a full assessment of the impact of both of these policies on the ability of renters to meet their housing costs.”
The coalition of campaign and support groups and services further argued that, “ To apply policies like these without doing any meaningful impact assessment is, we argue, lacking the necessary foresight and consideration of the impact they will have on people’s security of tenure and wellbeing and for many will threaten their change of recovery.”
In the wake of the COViD-19 pandemic the UK has seen approximately 6 million citizens claim for Universal Credit support. With the lockdown period and furlough scheme coming alongside thousands of household losing the security that surrounded their income with a reduction in working hours, seeing rent arrears soar. The reduction in housing allowance and universal credit which is set to take place in October is the largest cut to social security payments since world war two, seeing the income of claimants plummet by £90 a month, amounting to £1,050 each year.
Citizens Advice have also shared there concerns regarding the cuts, saying that those affected by the cuts have been expressing major concerns and anxiety over how they will be able to make ends meet after the reduction is in place. Figures from Save the Children have also revealed that over 3 million children that currently live in low income households will be affected by the reductions to housing allowance. The Joseph Rowntree Foundations has similarly reported that the £20 a week cuts will force 500,000 people under the poverty line in the UK.
Rather concerning a lack of awareness has been highlighted by the charity Turn2us, after a survey the group carried out revealed that from 4,000 renters between the 6th and 13th of august, 36% stated that they were not aware changes were being made to the amount of financial support they receive. Further to this, in a survey carried out between the 5th and the 19th of August with 2,000 universal credit claimants, the Trussell Trust found that 18% did not know of the impending reduction.
In somewhat of a half-hearted attempt to instil some sense of clarity surrounding the issue The UK government has informed all of those that would be affected by the change through an update in their online journals and a text message. A representative of the Department for Work and Pensions told the Guardian, “We made changes to all statements in July and are currently following up with text messages to alert claimants to check their accounts. Further notifications will also be sent in September and October.”
In response to the stance taken by the collation of groups calling for an insight into the impact of universal credit cuts a spokesperson from the UK government said, “Universal Credit has provided a vital safety net for six million people during the pandemic. The temporary uplift is part of a £400 billion support package and has been extended beyond the ending of restrictions, while we will be maintaining nearly £1 billion of additional housing support through local housing allowance rates.”
Facing Rent Arrears
When facing rent arrears as a tenant, it is essential that if you believe that you will not be able to meet any of your future payments that you inform your landlord as soon as possible. Understandably this is far from an ideal circumstance for the residents of a rental property and they may be reluctant to approach the owner of the property to discuss such matters. However, through the lockdown period landlords have been widely receptive of negotiation with the occupants of their rental properties to ensure that their rent arrears do not spiral out of control and leave the tenant accruing significant amounts of debt, whilst leaving the landlord without a rental income.
Recent research carried out by Paragon Bank revealed that in the months of April and June 2021 the amount of tenants that held missing rental payments had seen a reduction from 1.6 tenants per property owner in the first three months of the year, to just 1.3 tenants per landlord, the lowest figure seen in a decade. The report similarly found that the amount of debt each tenant held with their landlord had fallen after seeing its peak in the first few months of 2021. At the start of the year tenants owed an average of £2,376 to their landlord, however by April the average amount of unpaid rent was set at £1,781, the lowest average amount of rent arrears seen since 2017 as rent arrears settles at an average of £1,584 per tenant.
Similarly Shawbrook Bank surveyed a group of 2000 UK landlords with almost half, 46% reduced the amount of rent their tenants were required to pay each month over the lockdown period. Further to this 28% of these landlords provided their tenant’s with a payment holiday, followed by 14% giving the occupants of their rental property a rent reduction.
It goes without saying but if the tenant has been able to forge a repayment plan with their landlord this should be adhered to, with the property owner detailing the outstanding amount and the period over which the repayments will be made in writing, being signed by each party of the rental agreement. Unfortunately this is not always possible and in such instances he occupants of the property should turn to their local authority to see if they are eligible for any financial support through universal credit.
Can Landlords Decline DSS Tenants?
Whilst traditionally landlords may have adopted a blanket ban stance against tenants that are receipt of financial support through universal credits or housing allowance, with a mere 17% of landlords being receptive of DSS tenants as recently as 2017. However, as of last year the historic dismissal of DSS tenants by landlords was found to be unlawful, with the ruling stating that such policies were in violation of both sections 19 and 29 of the Equality Act 2010, as such rejections would be discriminatory towards renters due to their gender and any disabilities. In the past landlords have justified such positions by stating that letting their property out to a DSS tenant would be in breach of their buy to let mortgage or insurance policies, however this is no longer the case an cannot be sited as an excuse.
Paying Rent in Advance
In response to the record number of household that had their income affected by the outbreak of the pandemic, plunging thousands of households into rent arrears, an increasing number of landlords are asking their tenants to pay rent in advance. Typically this practice has been employed for tenants that scraped through their referencing checks, possibly failing the afford ability checks that give the landlords an understanding of if the tenant will be able to uphold their obligation to pay rent each month. In most cases rental property owners will request that an aspiring tenant pays rent in advance as they are seeking out additional security surrounding their rental income. It is not uncommon for those that are unable to find a guarantor such as international students, and those that are in receipt of universal credit to pay rent upfront.
Traditionally landlords have only requested that their tenants pay between one and six month’s rent, but in light of the rent arrears and landlords losing substantial income over the lockdown period, something many claim has been exacerbated by the eviction ban, many are now asking tenants for as much as a quarter of their annual income before they move in. The move has also recently gained traction as rental property owners struggling to recuperate any substantial amount of missing rental payments through making deductions from their renter’s tenancy deposit.
This is because the Tenant fees Act placed a limit on the amount a tenant is required to pay their landlord for a tenancy deposit, in an effort to make the rental sector more accessible by removing upfront costs. In most cases, as the annual rental charge for the property is lower than £50,000, the tenant will only be obligated to pay their landlord the equivalent of five weeks rent for the deposit; however if the amount the tenant pays each year in rent is over £50,000 then the landlord is able to request that the tenant’s pay as much as six weeks rent for this deposit. However, with the eviction ban meaning that many landlords were left facing tenants that were unable to pay their rent meaning that if the rent arrears was more than a single month then there was little a landlords could do to recoup these losses. With this in mind, no such legal threshold has been placed on the amount landlords can ask their tenant’s to pay in advance, leaving some rental property owners to exploit this loophole at a time where both demand for rental property and the cost of rent in some areas is surging. The move was largely condemned with the National Residential Landlords Association stating that, “We would encourage landlords to look for alternatives to asking for high levels of rent upfront. Where necessary, it is usually simpler to obtain a guarantor or suitable insurance product to provide assurance to tenants and landlords that rents will be covered.”
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