Mortgages  

Industry warns of looming landlord defaults

Industry warns of looming landlord defaults
 UK chancellor Rishi Sunak

The private rental industry has called on chancellor Rishi Sunak to address the rent debt crisis, which brokers fear will result in landlords falling into default.

The Department for Levelling Up, Housing and Communities published data yesterday (October 13) which found 7 per cent of private renters were behind on their rent between April and May this year - up from 3 per cent before the pandemic.

More than doubling since March 2020, the figure equates to some 780,000 renters, according to the National Residential Landlords Association.

But this figure could still climb and brokers fear it will have a harsh knock-on effect on landlords. A further 9 per cent of private renters expect to fall behind with their rents over the next 12 months, according to the government report entitled ‘Household Resilience Study’.

With rental debts only set to rise, brokers have shared their concerns over what this means for their buy-to-let clients and their monthly mortgage payments.

“These are concerning statistics,” said Robert Payne, director of Langley House Mortgages.

“If these trends carry on then we are heading towards a large number of defaults, which is bad news for everyone.

“It is unclear why this is happening but if it is linked to the impact of Covid-19 then we are potentially only witnessing the tip of the iceberg, with extremely worrying times ahead of us."

“Landlords are being put in a difficult position,” said Ben Beadle, chief executive of the NRLA.

“They either try to shoulder rent debts they cannot afford or seek to repossess properties as a final resort. Without a targeted package of support to pay off Covid-19 rent debts, many tenants run the risk of losing their homes needlessly.”

On behalf of the NRLA - which represents the UK’s landlord population - Beadle called on the government to take action.

“The chancellor needs to address this crisis,” he said. “His continued failure to act signals to the private rented sector that the government simply does not care about the problem.”

Building homes

Scott Gallacher, director at Rowley Turton, dubbed the statistics “depressing” in the context of future homeownership, with rental debts only pointing to fewer people considering buying.

The adviser reckons this can be put down to the UK’s ongoing housing shortage.

“The government needs to commit serious money to build hundreds of thousands of family homes for ordinary people, especially more council houses,” he said.

“It can't simply rely on the private sector, which naturally favours building more profitable four or five bed detached houses, to do this."

Yesterday, the DLUHC announced the progress of its Brownfield Land Release Fund, which has freed up 110 sites across 53 councils for developers to build what it estimates will eventually become 5,600 new homes.

The government has also committed to respond to a review by Conservative MP Richard Bacon, which found the need for custom and self-built homes “could conceivably be as high as 100,000 homes a year”.