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”.
Rhys Schofield, managing director of Peak Mortgages and Protection, said the government also needs to review its social housing initiatives in light of the new figures.
“We need some joined-up thinking as an industry because the reality is that, with no real social housing safety net, if these people don't buy we are condemning them to a retirement of poverty where they will not be able to afford market rents on a pension income,” he explained.
Analysts have said inflation, alongside rising house prices, could continue to divert more people to rental properties - increasing the likelihood of those falling behind on payments.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, argued: “Renters are reeling from the pandemic.
“[A] drop in income leaves them with nowhere to go. It’s why when asked what their biggest problems were, they named a drop in hours as the key problem, followed by furlough and unemployment.
“It didn’t help that more younger people rent, and they were particularly likely to have had their hours and pay affected during the pandemic.
“Higher inflation could mean we’re not past the worst of the crisis at all.”
Despite inflation rises, and despite a rise in renters falling into debt, data from the Office for National Statistics for the year to August 2021 showed private rent amounts in England increased by 1.2 per cent, well below inflation.
ruby.hinchliffe@ft.com
