Covid-19 has exposed the financial fragility of the UK’s 4.5m renters, as redundancies rise, arrears increase and the protection and savings gaps yawn wider.
Andy Walton, protection proposition director for the Mortgage Advice Bureau, said: “Twice as many people in rented accommodation have fallen into arrears since Covid-19. Some of this will be due to unemployment or being furloughed.
“Some will be down to being not well enough to work. Income protection needs advice and with 4.5m households living in the private rented sector we should be providing this advice right now.”
The issue of advice – and perhaps the lack of signposting to advice in the rented sector – is a key problem. Yet millions of renters are exceptionally vulnerable to financial shocks, and one of the most damaging is being unable to work through ill health.
According to the Department of Health and Social Care’s 2019 workplace report, more than 100,000 Britons leave work following a spell of long-term sickness absence each year.
In any economic environment, that is a high figure, but in a pandemic, with the recognised additional stresses of job loss, anxiety, mental ill health and risk to health, this should serve as an alarm bell to advisers to make sure their clients have appropriate protection in place.
However, a 2019 study by insurance giant Swiss Re suggested the UK has a protection gap of £2.4tn: the bells clearly need to ring more loudly.
Terry Mason, group operations director at rent guarantor service, Housing Hand, said: “With the likelihood of redundancies in many employment sectors, it is imperative to have some financial protection. Budgeting is hard enough in a stable environment, but the current environment is far from stable.”
‘Stability’ is the key word here. In this Covid-19 world, all of us are vulnerable to exogenous financial shocks, but particularly so those in rented accommodation, he said.
The statistics are worrying. According to Shelter, 227,000 private renters have fallen into rental arrears due to the current pandemic, meaning the total number of tenants in arrears has doubled each year to 5 per cent of private renters.
Lettings management platform Howsy extrapolated this across the market, warning this meant an estimated 226,757 households have fallen into rental arrears since the start of the pandemic. With the current average rent at £843 a month, that is an estimated £191m owed to landlords in a single month.
Accident, sickness and unemployment policies may cover a small element of redundancy or sickness payments, and may suit some people as a stepping stone to more robust policies.
But renters who may have perhaps relied on such policies to help in the case of job loss or sickness will soon find the finances do not stretch. Some providers curtailed the ‘unemployment’ part of policies as Covid-19 hit the UK, and when it comes to accident or sickness, these policies are inferior to even the more basic IP plans.