Landlords braced for chaos as unemployment soars

Nearly half a million private renters are likely to be pushed into rental arrears by the end of the year as job losses cripple landlords and tenants.

The Government’s forecast of 6.5pc unemployment this year will mean a further 400,000 private tenants will fall significantly behind on their rental payments in 2021, according to a report by the London School of Economics and Political Science.

Almost all of these tenants will be at risk of homelessness as the ban on bailiffs and the six-month notice period for evictions end on May 31.

The pandemic has disproportionately hit lower income jobs, which means the unemployment rate among renters is 10pc – twice the average level. Government data shows that an estimated 9pc of private tenants were in arrears at the end of 2020, triple the pre- pandemic level and equivalent to 353,000 households. LSE’s predictions suggest this number will more than double by the end of the year as the furlough scheme ends.

Many of the renters who are most at risk also now have much less stable tenancy agreements. Data from the National Residential Landlords Association, a trade body, showed that more than 30pc of landlords have allowed existing assured shorthold tenancies (which are typically fixed for a 12-month period) to become short-term rolling contracts, which typically offer only a month’s security. This means that tenants will be easier to evict.

Yet while renters’ positions become increasingly insecure, landlords also face a long period of uncertainty when the eviction ban lifts because the legal system will have to grapple with more than a year’s backlog of cases. The LSE report said: “The courts will simply not be able to cope with the cases. At the moment, the courts are not even able to deal with egregious cases involving antisocial behaviour, domestic violence or very long-standing rent arrears in a timely manner.”

Before the pandemic, the median time period for a landlord to repossess a property was 42 weeks. Now, the small number that are being processed are taking twice as long, and it could take years for the process to return to normal, LSE found.

Meanwhile, landlords are losing money fast. A third of NRLA members have lost more than 10pc of their income. Nearly a third are planning to sell properties or exit the sector altogether.

Dr Nancy Holman, co-author of the LSE report, said: “In a crisis of this magnitude there are no easy answers. Even if there is a rapid transition back to normality, the long-term arrears and loss of credit-worthiness among tenants and loss of income and confidence for landlords will continue to scar both individuals and the private rented sector for many years to come.”