Lord Bourne of Aberystwyth is a former Housing, Communities and Local Government Minister. Baroness Altmann of Tottenham is a former Work and Pensions Minister.
The number of private sector tenants now in rent arrears has increased threefold as a result of the pandemic.
With ministers having pledged to a tapering down of emergency restrictions in the rental market from the start of June, it is vital that a proper plan is put in place to address the debt crisis affecting many tenants and landlords alike. Otherwise, many tenants will find themselves forced to leave their home through no fault of their own.
According to recent Government figures, nine per cent of private tenants were in arrears at the end of last year, up from three per cent in 2019/20. This aligns with survey figures showing some 800,000 tenants behind with their rent solely because of the impact of the pandemic.
Whilst we welcome the support that has been put in place to support tenants, including increases in the Local Housing Allowance and Discretionary Housing Payments, the figures speak for themselves. The number of tenants in rent arrears is getting worse, not better.
The Government’s main approach to the sector has been a series of short-term restrictions on the ability of landlords to repossess properties and extending the notice periods they have to give in such circumstances. This has provided security to many tenants throughout the pandemic but has enabled debts to accumulate, in many cases to a level where they have no hope of being paid off in the short term.
However, the sector cannot live in a state of emergency forever. These restrictions will need to be lifted eventually, and ministers have indicated that extended notice periods will start to be tapered down from June. The question is what then happens to those tenants who have built rent arrears through no fault of their own.
We cannot expect landlords to shoulder the burden of rent debts. As Alex Chalk, the Justice Minister, has rightly noted, it is vital that we “avoid falling into the trap of assuming that those in that situation are somehow vastly wealthy and have numerous other sources of income to draw on.” The Government’s data shows that 94 per cent of landlords rent property as an individual, 45 per cent have just one rental property and 44 per cent became a landlord to contribute to their pension. A survey by the National Residential Landlords Association of its members has found that 60 per cent had lost rental income as a result of the pandemic, either through lost rent or properties being unexpectedly empty.
The Government needs to step in and develop a financial package that helps tenants to pay off arrears built since lockdown measures started last March. For those in receipt of benefits that would need to include looking at increasing the amount available to councils in Discretionary Housing Payments and re-considering the wisdom of the decision to freeze the Local Housing Allowance in cash terms.
Another package is needed to help the majority of tenants in arrears who, the Resolution Foundation has found, are not in receipt of benefits and do not qualify for emergency housing support.
One option would be to provide grants. However, this has the potential to raise moral hazards. How would grants of this kind be fair to those tenants who have struggled to get by, but worked hard to ensure they meet their full rental payments each month? Likewise, how would it be fair to have grants available to the albeit small number of tenants who have purposefully not paid their rent in the knowledge that they could not be evicted during the pandemic?
This is why we are calling for the development of a hardship loan scheme for tenants, similar to those in Wales and Scotland, and supported by organisations representing debt advice services and landlords.
The hardship loans should be provided interest free, and guaranteed by the Government, with repayments linked to the recovery of a tenant’s income following lockdown measures easing. This would help to ensure they are not saddled with a repayment that they cannot afford. The loans would be paid directly to the landlord so they get immediate relief and takes the pressure off them having to consider action they might otherwise need to take against the tenants to recover their income.
Most landlords would prefer to keep renting their property to a long-standing tenant wherever possible. But of course, many landlords rely on their rental income as part of their pension and cannot afford to act as housing benefit or social housing providers. It is in the interest therefore of both landlords and tenants to ensure support is in place to pay off rent arrears that may have built.
The Housing, Communities and Local Government Select Committee estimates that a financial package to cover rent arrears as a result of the pandemic would cost somewhere between £200 and £300 million. This would be tiny in government terms but would offer a significant return on investment when compared to the costs of dealing with homelessness.
For those who might not be keen on the idea of propping up tenancies that might have no hope of being saved anyway, tenants with Covid-related arrears will struggle to move on to new housing when faced with landlords who feel their only option is to seek a County Court Judgement against them which would damage their credit score.
The Government seems to have ceded the principle of loans to help in this way. It announced in the Budget that it would provide up to £3.8 million of funding to deliver a pilot no-interest loans scheme in order to “help vulnerable consumers who would benefit from affordable short-term credit to meet unexpected costs as an alternative to relying on high-cost credit.”
Its approach to the rental market during the pandemic has been a classic one of short-termism, which was maybe justifiable at the time, but there has been no thought to the longer-term consequences. As the country emerges from lockdown, this now needs to be addressed if as many tenancies as possible are to be sustained.