Years for rent and evictions to return to normal

A new report by LSE London highlights how, due to the future impact of the pandemic, it could take a number of years for the levels of tenants with rent arrears to return to normal. ;
Rent arrears

A new report has been released by research group LSE London, funded by Trust for London and the London School of Economics, and based on data from the National Residential Landlords Association (NRLA).

The report suggests that the number of private tenants that will have significant rent arrears by the end of 2021 will reach 400,000 and will take a significant number of years to return to normal levels.

Eviction restrictions

The report, which uses the government projection of unemployment rising to 6.5% this year, from 4.9%, predicts that more tenants will be unable to pay their rent.

The figures are also based on recent data which shows that 7% of private tenants are in rent arrears, twice the average of a normal year.

The report however does highlight that due to the court backlogs, it is unlikely that the process will be smooth sailing when the restrictions are removed.

The report states:

“Before the pandemic it was taking a median of 42 weeks for cases to reach repossession – the mean length was nearer a year. Now the small number that are being processed are taking maybe twice that long. What happens when eviction notices are enabled is totally unclear – but if nothing specific is done it could take years to return to normality.  Meantime many landlords will be receiving no rent for months on end.”

Professor Christine Whitehead, Emeritus Professor of Housing Economics at LSE and co-author of the report, commented:

“Most evictions remain on hold until after the 31 May. Depending on what the government announces will happen after this, many tenants could be vulnerable to being asked to leave their homes.”

“However, we do not expect an immediate surge in evictions since, in many cases landlords and tenants have found ways of coping through rent holidays and lower rents during the crises, and some renters have moved in with family or friends.”

AST renewal

The data provided by the NRLA shows that only 20% of tenants have issued new Assured Shorthold Tenancies (ASTs) to existing tenants, whilst over 30% have rolled them over to becoming Statutory Periodic Tenancies, shorter monthly rolling contracts.

This is one way that landlords are looking to get properties back, with shorter notice periods on the SPT’s than a regular AST.

It works both ways, however, as those landlords who are confident in their tenants’ position to renew an AST will also be reassured that those tenants will not be breaking their lease any time soon, and therefore removing the landlords’ source of income.

Dr Nancy Holman, Associate Professor of Urban Planning and co-author of the report, commented on the use of Housing Benefits or Universal Credit to pay back rent:

“Unfortunately, these solutions are partial. 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.”

“One in five households in England rent, with many having no other option. If we are to avoid catastrophic problems in the future, we must ensure that the private rented sector remains sustainable.”

The longer the pandemic continues to disrupt daily life, the further into the future the effects are going to be felt in the PRS.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.