Tenants call for year-long rent freeze

Covid-19 impact on March tenancies. Tenants hardest hit by Coronavirus. Late rent payments up just 2%. Universal Credit rent arrears deductions suspended;
Couple looking at paperwork

Generation Rent, a campaign group working on behalf of UK tenants, has called on the government to reconsider their position on allowing rent increases during the Coronavirus pandemic. They are instead asking for a 12-month freeze on rent increases.

Government statement refutes rent increase ban

On Tuesday 21st, Christopher Pincher, the newly appointed Housing Minister for the Conservatives, responded to a written parliamentary statement on rent increases, posed in March, by Labour MP Barry Sheerman.

In his response, Mr Pincher referenced a range of measures the government has already introduced, to support tenants at this time. He made it clear that a ban on rent increases was not on the horizon:

“The Government have no plans to ban rent increases during the COVID-19 outbreak as we have already announced extensive measures to protect renters affected by coronavirus. Through the Coronavirus Act 2020, we have introduced legislation to delay when landlords are able to evict tenants.”

He went on to outline his expectations from tenants and landlords both now and post-lockdown:

“All tenants remain liable for their rent and those who can afford to should continue to pay it. At the end of this period, if arrears have built up, landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account the tenants’ individual circumstances.”

Tenant fears over rent increases and debt

The Generation Rent group is involved in shaping government policy. It has expressed concern at the announcement from Christopher Pincer.

Caitlin Wilkinson, policy manager at Generation Rent has asked that for landlords to be banned from increasing rents for period of one year.

Furthermore, she has shared that many tenants are worried that they may get themselves into debt, through having to repay missed rent:

“The Government’s own advice is to stay home and avoid moving home if possible – meaning tenants faced with a rent hike have very little choice but to stay put and accept it.

“It should introduce a 12-month freeze on in-tenancy rent increases to ensure tenants are able to stay in their homes for the duration of this crisis.”

Whilst groups supporting the rights of tenants fear a spike in homelessness post-Covid-19, recent research suggests that only 10% of tenants have had to enter payment plans for their rent. This may give reassurance to those in rental property.

Rental propertyCovid-19 impact on March tenancies

Letting agent, Hampton International, have shared data on tenancies in March 2020, which demonstrates the impact they are seeing on the private rental sector, as the result of Covid-19.

70% of March tenancies maintained

Of tenancies due to end in March, 70% have instead renewed. This is the highest March take-up since 2008, when there was a 77% renewal rate.

However, tenancy renewals experienced a 0.5% year on year fall. This is the greatest fall the company has seen, since they first began their index of this metric, in 2014.

Knight Frank, another UK wide letting agent, have shared a similar picture. Their statistics show that tenancy renewals are 15% higher for the same period in 2019 and the highest they have seen in 10 years.

Annual renewal rents up in 5/8 regions

Regions where property is typically most expensive, have experienced the greatest impact on their renewal rental figure.

Three regions have experienced a fall in renewal rents, London, the South East and the East of England. London is by far the hardest hit, a product of the tighter margin between tenant income and cost of rent.

But, of the eight regions indexed, the remaining five have experienced increases in rent at renewal. The North, Midlands and Scotland have had strongest increases in rent at renewal.

Average rent of renewed tenancies (per calendar month)

Region

Mar-19

Mar-20

YoY

Greater London

£1,694

£1,656

-2.20%

South East

£992

£977

-1.40%

East of England

£923

£919

-0.40%

Wales

£613

£615

0.40%

South West

£759

£770

1.40%

North

£593

£602

1.60%

Midlands

£646

£659

2.00%

Scotland

£626

£647

3.40%

Great Britain

£933

£928

-0.50%

Great Britain excluding London

£737

£741

0.50%

Source: Hamptons International

Rents on new lets up 1.2%

Rents on new lets are up 1.2% year on year. The average rent on a new let was £980 in March.

With London statistics removed, growth is even more favourable, with an average of 2.60% growth and £792 average rent (up £20, from £772 last year).

Whilst the year on year figure has seen positive growth, month on month this represented a fall from 3.3% in February.

London and Wales are the only two regions that have seen a year on year decline, in average rents on new tenancies.

Again, London is the hardest hit at -1.30%. The impact in Wales was more modest, at -0.20%.

The South West and Scotland have experienced particularly favourable rates of growth, with 4.20% and 6.50% growth respectively.

Average rent of new lets (per calendar month)

Region

Mar-19

Mar-20

YoY

Greater London

£1,737

£1,714

-1.30%

Wales

£655

£653

-0.20%

Midlands

£680

£693

1.90%

South East

£1,028

£1,053

2.50%

North

£630

£646

2.60%

East of England

£944

£970

2.80%

South West

£795

£828

4.20%

Scotland

£632

£673

6.50%

Great Britain

£969

£980

1.20%

Great Britain excluding London

£772

£792

2.60%

Rental stock

Rental stock increased in March by 11%, month on month. However, the total number of properties available for rent was down, year on year.

Wales and the South, including London, saw the greatest increase in rental stock.

Where the demand for holiday lets has been impacted by the Coronavirus lockdown, some landlords have switched to traditional longer term renting. This has been partly responsible for the increase in rental stock.

Tenant demand

Hampton International recorded a 31% decline, in the number of prospective tenants registering for a property, from February to March 2020.

However, they do report that since this figure reached its lowest point at the end of the month, there have been signs of improvement.

Will Covid-19 influence demand for outdoor space?

Statistics from Rightmove, suggest that Covid-19 has influenced an increase in demand for rental properties with gardens.

The platform has seen the number of searches for property with a garden almost double since the first week of lockdown.

With many tenants trapped indoors over the lockdown period, it would not be surprising to see an ongoing trend in demand for some sort of outdoor space. This may be a consideration for landlords considering future property investments.

Tenants hardest hit by Coronavirus

The Association of Independent Professionals and the Self Employed (IPSE) has conducted research into Coronavirus support offered by the government. It has found that two self-employed groups are most vulnerable to a lack of support.

New mothers and those age 50-years old and over, who are self-employed, have been found to be those most likely to fall outside of the government support measures for Covid-19.

This is because, whilst support is offered to the self-employed (the Self-Employment Income Support Scheme, introduced in March), the eligibility requirements only include those who have filed a 2018-19 tax return. For those who have only recently become self-employed, this won’t be the case.

In 2019, the number of people becoming self-employed rose by 156,000 people.

The reason the groups mentioned above have been cited as most vulnerable to a lack of government support, is because they are amongst the biggest demographic groups, within the 156,000:

  • 83,000 people (53% of the total) were aged 60-years old or over, a year on year increase of 11%
  • 38,000 people (24% of the total) were aged 50-years old or over, a year on year increase of 3%
  • 25,000 people (16% of the total) were self-employed mothers, a year on year increase of 4%

Geographically, the rise in the number of self-employed people is in highest density in South East England (77,000), North-West England (38,000) North-East England (27,000) and Scotland (26,000).

Chloé Jepps, Head of Research at IPSE, commented on the findings of the research:

“This research, looking at the year-on-year increase in the number of self-employed, suggests the groups that were growing most quickly last year and are therefore most likely to miss out on support now.

“The groups most at risk of being left out in the cold seem to be not only older freelancers, but also mothers – who are if anything more likely to be in need of support.”

She went on to urge the government to widen their help:

“The government must get the newly self-employed – as well as limited company contractors and others who are missing out – the help and support they need. We urge the government to extend the Self-Employment Income Support Scheme to people who became self-employed in 2019/20 – and use this year’s tax returns to get them the financial assistance they need.”

Landlords whose tenants fall within these cohorts may, as a result, see these parties particularly at risk of financial vulnerability and may require the most support with rent payments.

If this is the case and as a landlord you require information, guidance or help in managing your tenancies, the Commercial Trust Covid-19 Hub signposts various resources that may be useful.

Rental insurance claims below 1%Late rent payments up just 2%

Late rental payments have only increased by 2%, since March 11th, according to Letting agent technology firm, Goodlord.

The company made an analysis of 20,000 representative rental properties to determine this statistic, which is an encouraging one for landlords.

The picture would quite likely have been a lot worse, were it not for the furlough scheme and other measures introduced by the government to support the UK economy.

Whether this will continue to be the case is an unknown.

However, the 2% increase was on a prior figure of 4% making current late payments 6% of the total due (in this analysis, a late payment refers to one overdue by seven days or more).

Rental insurance claims below 1%

The proportion of landlords pursuing insurances claims for unpaid rent is currently well under 1% of properties with this cover.

This would imply that landlords are, in the main, not suffering financially through lost rent, as the result of the Coronavirus.

Rent payment plans for less than 10% of tenants

Goodlord also surveyed 124 lettings agents. 70% of letting agent respondents said that less than 10% of tenants on their books were subject to agreed payments plans, to help them maintain their tenancy, whilst under financial duress.

Evidence from these three sources of data all imply that, as the moment, most tenants are able to pay their rent.

Chief operating officer at Goodlord, Tom Munday reflected on the positive picture so far being painted:

“Despite only being a month since lockdown began, the late payment figures for the rental industry are so far fairly steady. They show that the overwhelming majority of tenants are still able to meet their obligations and we believe the government’s furlough scheme will no doubt be playing a key role in this continuity.

“At the same time, agents and landlords are gearing up to offer more support in the months to come. Many agents, along with their landlords, are thinking about how they can offer flexibility, support, and guidance to tenants who might start to struggle.”

Where landlords are facing financial difficulty, these broader statistics will provide little comfort.

The Telegraph recently reported on one such scenario, where an unencumbered landlord was reliant on rental income to live:

“Christopher Lowery, 70, is already facing a financial crunch. Mr Lowery had to retire early because of cancer and he now consumes liquid food by tube. He and his wife have small pensions and rely on income from two rental homes in Suffolk.

“However, one of their tenants has already left and they fear that the property will be empty for a long time, costing them £750 a month. “I don’t know how we will get anyone in,” said Mr Lowery. Their rental income has more than halved and their costs have gone up as they now have to pay council tax.”
Source: The Telegraph.

Whilst the government continues to extend financial support across the UK, the financial pressure to loosen the Coronavirus lockdown will be significant, but medical advice has so far remained unchanged.

Universal credit deductions suspendedUniversal Credit rent arrears deductions suspended

The Department for Work and Pensions (DWP) has announced a new measure of support for Universal Credit claimants, in light of the ongoing Coronavirus pandemic. Rent arrears deductions will be stopped until 10th May.

This means that, where those owing rent arrears would normally have an amount deducted from their benefits each month, this will be temporarily halted in May, to resume again in June.

Rent arrears are not the only payments that have been suspended – all third party deductions are affected, which also includes service charge and Council Tax arrears.

Direct payments for rent fall outside of the change, so will continue to be charged.

In a statement on the matter, the DWP said they were streamlining operations, in light of the extra demand from new Universal Credit claimants:

“We have received an unprecedented number of new benefit claims and have streamlined our operations to make sure people get the support they need during this time.

“As part of this, we have temporarily paused third-party deductions from [Universal Credit] – these will recommence on 10 May.

“We are in the process of explaining the changes to claimants via their online journal and to third parties, including housing providers who collect arrears via this method.”

More than 1.5 million new applications for Universal Credit, a benefit paid to help towards living expenses for those on low or no income, have been made during the Covid-19 pandemic.

The standard allowance was recently increased from £317.82 per month to £409.89 per month.

Speaking on behalf of the National Residential Landlords Association, Ben Beadle, chief executive said of the decision:

“At such a difficult time the priority should be to do everything possible to prevent tenants getting into rent arrears in the first place by ensuring tenants are able to continue paying their rent in full.

“This means that the Government should ensure benefits cover the full cost of rents, end the five week wait for the first payment of Universal Credit and pay the housing element of the Credit directly to landlords.”

Polly Neate, chief executive of homelessness charity, Shelter, welcomed the announcement. But, she shared concern that further, more fundamental changes to Universal Credit, were required to support claimants:

"We're facing an onslaught of people suddenly unable to afford their rent at a time when people need to stay put and cannot safely move to a cheaper home.

"To avoid spiralling debt and needless evictions once the ban lifts, the Government must increase the housing element of Universal Credit so that it covers the average cost of local rents."

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