Rent Arrears Lowest in Decade

Written By PropertyLoop
August 09, 2021

Those that have found themselves renting a new home over recent years, or that have climbed onto the rental property ladder, choosing to let out a property to the ideal tenant, will be undoubtedly aware of the mounting rent arrears crisis many tenant campaign groups declared would plunge the nation into record levels of homelessness.

However, in spite of the staggering amount of households that have been left in need of financial support throughout the lockdown period, after having the stability of employment, working hours and income all left hanging in the balance after numerous government restrictions were put in place, the number of tenants that are facing rent arrears is the lowest seen in a decade.

Recent research carried out by Paragon Bank has unveiled that thanks to landlords cooperating with the occupants of their rental properties, offering them ample time in which to repay any owed amounts, addressing outstanding rent arrears in a way that keeps a roof over the head of the tenant, whilst allowing the owner of the rental to somewhat maintain the consistency of their income.  The report conducted by the renowned bank stated that between April and June of this year, the number of tenants that had an outstanding rental payment to the owner of the rental property had fallen from 1.6 tenants per landlord in the first three months of 2021, to only 1.3; the lowest figure recorded since 2011.

As can be expected the amount of debt each tenant faced through the accumulation of rent arrears experienced a peak in the initial months of 2021, with the average tenant owing an average of £2,376 in unpaid rent. However, the scale of these missing rental payments had been reduced to only £1,781 by the period of April to June of this year, the lowest amount of rent arrears seen since the tail end of 2017, with the levels of unpaid rent residing at £1,584 at this period.

Paragon Bank’s data suggests that this fall in the average amount of rent arrears faced by each tenant is due to landlords across the private rental sector offering their struggling tenants a period over which they pay a reduced amount of rent, or in some cases a payment holiday. Research carried out by Shawbrook Bank has further shown that from a group of 2000 UK landlords 46% were found to have reduced their tenants rental obligation at some point during the pandemic; with 28% of these rental property owners offering their tenants a payment holiday, with the remaining 14% accepting a reduced amount of rent from their residents.

The survey revealed that the rental property owners that offered their tenants a payment holiday experienced a financial loss of around £7,500; with the landlords that gave their occupants a reduction in rent lost an average of £6,500. Landlords that gave the occupants of their rental property that were facing arrears a payment holiday reported that the duration of this absence from rental payments lasted approximately three months; whilst rental property owners that faced rent reductions did so for an average of four months.

The survey carried out by Shawbrook Bank also detailed that landlords that maintained a rental portfolio of four or more properties were found to be increasingly likely to have offered the residents of their accusation a period over which they would pay a reduced amount of rent. However, it is also worth considering that a similarly founded survey conducted by Paragon, comprising 750 landlords found that more than 36% of the surveyed landlords experienced a tenant making a request for their rental obligation to be reviewed.

Is the Rental Sector Recovering?

With all this being said, it is understandable if these figures offered up by these reports come at somewhat of a surprise. Only as recently as April the Ministry of Housing Communities and Local government released a detailed report on how the UK governments had aided the growth of the private rental sector throughout the course of the pandemic. The report warned that the rent arrears crisis, of left unattended would lead to mass homelessness, stating that, “many renters who have been unable to pay their rent during the pandemic will be at risk of becoming homeless.”

The report also detailed how UK ministers redefined what a landlord would be able to consider “significant rent arrears”, with the benchmark established at nine months being reduced to a mere six. As can be expected, the report condemned these moves by the government, arguing that this was making it easier to rental property owners to evict tenants that had fallen behind with their payments and in turn creating an increased likelihood of homelessness. However, this is not to say that the support the government offered through its interventions wasn’t exclusively in support of landlords, as many stated that the eviction ban in place was far too linear, with no clear distinction being made between the tenants that were facing rental arrears as their working hours had been influenced by the pandemic, and the occupants of rental report that simply chose not to pay their rent. Landlords argued that this lack of clear distinction left landlords without any recourse for reclaiming their rental property to save their income, even in situations where it was impossible to negotiate with the tenants to arrange for a repayment scheme.

The National Landlord Association also made similar predictions in the closing months of 2020, stating that over 800,000 renters across the UK, or 7%, had generated an outstanding amount of rental payments with the landlord amounting anywhere between £250 and £5000 since lockdown measures where implemented in March 2020. The organisation’s predictions continued to details that more than 150,000 renters had accumulated rent arrears over £1000 since lockdown began, with Citizen’s Advice further revealing that by the start of 2021 around one million UK renters owed their landlord approximately £750 rent.  However, whilst these statistics provided by these numerous reports show the extent on of rent arrears, it has been said that almost half of those in rent arrears during lockdown have never been in debt to their landlord previously; showing that this willingness to negotiate with tenants that has been demonstrated by landlords has been critical to the growth of the private rental sector.

However, with recent weeks seeing demand for city centre rental opportunities flourish, alongside rental prices across the majority of the UK, London aside, sour as the sector looks to get back on its feet. However with interest rates still looking to favour those seeking opportunity, alongside buy to let mortgage lenders now offering incentives  for more environmentally friendly rental properties; some are arguing this may be the ideal circumstance to establish yourself as a landlord.

How Can I Get Out Rent Arrears?

Unfortunately, recent economic hardship has been felt by most, leaving a large portion of UK renters unable to pay their rent. As mentioned, it is expected that around half of those that are currently experiencing rent arrears to have never been indebted to their landlord before, leaving them unaware of where they can turn for help with their rent arrears.  If a tenant begins to accumulate a significant amount of rent arrears it is likely that the landlord will begin moving to repossess the rental property and evict the tenant, this is why it is essential the any arrears are addressed with the landlord as soon as possible, helping both sides of the rental agreement come to a solution that is mutually beneficial.

This is echoed by the advice lent by the government over the course of the pandemic, advising rental property owners to try and negotiate with their occupants, arranging a rent repayment scheme with their tenants. As can be expected when trying to reach an agreement with your landlord surrounding the repayment of rent arrears, it is crucial to establish a budget and see what you would reasonably be able to repay the owner of the rental property each month. If anything is agreed with the landlord, IE; how much will be repaid over what period of time, it is essential that this is new arrangement is acknowledged in writing with a signature being obtained from each party of the tenancy agreement.

Of course being in rent arrears is not the ideal scenario for the tenant; however it is also in the best interests of the landlord to ensure that some amount of rent is still being paid as otherwise they would be left with no rental income. With recent government data revealing that 45% of UK landlords exclusively generate their rental income from a single property, it shows that many that let out their property have been left scrambling to maintain an income when their tenants have been impacted by fluctuating earnings thanks to the pandemic.

In some cases, depending on the amount of income the tenant has, they could be entitled to financial support through either additional universal credit payments, or housing allowance. This would allow them to continue to meet their obligation to pay rent to their landlord whilst perhaps addressing the arrears faster than otherwise possible. It may also be possible for a tenant that is receiving such financial support to have these payments made directly to the landlord through a third party deduction. Further to this, in the circumstance that a tenant is already in receipt of some sort of housing benefit and is still unable to pay their rent, they may be able to obtain a discretionary housing payment from their local council.

It is also worth mentioning that if after numerous attempts by the tenants, the landlord has not provided any response, or has not agreed to a rent reduction or repayment then the tenant is still obligated to pay their rent in full. Understandably, this is not always possible and if the matter is taken to court showing if the tenant is able to show they paid as much rent as they could, alongside their attempts to negotiate with the owner of the rental property then this could work in their favour.

How Many Months’ Rent Arrears Before Eviction?

As mentioned, if a tenant begins to fall behind with their rental payments then it is likely that the landlord will take action to have this debt repair, alongside evicting the tenant from the property and regaining possession of the rental. This can be achieved through serving the occupants of the property with either a section 21 or section 8 notice of eviction. At the point where the appropriate notice period has expired, the landlord will be empowered to gain a possession order from the courts, meaning that the tenants must vacate the rental property. If after this the occupants are still refusing the leave the rental property, the landlord is able to obtain a warrant of eviction, entitling them to use bailiffs to enforce the removal of the tenants and the repossession of the property.

At the time of writing any section 211 notices that were served on or after the 1st June 2021 must provide the tenant with at least 4 months’ notice, showing the sector is finally taking steps towards “normalicy”; but whilst landlords have hailed these changes to eviction measures implemented through lockdown as empowering, some have argued this could come too soon.

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