More tenants in financial trouble as rental hardships hit home

More than 100,000 tenants in England and Wales owe more than two months’ rent, according to latest figures

The number of tenants in severe financial difficulty rose by 8% in the second quarter of 2012, according to figures released by one of the biggest property groups in the UK.

More than 100,000 tenants in England and Wales were in severe arrears – defined as owing more than two months’ rent – in the second quarter of the year. This is an increase of 24% compared with the same period of 2011 and the highest number since 2008.

The number of court orders issued to evict tenants increased by 6% in the first quarter compared with the last three months of 2011, and by 5% compared to the first quarter of 2011. The figures, produced by receivers Templeton LPA, part of the LSL Property Services group, are extrapolated from a sample of 18,000 LSL tenants.

Paul Jardine, director and joint-receiver at Templeton LPA, said: “As the private rented sector grows, the number of tenants in dire financial straits is steadily climbing. Falling wages in real terms have been compounded by rising rents, pushing a greater number of rented households over the edge financially.

“With the instability in the labour market and wider economy, and public sector cuts still to come, the section of renters in multiple months of arrears is likely to continue its expansion.”

He added that the impact on landlords of rising rental arrears had been cushioned by low mortgage interest rates, and that buy-to-let mortgage arrears had been steadily falling since the Bank of England reduced interest rates in 2009.

However, David Brown, commercial director for LSL Property Services, said landlords had not seen the same level of capital gains they enjoyed a few years ago, and rental income was now the main driver for annual returns.

“In this environment, late or non-payment of rent is even more of an issue for investors, and it’s not uncommon to see landlords be flexible on the rent at the outset of a tenancy to secure a renter with the strongest evidence of sound finances and affordability,” he said.

Kay Boycott, director of campaigns, policy and communications at Shelter, said: “This is yet more evidence of the crushing impact rising rents and stagnating wages are having on family finances. Shelter research found that average private rents are now unaffordable for working families in more than half of England, with many paying up to half of their income each month. And with homeownership out of reach for so many, hundreds of thousands of families are beginning to realise renting looks set to be a way of life, not just a temporary stopgap.”

Recent research by the Centre for Regional Economic and Social Research at Sheffield Hallam University found that landlords in London are more likely to evict tenants or not renew tenancy agreements than in other parts of the country because of housing benefit changes.

Sir Steve Bullock, London Councils‘ executive member for housing, said: “Rents are much higher in London than in other parts of the country, and landlords are rightly worried about tenants who claim housing benefit being able to pay their rent. However, it seems far too many are evicting tenants or simply not renewing tenancy agreements and not working with tenants and councils to find a way forward.”


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