As expected, the Government has reconfirmed its commitment to reform in the private rental sector during the State Opening of Parliament.
Although not mentioned specifically, Her Majesty promised to ‘enhance the rights of those who rent’. This undoubtedly means that the Renters’ Reform Bill, which will scrap the use of Section 21 evictions, will happen soon.
Even though this is inevitable and has been for some time, the scale at which the pandemic has accelerated rent arrears is really quite frightening and I am deeply concerned what this will do to the rental market if it goes ahead too early and without greater thought and detail into strengthening the Section 8 process.
That said, the government has now confirmed that it plans to wind down the evictions ban from 1st June onwards, allowing bailiffs to evict tenants once more, Covid safety rules allowing, and will also soon reduce the six-month notice landlords and agents had to give tenants before the evictions process can start to four months, with a further reduction due this Summer.
We’re now more than a year on from the start of the pandemic and the strain on the private rented sector is starting to show. In a recent poll carried out by Client Money Protect (CMP), nearly a third of letting agents (32 per cent) said that more than 50 per cent of their portfolio of tenants have fallen into rent arrears:
- 21 per cent said between 30 and 50 per cent are affected
- 19 per cent of agents said it is 15-30 per cent of their portfolio
- 28 per cent have between 0-15 per cent of tenants affected by rent arrears.
Obviously, the pandemic and the current eviction ban is playing a huge part in these rising rent arrears, but it does not bode well for when things start to go back to normal, only for tenants to be faced with the end of furlough and landlords to be hampered by the removal of Section 21.
The vast majority of landlords and letting agents are working hard to keep the lines of communication with their tenants open and be accommodating wherever they can.
In some instances, mediation has helped to successfully reach a way forward, whether that involves the tenant looking for another property, being offered a rent reduction or implementing a repayment agreement.
In my view, there needs to be a significant amount of time, post-pandemic, for the market to readjust.
Back to normal
Landlords and tenants need time to get back to normal and see if they want to remain in their current tenancy contracts, courts need time to clear the backlog of repossession cases, which are currently stacked up, and significant consideration and alterations must be put into making Section 8 fit for purpose. The government’s evictions winding down roadmap will help.
Reporting on the extent to which tenants are in arrears, 21 per cent of letting agents reported to CMP that arrears have reached six months or more. A further 18 per cent reported tenants being between three and six months in arrears.
If this is a taste of what landlords can expect, then it is inevitable that more landlords will start to leave the market, particularly at a time when prices in the sales market are at record highs.
Many landlords will be looking at this right now and considering their options. We even know of landlords selling their properties with tenants in situ just because they want out.
I know there are many tenants who have been badly affected by the pandemic, unable to work or had their wages/hours cut and for these people building rent arrears has been unavoidable, which is devastating for all involved.
Unfortunately, there are also a lot of tenants who have played the system to their advantage and avoided paying rent simply because they know there is nothing their landlord can do about it. No landlord wants to make someone homeless, but more has to be done to check the tenants’ viability to pay rent.
Without Section 21, landlords will be much more exposed to these kinds of serial rogue tenants who know how to use the system’s loopholes to remain in properties for free. This will also have a dramatic knock-on effect to referencing, making it even more difficult for honest hard-working tenants to find properties.
Affordable rental properties are difficult to come by and many agents are already inundated with enquiries every time a new property comes available. All that is going to happen, is the majority of tenants won’t even get a look in, as landlords and agents will be forced to cherry-pick only those in the very strongest and proven financial position.
In Bristol, for example, 30 percent of households are privately rented, and rents have gone up 52 per cent since 2011, but wages have only risen 24 per cent. This is only going to get worse if the pool of rented properties is reduced because landlords do not feel supported in the sector.
Tenant charities are calling for the Renters’ Reform Bill to be brought forward but I would urge government to consider such a move very carefully whilst there is so much uncertainty following the pandemic.
As I have said before, when it comes to tenants and landlords, one does not work without the other, so we need a PRS which is fair for all.