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17/12/25 3:30 pm
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Many landlords and letting agents are reporting that a higher proportion of prospective tenants are failing referencing checks as affordability pressures persist and background checks become more rigorous. This trend reflects deeper shifts in the rental market and regulatory environment and is crucial context for anyone letting property in the UK today.
The number of tenants passing referencing checks has dropped off drastically as the cost-of-living crisis bites.
Rent guarantee firm Housing Hand reports that about 35% previously passed checks, but that the number is dropping and could now be as low as 25%. Another 40% will get accepted using a guarantor, but that means up to 35% will fail to achieve either.
"Referencing has become more stringent and it's partly about ID checks, which shouldn't be a problem for legitimate renters, but it's also about their financial capability," COO Graham Haywood tells LandlordZONE.
David Coughlin, director of the Landlord Sales Agency, says he knows of one instance where a landlord has sold a property and the letting agent is trying to find his tenant a new home. However, this tenant has failed to pass current credit checks which are now more stringent than when he moved in years ago. Despite having paid his rent on time, the task is proving impossible.
"We've heard of similar cases," says Haywood. "Paying your rent on time doesn't necessarily give you a financial qualification. Referencing firms would typically base their test on three and a half times a would-be tenant's salary, but as rents have gone up, that can be four or even four and a half times their salary."
He adds that in the last six months, Housing Hand has seen a 50% rise in applications for guarantees and that it's not just young people who need to use its services, but older, "even elderly" renters as well, particularly if they're not in full-time employment.
"People are being challenged in terms of their income not going up," says Haywood. "There are also pressures on landlords paying higher mortgage rates, and the next few months aren't likely to get any easier."
Tenant referencing is the process landlords and agents use to assess whether a potential tenant is likely to pay their rent and meet the obligations of a tenancy. It typically includes:
Referencing has become more comprehensive and exacting in recent years, with agencies adding identity, employment and affordability checks as standard.
Strong referencing reduces risk for landlords but also means that more applicants are struggling to meet criteria in a stretched economy.
Recent industry estimates show that the proportion of prospective tenants passing referencing outright has fallen sharply in the face of cost-of-living pressures and tighter checks:
At the same time, referencing firms are increasingly expected to balance rigour with fairness, particularly under evolving rental law. Good referencing remains vital, particularly as eviction processes become longer and more costly once possession grounds such as Section 21 are fully removed.
If a tenant fails referencing, landlords have several options:
Landlords are not legally obliged to carry out tenant referencing beyond Right to Rent checks, but failing to do so increases the risk of future rent arrears or problematic tenancies.
As rental legislation evolves — particularly with the Renters’ Rights Act approaching full implementation — robust tenant referencing is becoming even more important:
Review the income multiples you use; consider whether local rent levels make rigid multiples unfairly restrictive — particularly in high-rent regions like London.
LandlordZONE analysis of tenant affordability trends highlights that rent versus income ratios vary significantly across regions, affecting tenants’ ability to pass checks.
Use agencies that verify identity, credit and employment thoroughly, but also explain outcomes clearly to applicants. Independent checks offer landlords protection in disputes and a documented audit trail.
Get written confirmation from previous landlords or agents using a standard form. It’s a good supplement to agency checks and can reveal behaviour not obvious from credit reports alone. LandlordZONE’s guide to providing a reference explains how this works in practice.
Keeping clear records of every step in your process is a strong defence against potential discrimination claims — especially under the Renters’ Rights Act’s compliance expectations.
Read more: Ultimate guide to referencing.
Tenants are failing reference checks more often because rents have increased faster than wages, making affordability thresholds harder to meet. At the same time, referencing agencies now carry out more detailed credit, income and identity checks than in previous years.
A tenant reference is usually considered failed when an applicant does not meet one or more criteria, such as income requirements, credit score standards or previous landlord feedback, used to assess affordability and reliability.
Yes. A tenant who fails referencing may still be accepted if the landlord agrees alternative arrangements, such as a guarantor or rent paid in advance within legal limits. The final decision rests with the landlord.
Not necessarily. Some landlords choose to proceed if the risk is manageable and appropriate safeguards are in place. Others may prefer to wait for an applicant who passes all checks, depending on their financial position and risk tolerance.
Tenants are more likely to pass referencing if they can provide proof of income, employer details, previous landlord references, valid identification and evidence of stable residency.
Aside from Right to Rent checks in England, tenant referencing is not legally mandatory. However, it is widely regarded as best practice and an important risk-management tool for landlords.
Landlords can reduce failures by clearly explaining affordability criteria upfront, using reputable referencing services, allowing guarantors where appropriate and keeping thorough records of the decision-making process.
Tenant referencing is only one part of responsible property management, complementing good tenancy agreements, regular property maintenance and adherence to legal requirements. As rental reforms unfold, staying informed about changes — including referencing expectations — will help landlords manage risk and maintain stable tenancies.
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