With the cost of living crisis being the political issue of the day, and a political leadership contest underway, there's something of a hiatus in the way it's being dealt with. But the situation is now quite urgent.

Financial distress is now higher than during the pandemic. Rising inflation, energy and food prices in particular mean that landlords are concerned about the impact this will have on their tenants and on their rent payments.

Almost 4.5 Million UK Families find themselves in serious financial difficulties, that's according to an influential new report just out.

How will the cost of living crisis affect you?

The UK's cost of living is set to increase considerably during 2022. This will pose a real threat to many families, including landlords, and in particular it will make it more difficult for low-income households to make rent payments. That's because, as a share of a low earner's budget, travel costs, fuel and food '� the commodities that are increasing in price the most - represent a bigger proportion of the low earner's income.

The abrdn Financial Fairness Trust, along side researchers at the University of Bristol, have estimated that 16% of households (4.4 million), are now in 'serious financial difficulties'� and another 20% are struggling to pay their way.

Many families renting homes in the private rented sector (PRS) will find it a struggle and will likely face difficulties as a result of the rise in living costs. Landlord's costs are also rising, while at the same time - some would argue because of Government policies - there's a scarcity of rental accommodation, so rent levels along with other prices will only go one way, and that's up.

Housing prices will keep on rising

After a couple of years of declining affordability, arising because of the Covid pandemic, 2022 is set to bring even greater challenges to the rental market. Forecasts show that house prices, mortgage rates and rents will keep on rising in the year ahead. This will continue to fuel competitive markets for house sales and the rental market.

Rise in households facing acute financial strain

The number of UK households facing acute financial strain has risen by almost 60% since last October, the abrdn study shows. The study's findings show the growing pressure that people are facing in the worst cost of living crisis in a generation, and this will only intensify come October next when another increase in energy bills will hit, and with inflation expected top 11%.

In May, before the resignation of Prime Minister Boris Johnson, his Government announced an extra �15 billion in cost of living support, but calls are now growing for even more Government aid ahead of the conclusion of the election process to choose a successor for Johnson.

Mubin Haq, chief executive officer of The abrdn Financial Fairness Trust has said;

'Times are tough for everyone, but it's those on the lowest incomes who are particularly feeling the effects of rising prices. Wages have largely stagnated and are no longer keeping pace with inflation; and social security is lower in real terms than it was over a decade ago. A more comprehensive and longer-term plan is urgently needed to ensure living standards do not sink even further.'�

The abrdn Financial Fairness Trust publishes a regular financial impact tracker initially to monitor the economic effects of the coronavirus pandemic, and support offered from the Government, on people's finances.

Researchers from YouGov questioned 6,500 people across the UK on how their personal and household finances have been affected by the pandemic, and how the cost of living crisis is likely to impact them over the next few months. They were asked about their income, payment of bills, borrowing, debt, savings and other financial changes, including their ability to pay for essentials such as food.

More than half of those polled for the Coronavirus Financial Impact Tracker considered their financial circumstances to be worse than during the early pandemic. When the same question was asked last October, only a third thought their situation had deteriorated.

How are people coping?

The latest report shows how people are trying to save money: of those who said they are in serious financial difficulty, 71% said they have reduced the quality of food they eat, 36% said they have sold or pawned possessions and 27% have cancelled or not renewed insurance.

The steps people are taking to save on energy bills include bathing and cooking less, and more than 20 per cent of casual workers have stopped or reduced their pension contributions. Single parents, social housing tenants and households with children are being hit the hardest, the report says.

Sharon Collard, a professor at the University of Bristol has said:

'It's particularly worrying that people are potentially storing up future financial problems for themselves.'�

There are five groups highlighted that are facing the toughest financial difficulties:

1 - Those with annual household incomes below �10,000 (41% are in serious difficulties)

2 - Social housing tenants (39%)

3 - Single parents (37%)

4 - Working-age households with no earners (31%)

5 - Households were someone lives with a disability (29%).

Perhaps not surprisingly, higher income households, older households (the fastest growing sector who are renting), and homeowners, appear to be less seriously hit by the cost of living crisis.

Single parent households have been the hardest hit, rising by 14 percentage points from 23% to 37% over the previous year's index. This group is followed by social housing tenants, private tenants and households with two children - all of these with 11 percentage point increases. The only group seeing a reduction in financial difficulty was households earning over �100,000 per year, a group that saw a 2 percentage point decrease.

We are nearly all suffering

Nearly every UK household is feeling the pinch to a greater or lessor extent. Energy bills are affecting 80% of households, transport costs 68% and grocery bills 62%. Around 80% of households have cut back their spending one way or another.

What are people doing to mitigate the impact?

The Report says that households have been taking a range of steps to mitigate the rising cost in living since the start of January 2022. Four-in-five (81%) according to the report said they have tried to cut back their overall spending, with 25% saying they have cut back by '�a lot' and 56% by '�a little'.

Looking at specific types of expenditure, a large proportion of households say they are cutting back, yet still spending more. For example,

- Two-thirds (68%) of households have cut back on energy use but have still seen their spending on energy increase.

- For the cut back on transport and food, these figures are 44% and 42% respectively

- The most common step the report identifies as bing taken by households to '�make ends meet' since the start of 2022 was to save less money than usual '� with this affecting half (51%) of households
- One third (33%) had actively dipped into their savings to pay for daily living expenses

- Less common, for households in serious difficulties, half (51%) of had borrowed money on a credit card, overdraft or from other formal lenders to pay for daily living expenses

- 46% were depending on financial help from family or friends

- Nearly 40% were attempting to access (additional) benefits or support funds.

- Around 36% of those in difficulty had sold or pawned possessions that they would have preferred to keep

- Around one-quarter had cancelled or not renewed at least one type of insurance product.

- One-in-six (17%) of those in serious difficulties '� equivalent to nearly 750,000 households '� had accessed a foodbank since the start of the year, but this being the first time the Tracker had collected data on foodbank use, it was not possible to compare with previous results since October 2021, but the Trussell Trust data is showing a 14% increase in the number of food parcels distributed in the financial year 2021-2022, compared with 2019-20.3

- Unlicensed money lenders are recorded as being used by around five-per-cent of those in serious difficulty

- In 9% of cases of hardship at least one earner had stopped or reduced their pension contributions, with 21% of '�gig economy' workers doing this.

All in all the findings of the report paint a pretty bleak picture for the UK economy; for tenants, and a considerable number of landlords will be affected.

One report by NatWest says that many tenants believe they'll only be able to get on the housing ladder in their forties, or even fifties due to this cost-of-living crisis. 13% have said they could even be on their way to collecting their pension before leaving renting.

The biggest question for many landlords over the coming months is going to be, can my tenants still afford to pay their rent?