Posts with tag: furlough scheme

Renters and landlords face cliff edge as furlough ends

Published On: September 21, 2021 at 8:27 am

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Categories: Landlord News,Tenant News

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Private renters and landlords in England face a cliff edge as the end of furlough coincides with cuts to benefit support, says the National Residential Landlords Association (NRLA).

With Bank of England warnings indicating that renters were more likely than any other group to have lost their jobs or been furloughed, the NRLA argues that many more renters face the prospect of mounting rent debts.

Its new report shows that, by the Government’s own admission, the proportion of private renters in arrears tripled in the period from 2019/20 to the end of 2020 from 3% to 9%.

With furlough due to draw to a close at the end of September, alongside a £20 a week cut to Universal Credit and a continued freeze to housing benefit support, more tenants are at risk of unsustainable debts.

The NRLA points to warnings from the Bank of England about the risks posed to the country’s economic recovery as a result of renters experiencing financial difficulties. It also highlights concerns about what impact a failure to tackle COVID-19 related rents debts will have on the credit scores of affected tenants, as well as the likelihood that they will be able to stay in their homes.

With the Government having now admitted that many landlords “are highly vulnerable to rent arrears”, the NRLA argues landlords cannot be expected simply to deal with non-payment of arrears.

The NRLA is calling on the Chancellor to develop an interest free, government guaranteed hardship loan to support the majority of tenants with COVID-19 related rent debts who are not eligible for benefit support. This scheme would help these tenants to pay off their rent debts and would follow the introduction of similar schemes in Scotland and Wales. More broadly, it is calling on the Government to scrap plans cut Universal Credit payments to avoid potentially devastating consequences for tenants across the country.

Ben Beadle, Chief Executive of the NRLA said: “Many tenants and landlords have struggled to cope during the pandemic leaving them exposed to the impact of rent debts which they are unlikely to ever pay off.

“By ending furlough and cutting benefits in quick succession, and without the introduction of a targeted package to tackle COVID related rent debt, the Government is worsening an already critical situation. Without transitional support, and as the country gets back to normal, the Chancellor will be turning his back on those renters and landlords in desperate need of help.”

Furlough scheme extension announced in spring Budget

Published On: March 4, 2021 at 12:11 pm

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Categories: Landlord News,Tenant News

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In yesterday’s Budget announcement, Chancellor Rishi Sunak announced the furlough scheme will be extended until September 2021.

Neil Cobbold, Chief Sales Officer at PayProp, comments on this news: “(Yesterday’s) Budget once again focused on the Government’s financial support in response to the COVID-19 pandemic. The most significant headline announcement for the private rented sector in the short term – an extension of the furlough scheme until the end of September – will provide additional support for many tenants.

“The furlough extension will indirectly safeguard the finances of landlords and letting agencies by helping to keep rent arrears under control in the short term.

“However, when the furlough scheme does come to an end, there could be a significant number of redundancies which could put additional pressure on many tenants’ ability to pay rent.

“There were rumours that rent grants for tenants in England – similar to those introduced in Scotland and Wales – were being considered by the Chancellor, but this additional support hasn’t materialised and the sector could now face a cliff-edge in a few months.

Ben Beadle, Chief Executive of the National Residential Landlords Association (NRLA), said: “The Chancellor’s pledge to do whatever it takes to support those affected by the pandemic will ring hollow for thousands of tenants and landlords across the country.

“The Government has admitted that private tenants have been hardest hit by the pandemic, and figures show that most of those in arrears are unable to access emergency housing support from local authorities.  

“Despite this the Chancellor has failed to provide the sector with the financial support needed to pay off rent debts built as a consequence of the virus. 

“Without help to get arrears cleared, many tenants face the prospect of losing their homes and having damaged credit scores, which will undermine the Government’s efforts to help generation rent become generation buy.”

Robert Nichols, CEO of Portico, comments: “It is also very welcome news that the furlough scheme has been extended, as well as the uplift to Universal Credit. These moves combined will continue to provide some much needed confidence in such extraordinary times and, together with the Stamp Duty holiday and the new mortgage guarantee scheme, buyers, renters and sellers can rest easier and plan their moves with less to hold them back.” 

Furloughed tenants in London spending 82% of income on rent

Published On: November 6, 2020 at 9:01 am

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Categories: Tenant News

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The continued level of unaffordability for tenants in London has been revealed by lettings and estate agent Benham Reeves, as the furlough scheme is extended.

Research from the agent shows the average London tenant was paying £1,644 a month in rent prior to the pandemic. They also earned an average net salary of £2,639, meaning 62% of their monthly salary was required to cover rent costs.

Under the latest version of the furlough scheme, which is a return to previous lockdown furlough scheme, employees will receive 80% of their current salary, up to a maximum of £2,500. As a result, London tenants who have been furloughed are seeing their net monthly income reduce to £2,003. This results in the average cost of rent requiring 82% of their monthly pay – a 20% jump compared to before the pandemic.

On top of this, Benham and Reeves also points out that in some boroughs the level of income required to cover rent costs for those on furlough has already exceeded 100%. 

The London agent uses Westminster as an example. Here, the research shows that the average tenant surviving on furlough will see their monthly net income reduce from £4,038 to £2,003. Prior to the pandemic, 75% of monthly earnings were required to cover the average rent of £3,046 in the borough but tenants on furlough have seen this climb to 152%.

Tenants in Kensington and Chelsea, Camden, Hammersmith and Fulham and Islington have also seen the average cost of renting exceed 100% of the average income for an employee on furlough. 

Marc von Grundherr, Director of Benham and Reeves, comments: “The outlook for London’s tenants is a tough one at present with a second national lockdown preventing many returning to work fully, if at all, while still having the struggle of paying rent and other monthly outgoings. 

“While the Government has introduced a number of schemes to help lighten this financial burden it’s unlikely to be enough with many seeing the cost of rent alone swallowing the majority, if not all, of their monthly income. 

“Of course, there will be those in a better position than the average tenant but it’s important to note that there will be many more that are worse off and facing an even tougher task.” 

The average net monthly income in each borough, how this has changed for those on furlough, and the percentage of both required to cover the average monthly rent. 

LocationAverage Rent pmPre-PandemicWith Furlough Scheme in Place
Average NET Salary pmRent as % of NET salaryFurlough net salary – including cap due to gov max contributionRent as % of NET furlough salary
Westminster£3,046£4,03875%£2,003152%
Kensington and Chelsea£3,023£5,21858%£2,003151%
Camden£2,302£3,38768%£2,003115%
Hammersmith and Fulham£2,117£3,20966%£2,003106%
Islington£2,003£3,19563%£2,003100%
Wandsworth£1,958£3,39958%£2,00398%
Lambeth£1,908£2,56574%£2,00395%
Hackney£1,842£2,36078%£1,94995%
Tower Hamlets£1,835£3,16258%£2,00392%
Richmond upon Thames£1,835£3,76949%£2,00392%
Newham£1,453£2,00772%£1,66787%
Haringey£1,669£2,35071%£1,94186%
Southwark£1,718£2,71763%£2,00386%
Brent£1,502£2,21768%£1,83482%
Merton£1,640£2,79959%£2,00382%
Barking and Dagenham£1,208£1,81667%£1,51480%
Ealing£1,569£2,43165%£2,00378%
Barnet£1,499£2,49860%£2,00375%
Enfield£1,292£2,11561%£1,75374%
Greenwich£1,476£2,65056%£2,00374%
Hounslow£1,352£2,26160%£1,86972%
Waltham Forest£1,352£2,27759%£1,88272%
Harrow£1,387£2,37059%£1,95671%
Lewisham£1,316£2,31957%£1,91669%
Hillingdon£1,200£2,11157%£1,75069%
Redbridge£1,311£2,37855%£1,96367%
Bromley£1,307£2,78747%£2,00365%
Kingston upon Thames£1,306£2,78247%£2,00365%
Havering£1,169£2,31151%£1,91061%
Croydon£1,140£2,26850%£1,87561%
Sutton£1,151£2,33649%£1,92960%
Bexley£1,092£2,35846%£1,94756%
LONDON£1,644£2,63962%£2,00382%
United Kingdom£987£2,03948%£1,69258%
SourcesONSONS gov.uk 

End of furlough puts 400,000 more renters at risk of debt

Published On: November 3, 2020 at 9:06 am

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Categories: Tenant News

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More than 340,000 private renters in Great Britain work in sectors at risk of redundancies when the furlough scheme ends, an analysis by Generation Rent has found.

A further 62,000 private renters work in sectors facing closure under Tier 3 restrictions. Generation Rent believes they could see their incomes reduced by a third.

The campaign group warns that this will add to the numbers of people who cannot cover their rent because housing benefit levels are inadequate, putting them at risk of arrears and eviction.

Generation Rent is calling on the Government to increase Local Housing Allowance (LHA) to cover the median rent to prevent families from getting into debt. It also calls for a fund to clear the debts of renters who are already in ‘serious arrears’ by compensating landlords up to 80% of the rent owed. It also believes that fast-tracking the abolition of Section 21 “no fault” evictions will prevent unnecessary hardship now that courts have reopened.

Sectors including nightlife, entertainment, events, and sport face continued restrictions. When the 80% guaranteed furlough ends, many employees may face redundancy or reduced income. Based on Labour Force Survey data, Generation Rent estimates that of the 1.4m employees in these sectors, 341,000 are private renters (24%).

The group points out that a further 62,000 private renters are working across Great Britain in sectors that could face closure under Tier 3 measures, including leisure centres, hairdressers and betting shops.

Generation Rent believes that these 403,000 workers will become more reliant on Universal Credit to pay their rent. However, its analysis of data from the Department for Work and Pensions (DWP) indicates that many will face shortfalls.

The regional findings from this analysis also include:

  • The number of private renters in London claiming Universal Credit doubled in the first three months of the pandemic (an increase of 100%), followed by 76% in the South East and 72% in East Anglia.
  • In North East England, nearly half (49%) of private renters are receiving LHA, meaning 19%, or 37,568 households, are left with a shortfall. Private renters in Wales and the North West are also badly hit, with 46% receiving LHA in May.

The region facing the least impact is Scotland, which still has 31% of private renters relying on state support, and 1962 households facing a shortfall.

Alicia Kennedy, Director of Generation Rent, said: “As the furlough scheme nears its end, people are worrying about how they will keep their heads above water. More than a million employees are at risk of redundancy and a quarter of them are private renters. 

“Thousands of renters started claiming Universal Credit at the start of the pandemic and have found that it is nowhere near enough to cover the rent they owe. Every month their debt piles up. Without additional support for renters, the government will preside over mass impoverishment of millions of people.”

Landlords should prepare for spike in rent arrears as furlough scheme winds down

Published On: August 4, 2020 at 8:15 am

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Categories: Landlord News

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With changes to the furlough scheme now in place, PayProp warns that letting agencies and landlords should prepare for a spike in rent arrears.

The rental payment automation platform advises that property professionals can minimise arrears with systems that manage and record payments and tenant communications effectively.

A rise in arrears could be caused by furlough scheme and lockdown changes

Since 1st August, employers using the Government’s Coronavirus Job Retention Scheme now have to contribute to National Insurance and pension payments for furloughed employees.

This will change again on 1st September, at which point employers will be required to contribute 10% of furloughed wages. This will rise to 20% in October before the scheme finishes at the end of that month.

PayProp points out that as the scheme winds down, there may be a rise in redundancies if employers are unable to afford the additional contributions. This could then lead to a rise in rent arrears if tenants find themselves unemployed. 

Neil Cobbold, Chief Sales Officer at PayProp, comments: “Rent arrears may spike again in the coming weeks and months as tenants’ finances are affected by a combination of changes to the furlough scheme and easing of lockdown restrictions.

“The job retention scheme has helped to keep people employed and subsequently allowed many tenants to continue paying rent but as it starts to wind down, letting agents and landlords should prepare for more tenants to fall behind on rent again – or, in the worst-case scenario, not be able to pay at all.”

How could a spike in rent arrears impact agents and landlords?

An analysis by PayProp shows that the average tenant in arrears owed almost 20% more in May than they did in January.

If the monthly percentage of rent they owe continues to rise, this could increase the pressure on landlords’ finances.

Cobbold says: “An increased number of tenants in arrears combined with rising debt per tenant presents a double whammy of lost revenue with landlords losing out on monthly rental income and agencies potentially losing out on management fees.

“Agents need to focus on how they can recoup tenant debt and reduce the chances of arrears getting worse in a way that is affordable for both tenants and landlords. This will help them to protect their own income as well as that of their landlords in a sustainable way, given the increased financial difficulties that renters are facing.”

How can rent arrears be record and managed effectively?

According to PayProp, the best practice for managing rent arrears is to digitally record all payments and missed deadlines. 

The chances of recovering lost income can be maximised if agencies and landlords have a clear picture of how much is owed. They should use practical strategies, such as chasing tardy payers promptly and agreeing affordable repayment plans or lump sum repayments with tenants.

Cobbold adds: “It’s important that agencies track arrears on behalf of their landlords so that they can attempt to recover debt and don’t have to write off the tenancy as a lost management fee in the future.

“Chasing arrears may seem like hard work with uncertain chances of success, but if this process is automated it can free up time and ensure no communication is missed – as well as building a clear paper trail for a potential eviction process in the most extreme cases. Opening up a dialogue with tenants is key to reducing the impact of rent arrears.

“In the long-term, agencies can manage arrears more effectively by ensuring all tenants are thoroughly vetted, while having the technology in place to record all payments and deliver automated reminders to improve payment rates.”