- Action needed to address mounting tenant debt
- Government-backed rent debt loan could support both landlords and tenants
- Switch of focus from evictions to debt solutions needed as second wave builds
UK rent guarantor service Housing Hand is calling on the government to step in and solve the issue of mounting tenant debt caused by the COVID-19 pandemic. The company is proposing a simple rent debt loan solution that would enable accommodation providers to avoid evicting non-paying tenants.
There are many different scenarios that are leading tenants to have difficulty paying their rent.
Some can’t pay due to having been made redundant, being furloughed or having hours reduced as a result of the coronavirus pandemic.
Others are claiming Housing Benefit but not paying rent because they know they cannot be evicted. There is also a wide range of other circumstances, with the common thread being that, whatever the situation, the landlord is still legally entitled to payment.
Terry Mason, Group Operations Director, Housing Hand said:
“The government cannot use private accommodation providers to bail out the rent arrears problem created by COVID-19. Action needs to be taken now, before the second wave builds, to assure both tenants and landlords that there is another option open to them aside from eviction, which in most cases both parties are keen to avoid.”
According to Housing Hand, the pending housing crisis is not one of evictions getting out of control, but the rental debt the tenants owe and how they can repay the landlords who are legally entitled to be paid.
A rent debt loan, paid to landlords by the government and then repaid by the tenant as affordability allows, could provide a simple way to avoid a huge number of evictions.
The landlords in all rent debt cases are losing. Some are happy to defer payment or reschedule but cannot countenance having nothing at all.
This means that many will face the prospect of having to evict perfectly good tenants due to the financial impact of COVID-19. It also raises the prospect of them selling their asset, which isn’t a good outcome for anyone.
“Almost all landlords are content with tenants remaining in their properties as long as they are paying rent, so this is the area the government needs to address to maintain tenancies – not put a blanket ban on evictions and expect the private housing sector to foot the bill”, Terry continued.
There’s also the issue of student rental debt building up. Student tenancies are further complicated by the migratory nature of those who hold them, along with the potential for further lockdowns and remote education.
The combination of these factors has led many students to favour a “no stay, no pay” mentality. However, that ignores the fact that student renters are still legally obliged to pay their landlords under the legally binding commitments made in their Assured Shorthold Tenancy (AST) agreements.
Some accommodation providers have agreed that students who cannot travel to the property to start the AST will be released from the contract as it is frustrated.
Some have even gone further and said that if students are told by the government or World Health Organization to move out during the tenancy, then they will be released from the AST.
However, some student renters want even more concessions, such as tenancies being voided if they change their minds about going to university or want to travel home if their university town goes into lockdown.
Again, it is private landlords who are left to deal with the financial and legal fallout of such situations if the student decides not to pay.
Jeremy Robinson, Group Managing Director, Housing Hand said:
“The private rental sector is vital to the UK’s housing makeup. If tenants genuinely cannot pay their rent, the government must step in and support them. Private accommodation providers cannot be expected to provide homes without being paid.”
“In many instances, rent covers the landlord’s mortgage and maintenance costs, meaning that non-payment puts both the tenant and the landlord at risk. We need a solution in place before the second wave really hits and delivers a huge economic as well as health impact.”