Sometimes it’s hard to feel sorry for rental owners – but I think someone has to stand up for them.
This week, the ‘deportation ban’ in place throughout the pandemic started to relax in England, promoting a charity to predict a “Wave of homelessness” as landlords prepare to evict tenants who cannot pay rent.
Before you all yell “Boo!” Greedy owners! I think a new aspect of this story is the large number of private landlords who have worked with their tenants to avoid precisely this situation.
In fact, homeowners, lenders and professional advisors I spoke with this week reject the suggestion that we will see a rush to the courts for repossession orders now that the ban is lifted.
While evictions are very often seen as a last resort, the finances of landlords and tenants have been severely strained during the pandemic – something that is going to have lasting repercussions on the personal finances of both groups, as well as on the attractiveness of being a real estate investor.
Since the eviction ban was imposed last March, the government has expected private landlords to bear the cost if their tenants could no longer pay rent.
The official advice was basically to negotiate with your tenants and try to get by.
In a survey Earlier this year, the National Residential Landlords Association (NRLA) found that more than half of its members had lost rental income during the pandemic. One in five homeowners in arrears said they were owed more than £ 5,000; those in London tended to do worse than those in the regions.
Help for homeowners was available in the form of mortgage payment holidays. The boss of one of the largest rental lenders told me that one in five customers had requested it during the height of the pandemic, although less than 1% of those borrowers requested further forbearance.
Instead, most under-rented landlords used their own savings to cover mortgage payments. Note that the personal income of a landlord is rarely taken into account by rental lenders, which has undoubtedly prevented a general increase in arrears.
Tessa Shepperson, the lawyer behind the popular Owners’ rights advice website, notes the abstention of “very many landlords who have given tenants breaks and rent reductions to help them get through the pandemic.”
She says most landlords agree that it is better for a happy tenant to pay something rather than an unhappy one to pay nothing, hoping rental income will rebound as the economy recovers.
Assuming rent arrears are the only problem, she believes the alternative of pursuing an eviction through the “extremely awkward and difficult” legal system is a gamble, not least given the time it is likely to take.
Before the pandemic, it took about a year for courts to hear repossession cases. The London School of Economics predicted Court bottlenecks and Covid-19 restrictions could dramatically lengthen this for all but the most severe cases.
However, 15 months after the start of the pandemic, there is a limit to the support homeowners can continue to provide and many fear what will happen when the leave plan ends.
Some landlords have had properties turned over by tenants who have accumulated significant debts. Shepperson says depending on the size of those, many homeowners won’t bother to sue them in court.
“It’s very difficult to enforce county court judgments (CCJs), so most homeowners will take the money from the bond and leave it there,” she said.
Nonetheless, the threat of a CCJ can scare off debtors and force them to pay as it will ruin their credit rating making it very difficult for them to rent another property.
A similar dilemma arises for tenants who wish to move to a cheaper location but whose rent deposits are forfeited to cover arrears.
Generation Rent, the campaign group, calls on the government to start a grant program for tenants in England to repay their rental debts (there are already similar programs in Scotland and Wales).
Assuming no amnesty is granted, what will happen to these debts?
Some homeowners are willing to agree to long term repayment plans. My mortgage contact says many of his clients are getting an extra £ 10-20 a week to spread the financial impact over as long as possible.
Another friend told me that he feels more like an advisor than a landlord, so much is his level of involvement in helping tenants with their finances and finding common ground.
Given the huge appreciation in house prices during the pandemic, some might argue that writing off rent arrears from their tenants is a move some landlords can afford.
For well-capitalized homeowners with more than one property, the blow would be easier. But around half of homeowners in the UK are said to have a detached house to rent. For them, the experience of the pandemic could be the incentive to sell for good.
Another NRLA investigation found that a third of homeowners were now more likely to exit the market altogether or sell some of their properties.
For owners who stick with it, there is anecdotal evidence that they get much more picky when granting new rentals.
Avoiding tenant benefits is sadly all too common, but I’m concerned that self-employed rental is also stigmatized, with landlords reporting that the finances of self-employed tenants have been hit much harder during the pandemic.
Like it or not, I predict an increase in the use of rental surety contracts, which involve a third party to vouch for the tenant in the event of non-payment. These are commonly demanded by owners of student houses, young people and those renting to foreign nationals with no UK credit history – and anyone who signs one is responsible for any missed rent.
BBC Radio 5 Wake up to the money program recently covered the case of Daoud, a Syrian civil engineer, who could not find a rental surety. Its landlord in Manchester insisted that six months rent be prepaid – amounting to £ 5,000.
So while I think there should be a broader appreciation of landlords who treated their tenants fairly during the pandemic, a bigger political issue looms: dealing with the consequences of rental debt overhang that should put tenants at a disadvantage. for years to come.