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What is the likely impact of the COVID-19 pandemic on the UK private rented sector?

Dr Tom Simcock shares initial thoughts on the likely effects of COVID-19 on private rented sector tenants and landlords in England and discusses the potential effectiveness of the government’s response.

The global COVID-19 pandemic is having a tragic and fundamental impact on our way of life. Our streets are deserted, non-essential shops and business premises are closed, millions are adapting to a new home-work environment, and unfortunately, many are current or future cuts in their income. Yet, this virus not only reminds us of the fragility and value of human life, but it has also exposed the insecurities, inequalities and fragile nature of our housing systems and economy.

In terms of the private rented sector (PRS), what will this crisis mean? We are entering unchartered territory in terms of economic and policy responses. The private rented sector provides housing to a diverse group including low-income households, families with children, professionals, people over 65, and students. Private renters are already struggling with issues such as affordability, insecurity of tenure, and poor property conditions. It is likely that this crisis will exacerbate these issues for much of the private rented sector.

Affordability was a major concern before COVID-19. Almost 3 million renting households are ‘one paycheck away from losing their homes’, with private renters paying a higher proportion of their income towards their housing costs in comparison to other tenures. The latest English Housing Survey shows that private renters pay 45% of their income[1] against rent compared to 19% for owner-occupiers against their mortgage, and the majority of renters have little to no savings to fall back on. Now the country is on lockdown, many have faced job losses and loss of income, putting many renters at risk of significant rental debt and the need to claim Universal Credit.

However, the indiscriminating nature of this virus has shone a light on the inability of our present welfare system to support the costs of the very basic of human needs, such as shelter. The cuts to our housing welfare system since 2010 have caused gaping holes in our social security net, with most LHA rates not covering rents across the country. The government in response to Covid-19 have increased LHA rates back to the 30th percentile level, however, will this provide enough support for the nearly 1 million households who have recently applied for Universal Credit? The government has stepped in with further schemes to support workers and the self-employed. The furlough scheme will help to prevent the loss of employment but it will mean a reduction of income by 20%, potentially putting a short-term strain on household finances. For the self-employed renters though, the current scheme is unlikely to be up and running until June 2020, with many likely to encounter financial difficulties until then. While these schemes are welcome and unprecedented, the current crisis does leave the potential for many renters to end up in significant rental debts and could face eviction in the future.

The insecure nature of the PRS has again been magnified by the current crisis. Previous research has shown the negative impacts of insecure tenure (including the availability of ‘no-fault’ S.21 notices) on mental health and wellbeing, with renters being unable to feel at home, put down roots in their communities, and ‘settle down’. It would not be inconceivable that many renters throughout this crisis are feeling anxious about their ability to keep a roof over their head. Rightly so, the governments across the UK have introduced measures to prevent evictions during this period, with the government in England suspending current evictions for 90 days, increasing the minimum notice period to 3 months across both Section 21 and Section 8 eviction routes, and are supposed to be bringing forward a pre-action protocol for private landlords, with the ability to extend these going forward. While these measures will provide short-term relief for renters (unless, of course, they face an illegal eviction) there will be future concerns on how renters will be able to make up any rental debts, especially if this crisis continues for more than 3-months. There is the potential that after this crisis we could face a significant number of evictions processing through the courts and potentially large number of renters receiving COVID-19 related rental debt CCJs, impacting future ability to get affordable credit, mortgages or other rental properties.

This crisis has caused the short-term holiday let sector to collapse. With events being cancelled and international travel grounded, landlords in this market are now facing no income. With emerging reports that rental markets are being flooded in previous Airbnb hotspots. In the short-term this could have a dampening effect on rents, however, given that the government has issued guidance inhibiting new house moves or new letting activity to be undertaken where possible, it is unlikely that many households will be looking for a new place to rent. Though, some private tenants could be in a position to negotiate a rent reduction. The longer-term impact of this on the market is unclear. However, this glut of new properties to rent has demonstrated the scale of housing stock being used for short-term lets. Policymakers would be wise to encourage through whatever levers are possible (whether fiscal or regulatory) that the majority of these stay within the longer-term housing market.

The levels of inequality across the country have been acutely demonstrated by the virus, especially in terms of those with housing and employment security, and those without. We have seen increasing social, economic and intergenerational divides, further evidenced by the growth in portfolio landlords. Some of our key workers, many likely private renters, such as those working on our front-lines round the clock to save lives, those cleaning our hospitals or replenishing the shelves of supermarkets, were recently “deemed low-skill” by the government because of income levels. This crisis has shown the insecurities and inequalities of our current society, we cannot expect to return to the prior ‘normal’, we must ensure our housings systems can weather future storms. We must question what the future purpose of the private rented sector is. And to draw upon the words of Churchill, if we are to move toward a more fair and equitable society, we must alter the law and change the system.

Dr Tom Simcock is a Research Fellow at Edge Hill University, Member of the Housing Studies Association Executive Committee, and Chair of the Evidence Network for Renting.


[1] Excluding housing benefit – which is not available to owner-occupiers. 41% of income if housing benefit is included.

Photo by Emily Wang on Unsplash

 
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Date: April 15, 2020 1:45 pm

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