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Rent crisis: can the private rented sector avoid an eviction "cliff edge"?

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8 min read

Housing charities fear the private rented sector could be heading for an eviction crisis, as the economy enters what could be a long-lasting downturn. Can tenants stay in their homes? Georgina Bailey reports

Two weeks ago, a row broke out within the Labour party about rent during coronavirus. The new shadow housing secretary, Thangam Debbonaire, had put forward five proposals to help renters through the crisis – however,  it was the proposed two-year period for renters to pay back arrears accrued due to loss of income that sparked a backlash from some on the party’s left.

After a Momentum-backed petition reached 4,000 signatures and the MP for Coventry South, Zarah Sultana, tweeted that rents should instead be cancelled, Keir Starmer was forced to push back. On an LBC radio phone-in, he argued that any policy based on ‘cancelling rent’ would have to compensate landlords – and would in effect involve a mass taxpayer bailout for some of the wealthiest landlords in the country. Clive Betts, chair of the housing, communities and local communities, tells the The House that to cancel rents would “almost certainly” breach a landlord’s right to private property, as enshrined in the European Convention on Human Rights.

That the topic of housing inflames passions should not be surprising. As with so many issues, the Covid-19 pandemic has shone a harsh light on the vulnerabilities of the private rented sector in Britain – and its precarious nature for some of the 20% of English households that rent from a private landlord. 

“We’ve seen a huge upsurge in demand for our help, many people are worried about what it means for their situation, worried about losing their home, and increasingly people losing their job and worried about paying their rent,”  Chris Wood, the assistant director of research, policy and public affairs at Shelter, says of the impact of Covid-19. At the beginning of the crisis, they were seeing many people being evicted, including frontline workers – something that some landlords are still trying to do illegally. 

In a move widely welcomed by housing charities and landlords alike, the Government moved swiftly to prevent people from losing their homes in the middle of the crisis. Housing minister Christopher Pincher tells The House he was “clear that no tenant should have to worry about being forced out of their home during this national emergency”. “It is only right that tenants are protected at a time when their income streams may be vulnerable,” he adds. 

In what Pincher describes as an “unprecedented” package from the Government, new evictions proceedings were banned for three months and a 90-day stay was issued for proceedings already going through the courts. The housing element of benefits was also increased, setting Local Housing Allowance (LHA) rates at the 30th percentile of market rents in each area.

However, that eviction ban currently expires on 25 June. As the deadline approaches, housing charity Shelter warn that unless further action is taken the sector faces a “cliff edge”, with “thousands of people being evicted in the coming months”. Although these measures can be extended for another three months at the Government’s discretion, thoughts are turning to what is next for renters and landlords concerned about how rents will be paid during what looks to be a long-term economic downturn.

Research by Shelter shows that 63% of households in the private sector have no savings. Almost one in five private renters in England – an estimated 1.7 million adults – said they were likely to lose their job in the next three months because of the coronavirus crisis, in a YouGov poll carried out for Shelter just after the furloughing scheme was announced in March. Two million renters (23%) said if they lost their job, they would be immediately unable to pay their rent. 

What can be done to support renters and landlords? John Stewart, the deputy director of policy and research for the National Residential Landlords Association (NRLA), agrees with the Labour leadership that proposals to cancel rent entirely are “nonsense”. “When the Government has already put money into the pockets of people through furlough or the self-employed support scheme, why would you give them even more money by not expecting them to pay rent?... Would the rent waiver apply to the billionaire renting a penthouse flat in London at £50-60,000 a week the same way it would apply to someone renting a two bedroom terrace in Manchester for £500 a month? Support has to be targeted,” he says.

Stewart, Betts and Wood all agree that a major part of the solution will be maintaining the new increased generosity in housing benefit for at least a temporary period – and even raising it, along with increasing the benefit cap too. This, they say, would ensure tenants have enough money to pay their rent now, as opposed to rent holidays which could see rent arrears build up to potentially unmanageable levels for tenants and landlords alike. 

Betts says: “The problem is if people really struggle to pay their rent for three months, or if the Government extend [the eviction ban] to six months – which they might do – and you build up six months of rent arrears, it is probably going to take you with the best will in the world two years to pay it back off. These are not people generally on high incomes, if you say ‘double your rent payments for six months’, it probably isn’t going to work.”  

Currently, 60% of private landlords say they are not receiving full rent for their properties. “Each landlord’s ability to manage that level of arrears depends on their own circumstances. A lot of landlords don’t have many properties, it’s not a large income,” says Stewart. “Landlords aren’t rushing to evict people at this time, but you can’t allow arrears to get unsustainable, there has to be an exit strategy for both the tenant and the landlord.”

One model floated by both Betts and Stewart is that of zero-interest loans to tenants of small landlords, as has been introduced in Spain as microcredit, small, commission free loans to be paid back over six years, with a possibility of another four year extension. “Currently, some people have the idea that it is only tenants who have any problems. Actually there are small landlords who have got problems with their incomes as well if rents aren’t paid,” Betts explains, “so, low interest loans, which help both landlords and tenants, should be given serious consideration.” 

One measure that the Government is looking at is introducing is a pre-action protocol, where landlords are obliged to sit down with tenants before starting eviction proceedings to try and work out a payment plan. Stewart doesn’t believe this will be too onerous for landlords, most of whom are “sympathetic” to the situation and want to keep their existing tenants. Of the 54% of members surveyed who have been approached for coronavirus related flexibility or support in rent payments, 90% said they had responded positively. 

However, Betts and Wood are concerned that the current pre-action protocol proposal doesn’t have any “teeth”, and relies mainly on the goodwill of the landlord rather than being legally enforceable by a judge. 

Shelter, therefore, would like the Government to “tweak” the existing law to give judges more discretion in evictions, where they currently have none. This would mean judges were able to take coronavirus-related economic impacts into account when considering both Section 8 (mandatory repossession if eight weeks of rent arrears have been accrued at the time of serving notice) and Section 21 (more commonly known as ‘no-fault’) evictions. Specifically, they would like Ground 8 to be temporarily disapplied for the duration of the crisis and immediate economic aftermath, and for Section 21 to be amended so judges could refuse to grant a possession order if the landlord had not offered a reasonable repayment plan (while the Conservative party promised to scrap Section 21 in its manifesto, this would not solve the immediate issue facing tenants as it would only apply to new tenancies). 

The NRLA say that their members accept that Section 21 will be scrapped in this Parliament but that “the key for landlords is a route to recover property where circumstances demand it.” In that vein, they would like for the current stay on evictions already in the system to be lifted at the end of the Government’s initial 90-day period, saying that most would be down to existing ongoing anti-social behaviour issues and have “nothing to do with Covid”. 

For Betts, the crisis has made the need for a Renter’s Reform Bill even more urgent, as promised in the Queen’s Speech: “We do need a complete reform of the rental system.” 

Wood agrees. “The private rented sector we have in this country is relatively deregulated, there aren’t the protections for renters.” Stewart contends that the system does have regulations – “160 at the last count” – but they are too complex and local authorities too under-resourced for regulations to be enforced properly. 

For Wood, the coronavirus crisis has re-emphasised the need for the Government to act on their election promise to be a party for tenants. “Now is the time to follow through on that – now is when renters need that help in this time of need.” 

 

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