As unemployment bites, more private renters will fall into arrears. While most are protected from eviction until well after next March, the stress of accumulating debt will prompt some to move in with family or find cheaper accommodation. But Christine Whitehead, Nancy Holman, Beth Crankshaw and Martina Rotolo (LSE) warn that the number of homeless households arising from eviction orders could more than double.
Around 4.5 million households (around 20%) in England rent privately – and many of them, along with their landlords, are very worried.
Only those who have a current Assured Shorthold Tenancy (AST), who are up to date or have less than eight weeks’ rent in arrears, are secure from eviction. And this is only until the end of their contract, which is rarely more than a year. After this, the landlord can issue a Section 21 ‘no fault’ eviction notice. The tenant who is more than eight weeks in arrears can be issued with a Section 8 eviction notice. Both are automatic once they get to court.
Whether they will actually be threatened with eviction depends on the nearly 2 million landlords. Their decisions will be based on how good a tenant they think they have, and how easy is it to find a better one. The latest evidence from the National Residential Landlords Association (NRLA) suggests that 87% of tenants are paying in full and a further 7% are not in arrears as they have an agreed plan. Even so, nearly a quarter of landlords have lost income.
But until March 2021, landlords must normally wait six months before issuing an eviction notice. So only the 6,000 or so pre-lockdown cases, the few tenants who received eviction notices issued from lockdown to 25 September, and those with particularly high arrears or other egregious behaviour are at risk of legal eviction before next April. The courts are in a mess and are already putting off hearings for months – some into 2023 – so evictions could well be further postponed.
As a result, there is almost no chance of a spike in legal evictions. Instead, there will be a long, slow burn which will leave more and more tenants – and sometimes their landlords – running up debt and feeling highly insecure. Moreover, although so far local authorities have seen little evidence of illegal evictions, there are plenty of lodgers, sofa surfers and others with few rights ‘asked’ to move on.
A YouGov poll in August suggested about 6% of private tenants were behind on their rent – half as a result of COVID-19. Shelter’s earlier evidence also suggested around 6% in mid-2020 and a doubling of arrears in the first few months of lockdown. Importantly, evidence from the Resolution Foundation suggests unemployment among tenants has similarly doubled over roughly the same period.
The central macro-economic forecast, made before the latest set of lockdowns, suggested that unemployment could be 50% higher in a year’s time. Some have now suggested it could reach well over 10%. If we can assume that the growth in arrears – starting from 6% in July 2020 – is closely correlated with, if not always caused by, unemployment, this would imply that by mid to late 2021 those in arrears would represent between 12.6% and 15.6% of all tenants. Unhappily, even these could be underestimates, as private tenants are generally younger and have been shown to be the group most at risk of losing income. The proportion of Londoners affected is likely to be particularly high.
Most will probably not be formally evicted. The English Housing Survey suggests that landlords only serve notice on about 10-15% of those who are in arrears at some time over the year. (Note that the number who experience arrears in a year has generally been roughly double the number in arrears at any point in time). In part this is because, in normal times, large numbers of private tenants would move on rather than build up debt, and many more would find the money to clear off the arrears.
Taking the lower, 10%, figure because tenants will have had a long while to make adjustments before a notice can be issued, would imply around 112,000 – 140,000 such notices. But, of those issued, only around 75% actually lead to orders and perhaps half of these orders are actually executed. On this basis, the numbers who are formally evicted might be between 42,000 to 52,500. If we take the 15% estimate, these figures would be 50% higher.
The options for tenants who lose income or become unemployed and cannot pay their rent are:
(i) to remain and negotiate an arrangement with the landlord (which is great – especially if the tenant gets another job – but cannot go on for ever) or borrow e.g. from their family;
(ii) to find alternative, presumably cheaper or more crowded, rental accommodation;
(iii) to go back to Mum and Dad (especially because many of those who will lose jobs are relatively young). In the early stages of the pandemic the evidence showed that the majority of those under 35 moved back home; or
(iv) to approach the local authority for support in finding accommodation.
Importantly, the very long notice period and the likelihood of court delays makes it much more likely that tenants will, over time, find some other solution, however unsatisfactory. Most non-family households, while they make up the majority of those coming forward for local authority assistance, will receive advice rather than accommodation.
In 2019 there were 30,000 plus eviction orders made. On our figures, there might therefore be between 75,000 to 100,000 such orders over the coming year. It is at this point that we might expect people to seek help from the local authority. If the ratio between orders and homelessness acceptances remains constant, that would imply some 45,000 such households potentially accepted as homeless – almost a 200% increase – with as many as 1 in 3 of these households being in London.
The big problem is not so much formal evictions but the months of insecurity, stress and hardship facing so many tenants and indeed landlords. That said, the following actions have potential:
- Low interest loans to tenants but paid directly to landlords to cover arrears, like those in Wales and Scotland, could offer hope to both landlords and tenants by giving time for current conditions to ease.
- Modifying Universal Credit – maintaining the Local Housing Allowance (LHA) at the fiftieth percentile and increasing the welfare cap in specific circumstances is undoubtedly good policy. But it still excludes significant proportions of those potentially in line for eviction.
- Discretionary Housing Payments – these enable local authorities to help, and there is money already available.
- Enabling people facing possible eviction to approach local authorities quickly. As part of their regular responsibilities, local authorities manage to support large numbers of tenants into settled accommodation, by negotiation with and sometimes incentives to landlords.
Even with a rapid transition back to normality, the long-term arrears and loss of credit-worthiness among tenants and loss of income and confidence for landlords will continue to scar both individuals and the private rented sector for years.
This post represents the views of the authors and not those of the COVID-19 blog, nor LSE. It is an edited extract from Where now for the private rented sector?, an LSE London/ Trust for London analysis.