Will government offer loans to vulnerable tenants to pay off rent arrears?

A rent arrears loan could help struggling tenants keep up with rent payments. Should Rishi Sunak add it to his support packages to help the country through Covid-19?

There have been more calls for England to bring in a system akin to Scotland and Wales where they offer loans to struggling tenants.

A survey by the National Residential Landlord’s Association (NRLA) has found that more than three quarters (78%) of landlords would support such a scheme. Other industry bodies and individuals, including housing campaigner Lord Best, are also calling for additional support for landlords.

Even though the vast majority of private tenants are keeping up with rent payments, some are inevitably struggling. The situation for landlords is therefore difficult, as they have been unable to evict tenants over recent months. Now, landlords must give tenants a six-month notice period, even those with serious rent arrears.

The cost of coronavirus

Overall, demand in the rental market has remained high throughout the crisis. A number of factors could be at work here, including people holding off on buying property for now. In terms of activity levels, many tenants are also looking to relocate after lockdown made them reassess their priorities.

A survey by the NRLA back in August found that 95% of tenants have paid rent throughout the pandemic. This includes those who have paid full rent, and those who have agreed arrangements with their landlords. Only 3% of those in arrears are unwilling or unable to pay.

However, the next few months remains uncertain for many as the second wave of coronavirus approaches. Therefore, most landlords believe the government should do more to support the sector during this time. Two-thirds of landlords in the latest survey said they face a tougher operating environment now. More than half (56%) said they were less confident now than three months ago.

Ben Beadle, chief executive of the NRLA says: “Providing the financial support needed to help tenants pay off rent arrears built since lockdown started would cost the government less than the Eat Out to Help Out scheme.”

“As we head into more local lockdowns, it is even more important that tenants don’t have to worry about meeting their rent bill.”

How could it work?

If the government were to provide loans to tenants in hardship, they would be able to sustain tenancies for longer, argue those in the industry. One advocate for rent arrears loans is Lord Richard Best, former CEO of the Joseph Rowntree Foundation.

“The landlord is happy, the cost to government is very modest and to the tenant, bearable,” he commented.

The proposed scheme would target those who have suffered directly due to coronavirus. It would specifically cover rent arrears that have come about since 23rd March. Payments from such a loan could go straight to the landlord, with the tenant paying off the debt to the loan provider.

In Scotland, the government has announced a £10m package to support people struggling to pay rent. Although not yet available, this will include a Tenant Hardship Loan Fund later in the autumn. It will allow tenants to take out an interest-free loan where they are unable to pay due to Covid-19.

The initiative in Scotland will help support the private rented sector in general, as landlords will be able to continue operating as normal with full rent payments. A similar package is going to become available in Wales.

Ben Beadle added: “Although landlords have been doing all they can to support tenants struggling to pay their rent because of the pandemic, it is not sustainable to expect rent arrears to build indefinitely with no hope of paying them off.”

“Once again the UK Government finds itself trailing behind the rest of the UK. It is time to deliver a similar scheme to support tenants and landlords in England.”

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