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Should the government bring in rent arrears loans for private tenants?

Earlier this month, the Welsh government announced a loan scheme to tackle rent arrears caused by Covid-19. Some industry bodies are calling for the same measures in England.

Tenants in the private rented sector in Wales will soon be able to apply to borrow money to cover rent arrears. From September, the £8m Tenant Saver Loan scheme will be available for those who are behind on rent payments as a direct result of the coronavirus pandemic, and payments can be backdated to 1st March 2020.

The National Residential Landlords Association (NRLA) was a driving force behind the Welsh loan scheme. ARLA Propertymark has also endorsed the initiative, saying it will “bring welcome relief to tenants, landlords and agents”.

However, many believe more should be done to help the private rented sector in England, too. The government is now facing calls to introduce a similar loans scheme across the country.

Major UK letting agency Belvoir is the latest industry body to petition for change. The agent believes offering private tenants financial assistance would hugely reduce the impact of rent arrears and potential evictions. It would also provide some much-needed income security to landlords.

Belvoir CEO Dorian Gonsalves says: “With confirmation that the UK has officially fallen into recession, we believe that it is more important than ever for the government to introduce a loan scheme similar to that in Wales.”

“This will ensure all tenants are able to pay their rent, and landlords can continue providing much-needed housing.”

Help tenants as well as homeowners

Over the past few months, the government has brought in schemes to help homeowners and buyers through Covid-19. Early on in the crisis, it announced that borrowers would be able to take mortgage payment holidays. Thousands of homeowners have taken advantage of the scheme, preventing huge numbers from defaulting on payments. Thanks to an extension, people can now apply for a three-month mortgage payment break up until the end of October.

For buyers, movers and investors, the government has also implemented a stamp duty cut. Until 31st March 2021, properties costing less than £500,000 will be exempt from stamp duty. The effects of this are already apparent across the market.

However, while landlords can take advantage of the above schemes, there is not much in place specifically for renters.

“Homeowners who have been financially impacted by coronavirus have had the advantage of being able to access a mortgage holiday, and it would seem only fair that tenants should have access to a similar loan scheme to the one operational in Wales,” says Dorian Gonsalves.

How the Tenant Saver Loan scheme works

The new Tenant Saver Loan scheme will help renters who have seen “a drop in their income due to Covid-19”, says the Welsh government.

There is no limit on the amount tenants can borrow, and all payments go directly to the landlord or agent. Tenants whose rent arrears pre-date coronavirus may not be eligible to apply. Those who successfully obtain a loan will have five years to repay it, at an APR of 1%.

The loans will support thousands of tenants and landlords in difficulty across the country.

The NRLA said: “These loans will help keep tenants who have been affected by coronavirus in their homes, while supporting landlords reliant on rental income to pay their own bills.”

“We would advise every landlord with a tenant in arrears to make sure they are aware of the new scheme and advise any landlord in receipt of these payments to commit to working with their tenant to maintain the tenancy in the long term.”

The Welsh government says the loans will become available from September. More details will follow closer to the time.

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