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Savings, debt and assets

Here's how the Government can release renters from mounting pressure

The Prime Minister has said that no-one should be sleeping rough or made homeless as a result of this pandemic. Yet renters are in the grip of mounting pressure from the triple threat of unemployment, growing rental arrears and eviction, while the Government takes no action.

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Renters tend to work for sectors that are currently struggling due to the impact of the pandemic, and are consequently being pushed into rent arrears with no support, at a time of continued uncertainty surrounding their eviction rights. The Government can do the right thing this Budget and quickly ease these pressures by:

  • Supporting renters in hard-hit sectors to keep their jobs by ensuring that if a business must close, or is restricted by social distancing requirements, access to the full furlough scheme is maintained.
  • Tackling the issue of high levels of rent arrears by directing immediate financial support to renters in arrears by boosting the funding for Discretionary Housing Payments (DHPs) and tweaking the way they are set up and administered.
  • Providing renters with security by urgently reinstating a watertight eviction ban until the lockdowns are over, without announcing arbitrary dates for this protection to be cut off.

Renters face a serious risk of unemployment if the furlough scheme is not unwound sensibly

Despite the success of the furlough scheme so far, the UK’s unemployment rate has still risen. A total of 7.8% of UK renters were unemployed by September 2020, and there had been an increase of 75,000 unemployed private renters from March 2020 to September 2020*. JRF analysis published last week shows that the furlough scheme has targeted support towards those most at risk of poverty, which is welcome. This has included sectors that renters are disproportionately likely to work in, such as hospitality, the arts and entertainment, which had almost 50% and 40% of their workforces respectively furloughed as of 31 December 2020.

Last week’s Monetary Policy Report from the Bank of England forecasts that unemployment could rise to 7.75% in the middle of 2021, and our analysis shows that renters are likely to be hit disproportionately hard by these job losses. As we outlined in our 2020/21 UK Poverty Report, renters tend to work in sectors that were hardest hit early in the pandemic. So far, the furlough scheme has done a good job of protecting the employment and incomes of renters, but new JRF analysis shows a worrying picture for the next three months.

Last week’s Business Impact of Covid-19 Survey (BICS) results show us how confident businesses are about their survival, with Accommodation and Food, Retail, and Other Service industries most likely to say they have little to no confidence they will survive the next three months. Analysing this by tenure, we can see that 28% of social renters and 22% of private renters who are employed work in these vulnerable sectors.

Currently, the furlough scheme is set to be wound up in just over two months, and if it ends suddenly before restrictions are eased, unemployment could hit renters sharply through businesses who already fear for their survival. This is particularly worrying as private renters have a bigger chunk of their income eaten up by housing costs than other tenures. Housing benefit only covers the lowest 30% of rents in a local area meaning many people whose incomes are falling will need to top up their benefit. In addition, from April 2021, Local Housing Allowance (LHA) will be frozen at current rates, and a gap between rental costs and the support available to households will open up. Homes for social rent should provide a lower-cost option but the UK currently has a huge shortfall in social housing. In addition, the Government is yet to put its manifesto commitment to end no-fault evictions in place. Renters who are facing an uncertain year ahead with their jobs are right to be worried about whether they will be able to stay in their homes.

However, clear fiscal policy can help to release this pressure. JRF recommends that the Government takes a sensible approach to unwinding the furlough scheme by ensuring that as long as a business must close, or is severely restricted by social distancing requirements, it should have access to the full furlough scheme in its current form. Not only will this help to address unemployment and economic activity concerns, it will also help to address the other big threats facing renters – falling into arrears and facing eviction.

Rental arrears levels are high, and renters have inadequate support to address them

JRF research published in November 2020 painted an alarming picture for the rent arrears that had been accrued so far through the pandemic: 2.5 million households in Great Britain were worried about how they would pay their rent between November and January, and 700,000 households in England and Wales were already in rental arrears totalling at least £400 million.

Research by the Resolution Foundation in January has found that this number has remained high, with a similar number of households in arrears. And we can expect that these numbers will continue to grow, even under best-case scenarios with sensible unwinding of furlough and a successful vaccine rollout.

The negative consequences of accruing rental debt are significant. It can lead to eviction, impact people’s future opportunities for other rental properties and affordable lending, and negatively impact economic recovery. People are less able to spend in the economy when they must use future income to repay debts, and because rent is a priority payment, accruing rental debt often means that households are forgoing other essential spending too, like food and electricity.

While Wales and Scotland have established tenant loan schemes to help renters cope with COVID-related rental arrears, renters in England are yet to receive support. We recommend that the Government establish direct, immediate financial support for renters in arrears by boosting funding for DHPs, tweaking the way they are set up and administered.

We also recommend that the Government put the rental market on a more sustainable footing by ensuring that renters can cover their housing costs and stay in their homes. This can be done by making the £20-a-week uplift to Universal Credit permanent, extending the uplift to legacy benefits, continuing to increase LHA rates in line with local rents, and building more homes for social rent.

Renters continue to face insecurity over last-minute extensions to the eviction ban

Evictions from the private rental sector are the leading cause of homelessness. Ensuring that no one loses their home in this pandemic is not only doing the right thing, it will also help the Government to make good on their promise to end rough sleeping this term. Ending rough sleeping will become much harder if the numbers of rough sleepers soar due to coronavirus-related evictions.

The initial pause on evictions at the start of the pandemic allowed many families to stay in their homes in the first national lockdown. It ended in late September in England and Wales, and the protections have since been watered down and no longer replicate what was previously available. In addition, the Government has reduced the amount of arrears households can build up before being evicted from nine months to six months, and now include arrears built up during the pandemic in this period, making it tougher for struggling renters to stay in their homes.

While this protection is better than nothing, announcements of support have continually come late, only days before protections are due to expire. A similar story has played out this week, with another arbitrary six-week extension to the ban on bailiff action announced, kicking the can further down the road. The current eviction ban in England ends on 31 March, and the pandemic and its restrictions are almost certain to still be with us, so why pull this lifeline away then? This uncertainty only compounds the sense of insecurity renters are facing. During the pandemic, over 300,000 renters have had their landlord discuss eviction with them. The threat of eviction causes a huge strain on mental health and disruption to family life. Many renters have had possession orders issued mid-pandemic, and would have felt the pressure to move.

To address this, the Government should fully reinstate a watertight eviction ban until current lockdowns, and the risk of further lockdowns, are lifted rather than announce arbitrary end dates to the lifeline giving renters the security of knowing they can keep their homes.

*Note: these figures are not seasonally adjusted.

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