The government must pay off tenant debts to avoid pushing too much homelessness
Private tenants were already in a more precarious financial position than landlords when we entered the first foreclosure. Renting is generally more expensive than paying a mortgage. At the start of this crisis, tenants were spending an average of one-third of their income on rent, and the majority had no savings as a result.
This week, as the country slowly emerges from its third shutdown, the Committee of Housing Communities and Local Governments (HCLG) released a report criticizing the government’s lack of comprehensive data on the extent of the rental debt contracted by private tenants and calls on them to urgently come up with “a coherent exit plan to help”.
If no action is taken, the harsh reality for tenants who have lost their jobs or lived on reduced vacation wages, and who have fallen behind on their rent as a result, is: any accumulated debt owed to them. their owner will likely wipe out any available income balance they have, jeopardize their chances of saving for the future and, if they cannot pay them, can lead to homelessness.
Committee chairman Labor MP Clive Betts said I that “the issue of rent arrears has been a looming cliff edge during the duration of the pandemic.” He also urged the government to “establish a system of financial support for tenants who have accumulated large rent arrears during the Covid-19 pandemic” and put it in place as soon as possible.
The significance of this report is that it urges the government to create a fundraiser for private tenants. It is the recognition by a multi-party committee of a reality which is fast approaching vis-à-vis the government: that they will have to settle the arrears of the private tenants because they cannot continue to prolong the suspension of evictions, in place intermittently. since March 2020, forever.
The crucial recommendation of the HCLG committee is that the government should immediately consider how a private tenant support program could work to prevent this from happening. He points to low interest loans, like those adopted in Scotland and Wales. But tenants shouldn’t leave the pandemic saddled with debt while landlords and landlords are offered mortgage vacations, allowing them to get by with their assets and credit scores intact. This is why the approach favored by the Committee is the introduction of a Discretionary Housing Payment (DHP), which could be given to those in arrears to clear their debt in the form of grants, not loans.
DHP are a ready-made and available solution for this emergency. They are currently made available by local councils for private tenants who need additional money to help cover their housing costs beyond what is available through the local housing allowance.
Changing them to help with the fallout from the pandemic “is the easiest and most direct way to avoid evictions and help homeowners collect income,” Betts said. The Committee estimates that such a rent arrears relief program could potentially cost between £ 200 million and £ 300 million. However, given the number of potential evictions it could prevent, and considering that the number of people in temporary accommodation is already swelling (which means the bill will be too), it would likely save a significant amount of money on homeless assistance.
Activists like Generation Rent, Shelter and Crisis, as well as the National Residential Landlords’ Association (NRLA), have been warning of the worsening rental debt crisis for a year now. Caitlin Wilkinson, Policy Manager at Generation Rent, said I: “It is vital that grants, as suggested by the Housing Commission, are introduced rather than loans. Most tenants in arrears are unlikely to be able to repay their loans on top of their ongoing housing costs. ”
Ms Wilkinson also warned that while a modified version of DBHs would pay off most tenants’ arrears and keep them in their homes in the short term, such an intervention carries “longer term risks and could keep rents artificially high, when ‘they are falling in the wider market due to the economic downturn.
“If all rent arrears are paid, landlords will receive the rent they were owed at the start of the pandemic, supporting rents and making housing less affordable in the long run,” she said. I. “This is why Generation Rent developed the policy of a Covid Rent Debt Fund – this would erase tenant debts and compensate landlords for 80% of lost income. It would cost the government less than paying off the debt in full and allow rents to adjust. ”
Since the start of the pandemic, a question has remained unanswered since The 4.55 million private households in England: where is the containment exit roadmap for private rental companies? With the ad hoc strategy of the government of last minute extensions of the suspension of evictions and a paltry increase to local housing allowance which, in some areas, does not actually cover rents, it remains significant.
We now know – whether we ourselves or a loved one lost a job and at the sight of closed shops and restaurants – that the coronavirus crisis has caused an economic storm. To deal with it, the government borrowed, supporting the wages of salaried workers through the leave scheme and providing government-guaranteed loans to businesses. Many parts of the economy have indeed been suspended in the aspic, but the question of exactly how we are going to bring them back to life remains unresolved.
The fact that many private tenants were on shaky financial bases before Covid-19 led to further instability means this demographic has been hit particularly hard. Estimates of the extent of this change vary, but it is believed that up to 800,000 of them are already behind on their rent, leaving them exposed to deportation. And that’s before the leave safety net is pulled from under us.
At every stage of this crisis, tenants have been treated after the fact by the government. Given that private rental is the second form of housing tenure – after home ownership and before social housing – this makes little sense. The government must now make tenants a priority in order to keep its promise that no one should lose their housing due to the pandemic. But in doing so, they must mitigate the risks of artificially inflating private rents with private money and indebted tenants with debts that will impact them for years to come.
A government spokesperson said: “We have acted to provide tenants with strong protection during the pandemic, with longer notice periods of six months and prohibiting the bailiff’s execution of evictions in all cases except the most serious, until May 31. ”
Vicky Spratt is IHousing Correspondent