I am in a situation that will be familiar to many landlords: my tenant cannot afford to pay the rent. This means that despite a mortgage holiday — a misnomer since my interest payments still accrue — I am facing a shortfall in my income of almost £2,000 a month.
When I asked Robert Jenrick, the housing secretary, what he thought I — and other landlords in the same position — should be doing, his office replied somewhat unhelpfully: “We urge any tenants who may be experiencing problems to contact their landlord at the earliest opportunity, and for parties to reach an agreement if there are issues with payment.”
Precisely how I am supposed to be able to do this with my tenant on the breadline is unclear.
At the start of next month, many private landlords are likely to find themselves in a similar position, with some 1.3 million families at risk of falling short on May’s rental payment, according to research by The Times.
Many more tenants, on reduced hours or furloughed, face the prospect of being laid off when the furlough scheme comes to an end, and with the lockdown removing any prospect of them being able to move to cheaper rental accommodation — the government has advised that no one should move home unless it is essential — rent arrears are likely to be widespread.
“More than half of private renters are at risk of losing income and so millions could be getting behind on rent,” says Dan Wilson Craw, director of Generation Rent, which represents private tenants. “To prevent an evictions crisis when the moratorium is lifted, the government needs to protect renters who get into arrears during the pandemic.”
In the student rental sector, landlords are already feeling the pain. With universities closed and many students living with their parents, providers of purpose-built student accommodation have lost £774 million in rent by releasing students from their contracts, according to Cushman & Wakefield, a commercial property business.
“Tenants still have an obligation to pay their rent and should continue to do so wherever possible,” says a government spokesman. Lindsay Judge, of the Resolution Foundation think-tank, believes the government may be expecting private landlords, like me, to make sacrifices, forcing landlords to absorb losses now, “then giving them a tax break later to recoup it”. I’m not holding my breath.
Landlords are in a fix. Where the tenants are in genuine difficulty, waiting for them to request a rent deferment or discount causes resentment, making negotiations fractious, says Chris Norris, policy director at the National Residential Landlords Association.
Landlords who approach their tenants risk signalling they are prepared to give a deferment — or a rent cut — that they cannot afford, especially since many tenants fail to realise that a mortgage holiday still means the unpaid interest accrues.
When one working couple asked him to “pass on any help” he was receiving with his mortgage, Richard Blanco, a London landlord, was baffled. “One is still working and the other is furloughed on 80 per cent of salary. I was a bit puzzled as to why they needed help,” he says.
When one of Karen Gregory’s tenants asked for a reduction in rent on the basis she had secured a mortgage holiday, she offered them a deferral on their rent payments and suggested they first requested to defer their council tax or utility bills. “I don’t think the government did us any favours in talking about it being a holiday not a deferral,” she says.
Some tenants never imagined they would find themselves negotiating with their landlord for a deferral, says Blanco, who owns several rental properties.
High earners who work through a limited company, paying themselves via dividends, do not qualify for the government grants for the self-employed, but may have seen their incomes evaporate. “These are senior account managers or directors: they wouldn’t dream of getting into arrears and are resentful when landlords start inquiring into their finances,” Blanco says.
While the government has raised housing benefit to cover the cheapest 30 per cent of rental homes in the country, many tenants may not be aware they qualify, may not want to take benefits, or may face obstacles in securing these because English is not their first language.
Blanco is trying to ensure his tenants have all the information that might help them. One woman rents a shop in London — from which she operates a takeaway — and the flat above. He has sent her links to help her claim £10,000 from the Small Business Grants Fund and the universal credit she is eligible for. “She’s a proud woman and she feels uncomfortable, but I am expecting she will pay me when she gets her grant,” he says.
The National Union of Students has demanded that any tenants who have felt the financial impacts of coronavirus have their rents subsidised, significantly reduced or waived entirely for six months. Nine key private sector student accommodation providers, including Unite Group and Student Roost, are offering to release students from contracts or provide some sort of rebate, according to Cushman & Wakefield.
Norris says that many student tenants wrongly believe they will be able to leave their flats and not be liable for rent. “Where tenants are coming and asking, landlords are typically reaching agreements, such as a 50 per cent rent reduction, but where they are going in with belligerent demands, they are being met with a hard line,” he says.
However, many students renting from small landlords have been denied any refunds or discounts. Robert and Sarah Raymond’s two daughters returned from Sheffield University to the family home in north London in the middle of March when the university closed, having paid their rent up to the end of June, when term ends.
Despite carefully worded emails to both landlords, neither have offered to refund any of the rent. Robert, who works in private healthcare, has seen his income plummet to roughly £100 a week over the past five weeks because coronavirus means he can no longer see patients. Despite an advance of £600 before his universal credit kicks in, the family is feeling the pinch (Sarah doesn’t work).
“We hoped we would get something back from the rent. The government needs to help with this: we have had nothing at all,” Sarah says.