The number of tenants seriously behind on rent has risen to the highest level in the UK for two years in the second quarter of 2015, according to the latest tracker report.
There are now 74,000 tenants owing more than two months’ rent which means 5,000 more households are in significant arrears than a year ago, or an annual increase of 7.2% since the second quarter of 2014, when this figure previously stood at 69,000 across the UK.
On a quarterly basis, the number of cases of severe arrears has risen by 4.4% or 3,100 households, since standing at 70,900 in the first quarter of the year, the report from estate agency chains Your Move and Reeds Rains, part of LSL Property Services, also shows.
However, the report points out that the recent worsening in the number of tenants in serious difficulties remains relatively mild by historical comparison. Compared to the worst peak of serious rent arrears, seen in the third quarter of 2012, when 116,600 households owed more than two months in late rent, this has moderated significantly.
The report also points out that the chance of a given tenant falling seriously behind on rents is still extremely low. As a proportion of all tenancies, those in severe arrears represent just 1.4% of all tenants, stable compared to the previous quarter and the same as was seen a year before in the second quarter of 2015. This compares to 2.9% of tenants in the first quarter of 2008, twice the current proportion, even before the worst of the financial crisis and recession.
‘Across the UK most households are beginning to earn more, and it is this majority of tenants who are able to bid up the price of rented homes in the face of constricted supply. Rents are accelerating in response, rising by more than 5% over the last year according to our separate research,’ said Adrian Gill, director of estate agents Your Move and Reeds Rains.
But he warned that behind this headline buoyancy, there is a less positive story. ‘For a small minority there has been no transformational boost to household earnings, and it is this more marginal population of tenants who are feeling the squeeze of rising rents most sharply,’ he explained.
‘Severe arrears are still much lower than their previous peaks but a lack of further progress highlights the underlying and fundamental supply shortage. Tenants need more available listings on the market, and landlords should be encouraged to invest further in order to keep up with growing demand,’ he added.
The data also shows that eviction rates have improved. In the second quarter of the year a total of 27,910 tenants faced a court order for eviction, on a seasonally adjusted basis. This represents a 3.9% improvement since the first quarter of 2015 and is 5.9% lower on an annual basis compared to the second quarter of 2014.
In the eleventh consecutive quarter of improvements, the number of buy to let mortgages over three months in arrears has fallen by 35% since the previous quarter and by 58% since the second quarter of 2014. With just 5,700 cases of landlords now more than three months in arrears, this represents the lowest level of landlord mortgage arrears on record.
‘While slight, there remains a persistent risk of severe arrears. From landlords this demands awareness, communication, sensitivity and support for tenants. Landlords also need the right incentives to invest further and boost supply. This means rent controls are categorically not the answer,’ said Gill.
‘Yet more fundamentally, this is a wider challenge that highlights the need for a sea change in the construction of listing in the UK. A healthier jobs market means many tenants may be earning more. This may even help with rising rents for a time,’ he explained.
‘But in the long term it is only through actually building more homes, of all tenures, that the British listing market will house more people. This fundamental challenge is as true in the private rented sector as for owner occupiers and across all types of social housing,’ he concluded.
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Source: Property News Spain