Just shy of one and a half million renters in the private rental sector were receiving Universal Credit as of August last year – included in which is a housing cost component – more than half of these already had a shortfall between this support and the rent they paid.
While the Bank of England has raised interest rates to combat inflation, central government has dealt with a growing disparity between benefits and cost of living by cutting the £20 per week pandemic payment from Universal Credit recipients.
With around 800,000 renters in receipt of Universal Credit already experiencing a shortfall in August of 2021, prior to the cut in October 2021, the cut has yet to be truly felt by landlords throughout the country. Added to this a huge level of inflation and ‘shrinkflation’ (where the price remains the same, but the amount of product decreases) at the lower end of the scale in terms of the average weekly shop, and there’s an imminent crisis in the private rental sector.
With households facing a cost-of-living squeeze, it is vital that the benefits system gives the protection that tenants deserve. That is why the Chancellor needs to end the housing benefit freeze as a matter of urgency. Without this, many tenants and landlords face an uncertain future about how to keep tenancies going.
With the English parliament already lagging behind the other home nations in help for landlords with pandemic caused arrears, calls for them to back landlords – who already carry a significant proportion of the social housing burden due to stagnating council house building in the last decade – are intensifying.
For those that have been reading articles here and elsewhere, it will come as no surprise that this could lead to an increasing number of landlords refusing to accept tenants on benefits, leading to a worsening crisis in social housing.
With demand at an all-time high driving up the possible rental yields for landlords throughout the country, there will clearly be a case for even the most committed social landlord to avoid tenants that could fall victim to rising costs and shrinking benefits. This shows a remarkable short-sightedness from central government, who will inevitably face growing costs associated with emergency housing, strain on the NHS, rising homelessness and more.
What this means for Wirral landlords
With Wirral landlords already more likely to house social tenants than much of the rest of the country (55% of adults in the North West claim state benefits, making it the joint fifth highest in the country), many landlords will have already felt the impact of the cuts.
With this in mind, for those landlords committed to offering high quality, safe housing for their tenants regardless of benefit status, it may be that the best route forward is to seek the reassurance of a guarantor agreement from new tenants.
The year ahead is already likely to be an expensive one for private landlords due to stricter EPC requirements, so the issues arising from activity in Whitehall are beginning to look less like oversight and more like mismanagement. The only real actions available to landlords for the moment are to ensure that there are contractual terms in place to cover arrears, and to contact their MPs to petition the government for long overdue relief packages for the private rental sector and those on the lowest incomes.
Need help preparing guarantor agreements, or in keeping up with the latest legislative changes impacting the sector? Contact Us to speak to one of our experts and let us take the stress out of managing your portfolio.