Renters hit much harder than homeowners during COVID

Recent surveys and studies have shown that private renters have fared much worse financially during the coronavirus crisis than their homeowning counterparts. 

The UK Government's Household Resilience Study (the second part of which was released on 21 April 2021), suggested that while just 1% of people with mortgages were behind on their payments during the survey period, 9% of renters were in arrears. This means that compared to the middle of last year (when the figures were 6% and 3% respectively), homeowners have found their situations substantially improved while the numbers of renters in arrears have tripled.

This is reflected in the wider state of the property industry, in which the sales market has boomed since last summer while the rental sector has been under significant stress. 

Warning signs in the private rented sector

Organisations from The National Residential Landlords Association to housing charity Shelter have been trying to ring alarm bells about the hidden crisis of rent arrears approaching our private rented sector. In February 2021, independent think-tank, the Resolution Foundation, released a report that suggested a lower percentage of renters in arrears than the Household Resilience Report (6% compared to 9%), but agreed with the government-backed study that ‘housing arrears have grown steadily over the crisis’.

In some cases, landlords have attempted to slow the mounting debt by offering rent holidays or discounts (as the government encouraged them to do last year), but reports differ substantially over how frequently this has happened. Often tenants have just fallen further and further into arrears as the pandemic has gone on.

In normal times, it would be tempting for those in power to try and blame tenants themselves for this, but the truth is that no-one could have predicted what has happened during this past year, and the pandemic has disproportionately affected those who are less financially secure.  

One aspect of a wider disparity

Part of the problem is that the difference between renters and homeowners isn't just to do with outgoings but also earnings.

The Household Resilience Study explicitly connected the increase in rental arrears to pay cuts, noting that 15% of those in arrears said that it was because they were furloughed on reduced pay and 14% said they had been forced to work fewer hours or less overtime.

Compare this with the situation for homeowners and there appears to be a clear difference. The Resolution Foundation report mentioned above claims that while 16% of people with mortgages have seen a drop in income during the pandemic, this figure jumps up to 24% for working-age private renters. 

In many cases, renters work lower-paid jobs, frequently in sectors like the service industry that have been hit especially hard by the pandemic. They are also often younger, and statistics suggest that young people in the UK have seen their earnings and career prospects plummet during the past year. Figures from HMRC showed that people under the age of 35 accounted for almost 80% of payroll jobs lost during the coronavirus crisis, while the Office for National Statistics reported that employment among 18 to 24-year-olds continued to fall during the first quarter of 2021, even as the job market otherwise began to pick up. More concerningly, an increasing number of young people have moved into economic inactivity, which means they've effectively stopped looking for work until opportunities improve.

So what's the way out for tenants in trouble?

Most industry bodies, housing organisations and charities seem to favour a scheme of government-backed loans or grants to stabilise the sector, backed up with improvements to the benefits system. Indeed, even the Ministry of Housing, Communities and Local Government (MHCLG) has criticised the government's current approach and recommended a package of aid and legislative measures costing around £300 million. The argument is that this will save paying out a great deal more in homelessness relief in the long-run.

As mentioned above, though, shoring up the debt is only part of the problem. Key to moving past this situation and narrowing the disparity between renters and homeowners will be getting the economy moving again – and especially opening up employment opportunities for younger people who've been hit disproportionately hard by the events of the last year.