As with so many other sectors at the moment, the private rented sector is keeping the hatches battened down and trying to adapt to a fast-changing and unpredictable situation. A safe place to live is hugely important right now, and landlords have found their business affected both by the virus itself and by the various legislative and lockdown measures that have been rushed into force to try and slow its spread.
Here’s a quick update on some of the developments we’ve seen since the pandemic kicked off, along with a few things that we can perhaps keep an eye out for in the coming weeks and months.
Financial hardship and government support
The perfect storm of illness, lockdown measures and an almighty financial crash has devastated British business across many sectors. In many cases there is the prospect of future recovery, but as the chancellor, Rishi Sunak, has repeatedly pointed out during the government’s daily press briefings, it’s ‘just simply not possible’ to save every business or job. Several big companies have already gone to the wall, and we can expect to see more go the same way before all this is done.
Of course this is a huge issue for the private rented sector because suddenly vast numbers of people are unexpectedly out of a job through no fault of their own, affecting their ability to pay basic expenses like food, utilities and rent.
Fortunately the government is introducing a range of measures that should allow many people to keep their jobs. A key element of this is a scheme that allows employers to furlough their staff (meaning that they remain on the books but temporarily stop working) but still pay 80% of their salaries through a special government grant. A similar plan will cover self-employed people. Neither scheme is perfect, and a lot of people aren’t eligible for one reason or another, but the majority of tenants will have some sort of protection for the time being.
From a landlord’s point of view, this means that your tenants will probably still be able to pay rent, but they may be rather more hard-up than usual, and may also experience delays in getting paid themselves (grants for furloughed employees, for example, have not yet come through, while self-employed people will probably not be paid out until June). Given the high value of a good landlord-tenant relationship, it makes sense to be accommodating where you can.
Those unlucky enough to miss out on the government help mentioned above will need to rely on the benefits system, and this has been temporarily bolstered as a result. Universal credit and local housing allowance have both been raised (the latter quite significantly), as has the amount of money people are allowed to earn before their benefits are reduced.
In theory this should mean that people on benefits are better off, though in practice many of the new people signing on will have been earning much more before the crisis. If your tenant falls into this category, it’s quite possible that they will struggle to make rent, and you will want to try and moderate the impact of this on both yourself and them. Now more than ever it’s important to keep channels of communication open, so that if there’s a possibility of the tenant missing rent payments you can come up with a plan between you.
The option of mortgage and rent holidays
The government has asked providers of buy-to-let mortgages to give landlords the option of a three-month mortgage holiday. This is on the understanding that it will take the immediate financial pressure off landlords, and will allow them to devise payment plans or even offer rent holidays to tenants who have been hard-hit by the crisis.
You’ll still have to make up the payments and interest charges will still accrue – making it a touch more expensive in the long-run – but if your tenants are over a barrel and your own finances are tight then it’s a very useful option to have.
A temporary halt to evictions
If your tenants do stop paying rent then there’s not a great deal you can do about it for the time being. The government has introduced a mandatory three-month notice period before evictions can be taken to court, but more importantly the courts have halted eviction proceedings anyway – even for cases that were already in the system.
This will be the case until at least late June, and even when the courts do pick up again, the process is likely to be even more glacial than usual thanks to a backlog of cases.
In fact, the government is recommending that no-one commences eviction proceedings for the time being, and the advice does make sense. Many tenants are much more vulnerable than usual, and eviction carries a higher risk of homelessness. Also in many cases the arrears that run up over the coming months will be utterly beyond tenants’ control, and the preferable option is that they should be able to come up with a payment plan when the dust settles, rather than ending up evicted and in debt. To this end, the government is also talking about extending the pre-action protocols (the efforts that social landlords have to make to negotiate a solution with a tenant before taking court action) to the private rented sector.
All this will be very difficult for some landlords – particularly those with tenants who were a long way in arrears before coronavirus landed – but unfortunately it is what it is.
Mortgage market lockdown
Demand from buyers was plummeting anyway once lockdown kicked in, but earlier this month the government asked mortgage lenders to put mortgage offers on hold – essentially suspending the housing market. They were already telling people not to move where possible, but while some property sales will have gone too far to be postponed (official government advice explicitly states that ‘there is no need to pull out of transactions’), this more or less puts a stop to the rest. Mortgage providers are apparently ‘working to find ways’ to extend existing mortgage offers.
Advice not to move house
While the government advice document on moving house is aimed specifically at buyers, its guidance for renters and landlords is much the same, stating that 'home buyers and renters should, as far as possible, delay moving to a new home while emergency measures are in place to fight coronavirus.'
The advice is to negotiate an extension to any existing contract until lockdown measures are lifted, and in cases where tenants do not already have a new home lined up, this seems a sensible course of action. Apart from anything else, the guidance is that ‘no-one should visit the property to conduct viewings, or for anything else which is not urgent and health and safety-related’, which would make it very difficult to find new tenants anyway.
While routine inspections should be suspended for the time being, essential maintenance is still very much a legal requirement for landlords. As with everything else, though, you may have to adjust your expectations and ways of working during the time of coronavirus. There are fewer contractors available, and you may encounter resistance from your tenants if you try to send people into their home. If they are self-isolating for whatever reason, the situation will be even more difficult.
If you manage your property through an agent then they will pretty much all be working from home. They won’t be conducting routine inspections, and there may be logistical challenges such as getting spare keys to contractors who previously would just have popped into the office.
The economic future
In a world of unknowns, this is the elephant in the room. Government measures – extensive as they are – are only designed to tide us over while the danger to public health is at its highest, and at some point the economic damage will start to bite. Businesses will fail, jobs that are currently suspended will be lost, and some tenants who have got into arrears will not be able to dig themselves out. Depressed financial markets will have effects across the globe, including wiping huge amounts off savings and pensions. The housing market will pick up, but how far remains to be seen.
And then there is the cost of the government measures themselves. Apart from an ominous threat to self-employed people, Rishi Sunak has been sensibly non-committal about how he and the chancellors who follow him might recover the many billions spent during this time of crisis, but it will have to be paid back somehow. Given their status in recent years as the chancellor’s punchbag, landlords may be justifiably concerned about future budgets.