The current global outbreak of Coronavirus is a serious danger to health – and even life – but it’s also hit many people’s finances incredibly hard. Huge numbers of businesses have been forced to shut their doors in efforts to contain the spread of the virus, and while this is hopefully just a temporary measure, it does mean a lot of employers can’t afford to pay wages at the moment (sometimes including their own).
For many tenants, this has pitched them suddenly into the frightening situation of not being able to make their rent payments. Fortunately the government has introduced a range of financial and legislative measures aimed at making sure no-one ends up losing their home during this difficult time.
The key thing that will save a lot of people is the government’s undertaking that if employees are ‘furloughed’ (meaning that they are kept on a company’s books but stop working temporarily), 80% of their salaries will be paid, up to a maximum of £2,500 per month. This is called the Coronavirus Job Retention Scheme, and is available to anyone who was hired on a PAYE basis on or before 28 February 2020. Your employer applies for it in the form of a government grant, which will also cover the National Insurance and pension contributions that employers are required to make. The scheme only applies to people who are unable to work because of Coronavirus – anyone who is continuing to work (including through flexible working arrangements) should be paid for it as normal.
Self-employed people have a similar arrangement, albeit a bit patchier. Those dreaded payments on account due at the end of July can be deferred until next January if necessary, and as with PAYE employees, the government has agreed to pay 80% of a self-employed person’s income, up to a maximum of £2,500 per month. This will come in the form of a one-off payment for three months – probably processed sometime in June – and the scheme may be extended if necessary. It doesn’t cover all self-employed people, though, and while the government estimates that only 5% of people will fall through the cracks, that is still quite a lot. Notably people won’t be able to claim if they’ve been self-employed for less than a year, or if they have set themselves up as a limited company (which some people have to because their clients insist on it for invoicing purposes). The chancellor has also issued an ominous threat that self-employed people should expect tax hikes when this is all over.
That aside, the government’s offer is pretty generous for most people, but it still means tenants might be a bit more hard-up than usual and may have some gaps in their income while grants are processed. If this applies to you, the best thing to do is to talk to your landlord as soon as possible.
Increases to Universal Credit and housing benefit
Some tenants will be unlucky and will not be covered by the government’s income protection measures for one reason or another. In these cases, the benefits system has been considerably bolstered to try and tide them over.
Universal Credit has had a temporary hike until further notice, as have local housing allowance (LHA) rates. LHA rates were due to increase anyway after a five-year freeze, but new rules in the Social Security (Coronavirus) (Further Measures) Regulations 2020 have seen these increases pegged to the 30th percentile of rented housing stock in a claimant’s particular area. This is actually what housing benefit used to be based on, but its real-world value has been dwindling away for years. The irony has not been lost on a few commentators that some of society’s most vulnerable and marginalised people may finally see their situations improve thanks to a global pandemic.
These changes are only temporary, and will still probably not cover rent for the kinds of properties occupied by employed tenants who’ve fallen through the gaps in the government’s other provision, but at least it’s something.
Allowances for landlords
This is an unprecedented situation and it’s fair for tenants to expect a bit of flexibility – particularly since landlords are being offered some concessions too. Mortgage providers are being asked to offer landlords with buy-to-let mortgages a three-month mortgage holiday, on the understanding that this will allow landlords in turn to take the pressure off tenants who are having trouble paying rent.
It’s worth noting that landlords will probably not be particularly keen to take this up – they still have to catch up on the mortgage payments afterwards and some extra interest will probably accrue in the meantime – but it’s a card they can play if they need to, and it means they’re less likely to get into financial difficulties themselves if a tenant misses a payment. It just provides a bit of play in the system, and it’s designed to help tenants rather than landlords.
None of this absolves tenants from paying rent, and it’s fair for landlords to ask that any reduced payments are caught up later, but in times like these most landlords should be willing to discuss alternative payment plans if a tenant’s income has taken a hit.
Protection from eviction
The government is strongly advising that no landlords should be trying to evict tenants at the moment, and changes in the last couple of weeks have in fact made sure they can’t. Since 26 March, landlords have been required to give three months’ notice before starting any court proceedings, but the courts have also suspended all repossession action anyway. No evictions will be taking place for at least three months, even if they were already in the system when the virus hit.
While this means no-one will be made homeless in the immediate future, even when evictions do start again, tenants should be in a stronger position than usual. There are plans to extend the pre-action protocols (the attempts at negotiation that social landlords are required to make before they can issue an eviction notice) to the private rented sector, and there will also be the simple fact that many tenants who get into arrears over the coming months will otherwise have been model tenants. Hopefully most landlords will be able to take a long view.
Several decades of other legislation
The most comprehensive protection for tenants is the vast volume of law that’s already there, and Coronavirus doesn’t change that. Essential maintenance still needs to be done, gas safety still needs to be attended to, deposits still have to be administered properly and myriad other rules still apply.
It’s fair to say there will need to be a bit of understanding on both sides. It makes sense for landlords to pause routine inspections and non-essential maintenance for the time being, and there may also be some complications around more urgent maintenance work. Tenants may be self-isolating, for example, or landlords may have trouble finding contractors willing to go into people’s homes. Ultimately tenants and landlords will get through this by working together and trying to see each other’s point of view, but then that tends to be a good idea anyway.