Covid has been a thing for almost a year now. While the landscape isn’t quite one of a dystopian future ravaged by a worldwide pandemic just yet, the current climate is anything but normal. Every part of life has been affected, including moving home.
The rental market, in particular, needed to adapt to a world with social distancing. It was sent into a deep slumber along with the rest of the property market, but people still need to move. And so it’s picked up again in the last few months, with rents even rising in some places.
But there are longer-term questions to be asked, especially around the banning of evictions and what that could mean in the long term. That’s why we’ve put this guide together, looking at some of the issues landlords could face as a result of Covid.
The section 21 conundrum
In the wake of the pandemic, something was needed to safeguard the living rights of tenants who found themselves financially restricted by Covid. However, that doesn’t mean there haven’t been issues for landlords as a result.
Landlords are now required to provide six months’ notice for tenants to vacate the property. Repossession cases regarding rent arrears also won’t be treated as a priority until tenants have built up a year’s worth of debt.
It has led to the National Residential Landlords Association (NRLA) sending a letter to the prime minister, suggesting that landlords could be left without any rent for up to two years. Such circumstances aren’t only bad for landlords; it’s no good for the tenant either, as defaults on mortgage payments could lead to repossessions from the banks, leaving landlords without an investment property and tenants with no home.
Could landlords feel the pinch?
With the average monthly rent in London currently £1,583 per month, landlords in the capital could find themselves around £19k out of pocket if the worst-case scenario of tenants not paying rent for one year comes to fruition.
If landlords need to shoulder up to two years of missed payments, thanks to court cases being delayed, the figures could rise to astronomical levels that are unsustainable. The NRLA has asked for interest-free, government-guaranteed hardship loans to be made available to tenants to pay off arrears caused by Covid. Everything is still up in the air, however.
Something needs to give, whether it’s financial support offered to tenants at the front end so that they can pay their rents. Or landlords being financially compensated on the back end, ensuring that mortgages repayments are made.
The knock-on effect
Some landlords may start thinking about their investments in the long term as a result of tenants who default on payments. Remortgaging may be an option for some, temporarily shielding the burden until issues are resolved.
Another aspect could see some landlords sell up, even though the market isn’t best positioned for property sales at the moment. Sales would also further dilute the rental stock available at a time where demand for rental property is growing exponentially.
Tenants who have rent arrears could also see their credit scores plunge, making it harder for them to get on the property ladder in the future. Therefore, the genuine knock-on effects of the current climate could lead to an even greater demand for rental property.
Navigating the lettings market
While rules around evictions have left many landlords with more questions than answers, there are brighter days ahead. The number of people looking for rental homes continues to outpace supply in the market. Such news will offer landlords some comfort.
The Government could yet still come up with a package aimed at tenants who have defaulted on rents. Meanwhile, many landlords will be even more stringent when it comes to vetting new tenants, as they will try to avoid a scenario of rental payment defaults.
It also wouldn’t be a surprise to see even more landlords using professional property management companies who can immediate between both parties should any issues arise. However, it’s it’s important to state that the number of defaults on rental payments are still considerably low compared to tenants who pay on time.
The future of renting
There is too much demand in the rental market as it is, and the desire for rental homes will only increase with a quarter of all UK homes set to make up the private rental sector by next year. In the short term, landlords will likely place even more emphasis on carrying out checks and procedures, ensuring a robust process before choosing their next tenant.
The reliance on property managers will likely grow in importance too, as landlords may feel more secure knowing they have a professional company managing every aspect. The long term future is still unclear, but there needs to be a resolution for the eviction process, something that works for both landlords and tenants.
Now that’s a dystopian future many landlords and tenants can get on board with.