Chaos in the rental market in England: 80,000 landlords fearing bankruptcy
The coronavirus crisis has plunged the rental market into turmoil as tenants are unable to pay their bills and homeowners fear financial collapse.
Landlords are struggling with unforeseen expenses and fear that when the epidemic is over, they will stay with rented houses that cannot be rented legally.
One estimate is that up to 80,000 homeowners may be forced to leave the sector.
Housing charity Shelter has warned that one in five tenants is at risk of losing their job, and gaps in the social security system mean that they will be in financial trouble long after the pandemic is over.
According to the Center for Economic Research, the problems facing the rental sector will become "a catalyst for an impending housing disaster".
The NRLA (National Residential Landlords Association) report shows the magnitude of the challenges facing the sector. It warns that many landlords and tenants have fallen through the cracks in government support schemes.
Buy-to-let homeowners can demand a loan holiday from their bank and use this opportunity to support tenants who have difficulty paying their bills. However, NRLA said that thousands of investors (about 28%) own rental properties without mortgages and many of them relied on rent income to support their livelihoods. In many cases, the crisis led to a drop in these incomes.
NRLA said it received reports that the tenants were cancelling their rents because they mistakenly believed that they no longer needed to pay. This also applies to landlords who have applied for credit leave but do not understand that they will still have to pay back the money.
Landlords with empty or soon empty properties will not be able to rent them out to new tenants and will pay municipal tax and utility bills while they are empty. An NRLA survey of 2,700 homeowners found that 41% of them could not cover the unexpected costs. In addition, 3% of them expect to lose their business because of the coronavirus.
According to real estate agency Hamptons International, in the UK there are 2.3 million landlords, which suggests that 79,800 of them may go into bankruptcy.
Those landlords who have tried to refinance their property, have limited opportunities. Financial analyst Moneyfacts said that more than 1,300 buy-to-let loans have been withdrawn since the beginning of the crisis.
Chris Norris of NRLA said: "Some landlords may have to sell their properties as soon as possible, but this will only exacerbate the rental crisis".
He also says that the Scottish government has offered support to landlords who do not have mortgages, but those within Scotland cannot benefit from this.
Shelter states that 1.7 million private tenants in England (equivalent to one in five) may lose their jobs within the next three months. Many of these people will have to go to social security for the first time, but Housing Benefit, one of the components of Universal Credit, covers only the cost of renting the cheapest 30% of the property in the area.
Apartment renters who pay the average price face a funding gap. For example, in England for a two-bed property gap is up to 400 pounds sterling per month, and in London the difference is 1,227 pounds sterling.
This issue could be solved if tenants found cheaper rentals, but this is not an option during isolation.
The Government has said it has proposed "unprecedented support measures for tenants". However, there were new concerns that many houses would no longer be rented at the end of the outbreak as the safety certificates for gas, electricity and other safety equipment would expire.
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