The level of serious rent arrears in the private rental sector has dropped, according to recent research by Your Move and Reeds Rains.
The estate agents have found that tenants renting from private landlords are now less likely to fall into serious rent arrears, thanks largely to a decline in unemployment rates.
The latest report shows that just 86,200 tenants in the UK were more than two months behind on rent in the first quarter (Q1) of 2016, down by 4% compared with the 89,300 recorded in the previous quarter.
The number of tenants in serious arrears in Q1 is also lower than the long-term average of 92,600 tenants, which dates back to Q1 2008.
The level of serious rent arrears peaked in Q3 2012, when 124,800 households owed more than two months’ rent and when unemployment in the UK stood at 7.9%. Since then, a boom in employment has been responsible for lifting many of the riskiest tenants out of serious rent arrears.
The Director of Your Move and Reeds Rains, Adrian Gill, says: “Fewer tenants in serious arrears reflect the health of the jobs market. With an extra 44,000 jobs created in the first quarter of this year, thousands of tenants have been able to get their finances back on track and pay down late rent.”
Gill notes that a reduced risk of serious rent arrears is “welcome news” for existing landlords, who are facing many “artificial challenges” imposed by the Government. However, he warns that no one should be complacent; “managing a property is never simple”.
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Gill continues: “Some landlords are being held back from buying property by the Stamp Duty surcharge. If this stems the flow of new homes into the rental market, then shortages in some areas could push up rents, hitting affordability.”
However, the number of tenants in serious rent arrears has dropped by 16% since the eve of the financial crisis, in Q2 2008 – from 102,900 to 86,200 today. This has occurred despite the expansion of the private rental sector over the same period. In 2008, 3.6m households rented from a private landlord. Now, after just eight years, this has grown by 62%, to reach 5.8m households.
Gill adds: “The massive growth in the number of homes available rent – driven by both deliberate landlords and accidental landlords coming into the market – has ensured that rents have not outpaced the ability of tenants to pay.
“The affordability of renting and the number of tenants falling behind on rent also needs to be seen within the context of the rapid expansion of the private rented sector and the addition of millions of extra houses and flats to rent.”
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