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The private rented sector has experienced significant change over the past 2 years; from regulative change to the reform of taxation. All at a time when the private rented sector is increasingly important in the provision of homes for millions of people.
The UK Government should be supporting private landlords with tenure neutral policies that supports growth of all sectors, but with the recent Housing White Paper it seems the government are more concerned with encouraging home ownership and institutional build-to-rent investors. Yet, with increases in house-prices that are out of step with average earnings, the relative stability of private rents ensures millions of families can have an affordable home.
Over the past year we have been conducting regular quarterly surveys to assess the state of the market and provide robust evidence to policy makers. In past surveys, we have explored the issues of changes to mortgage interest relief and the introduction of energy efficiency measures.
Our latest quarterly survey focussed on the impact of the introduction of universal credit and wider issues of welfare reform on the sector. These changes could impact on the most vulnerable in society and so any negative consequences from policy changes could lead to increases in homelessness.
Our latest report, named ‘Welfare Reform and Universal Credit: The impact on the private rented sector’, provides the findings of this latest survey based on a sample of 2,974 landlords.
Overall, the findings provide a stark account of issues associated with the introduction of Universal Credit (UC) and specifically the lack of direct payments of housing costs to landlords.
Of those that let to tenants on benefits, 38% of landlords reported their UC tenants had gone into rent arrears in the past 12 months. This is especially concerning when we then calculated that on average they were owed £1600 in rent arrears by UC tenants.
The issue of rent arrears for UC tenants is also one of the leading reasons for a landlord to regain possession of a property (64% of landlords). Furthermore, the change to direct payments with the introduction of universal credit was identified as a key policy that was making nearly 2 in 3 landlords (63%) less likely to let to UC tenants.
All of these findings show that reform to universal credit is overdue. The government needs to ensure that it is easier for landlords to claim alternative payment arrangements (for direct payment to landlords) to ensure rent arrears are kept to a minimum. Without some change on this policy landlords will remain unwilling to let to tenants on universal credit going forward.
However, it is not just welfare reforms that have knocked landlord confidence. The key trend data is indicating that the current political, taxation and economic climate has shaken the sector.
While more landlords were confident (38%) than not confident (28%), plans for landlord portfolios have changed over the past 6 months. The proportion of landlords who have added to their portfolio is down by 7%, and the proportion who have reduced the size of their portfolio is up by 2%.
Looking ahead, the proportion of landlords who plan to add to their portfolio is down from the previous 6 months. At the same time, the proportion who plan to reduce the size of their portfolio has increased. While this is only a 3% increase, this is something we will be keeping an eye on. Especially with the staggered introduction of changes to mortgage interest relief.
For the next 12 months, this finding could signify a significant decrease in available homes to rent for tenants. Using the latest data from HMRC for the number of landlords, and if these landlords only reduce their portfolio by 1 property, this would equate to a net loss of 76,000 properties to rent over the next 12 months alone.
This would be a disaster for the country, especially at a time when RICS are predicting that 1.8 million new homes to rent are needed by 2025 to meet demand. Without the confidence of landlords this will not be met, leading to family incomes squeezed from rental price pressures as the supply of new rental homes runs out.
[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row][et_pb_column type=”4_4″][et_pb_cta button_url=”https://research.rla.org.uk/report/welfare-reform-and-universal-credit-the-impact-on-the-private-rented-sector-2017/” url_new_window=”on” button_text=”View the report here” use_background_color=”on” background_layout=”dark” border_style=”solid” custom_button=”off” button_letter_spacing=”0″ button_icon_placement=”right” button_letter_spacing_hover=”0″ _builder_version=”3.0.64″ /][/et_pb_column][/et_pb_row][/et_pb_section]