There are now 84,200 tenants more than two months behind with paying their rent, as of Q3 2015, compared to 74,000 in the second quarter. In absolute terms this represents a quarterly increase of 10,200 additional households in potentially serious financial difficulties. On an annual basis, this means 13,200 more households are in significant arrears than a year ago, or an annual increase of 18.6% since Q3 2014, when this figure previously stood at 71,000 across the UK.
On a historical basis, the latest deterioration in serious tenant arrears remains relatively mild, remaining considerably below the record 116,600 such cases seen in Q3 2012. However the latest figures for Q3 2015 represent the highest levels in more than two years.
In part, the increase in absolute numbers of serious arrears due to the overall growth in the size of the UK private rented sector. As a proportion of all private tenancies, just 1.6% are in serious arrears of more than two months, as of Q3 2015. This compares to a peak proportion of 2.9% of tenants in Q1 2008. However this proportion has also increased marginally from 1.4% in serious arrears as of Q2 2015.
Adrian Gill, director of estate agents Your Move and Reeds Rains, comments: “The chance of an individual tenant falling into serious arrears remains very low. In general, renting works for most people. Over the last decade the private rented sector has expanded at an unprecedented pace, providing homes for millions of households at the same time as absorbing the worst financial crisis in living memory.
In the current climate, optimism feels increasingly reasonable. Most households are beginning to earn more, the cost of living is stable and the chance of falling into unemployment is diminishing. For the majority of tenants, paying the rent is becoming easier rather than harder. But beneath this rising tide there are inevitably some households and individuals who are not yet feeling any new economic buoyancy. As others bid rents higher there will be a minority who are still struggling to keep up. Landlords and tenants have a mutual responsibility to be aware of this small but significant risk.”
Eviction rates yet to mirror higher levels of serious rent arrears
In the same quarter of Q3 2015, there were a total of 26,712 court orders for the eviction of tenants, on a seasonally adjusted basis. This is 4.3% lower than was seen in Q2, when seasonally adjusted eviction orders stood at 27,909, and 7.8% fewer evictions than 28,959 a year before in Q3 2014.
Landlord finances stabilise with lower arrears than in 2007
Breaking eleven previous consecutive quarters of improvement, landlords’ own finances have remained in stable health between Q2 and Q3. In the latest figures there are currently 5,700 cases of buy-to-let mortgage arrears, the same level as was seen in the previous quarter. On an annual basis, this represents less than half the 12,500 cases of buy-to-let mortgage arrears seen in Q3 2014, or a drop of 54.4% over the last four quarters.
Adrian Gill concludes: “Landlords and buy-to-let lending have been targeted from a variety of angles in 2015 – under a harsh political spotlight, subject to new taxes and freshly scrutinised by regulators. There could be a real debate about the role of landlords, and indeed the urgent need for more investment to keep up for demand for homes to rent. However this should be done constructively – and any worriers about the financial health of landlords should consider the reality of buy-to-let mortgage arrears at record lows.
In the context of resurgent tenant arrears, landlords are the buffer delaying a parallel peak in evictions. And healthy landlord finances make that tolerant approach more likely. So while penalising landlords may win easy political points, making investment in new homes to let harder could be counterproductive – especially in the face of new challenges.”
