Landlords warned that renters will struggle to pay rent

Landlords warned that renters will struggle to pay rent

10:33 AM, 11th August 2022, About 2 months ago 11

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Tenants will struggle to pay their rent and bills as growing numbers of them are already cutting their food budget because of the cost-of-living crisis.

The warning comes from Sarah Coles, a senior personal finance analyst at the financial services firm Hargreaves Lansdown.

Sarah points to data from the Office for National Statistics (ONS) on how people are reacting to the cost-of-living crisis.

Spend 31% of their income on rent

The ONS data shows that tenants are less likely to have wiggle room in their budget because they spend 31% of their income on rent, compared to mortgagees who spend 18%.

Renters are also being hit harder by rising prices, especially by hikes in rents, and they are twice as likely to say their housing costs are rising – 33% compared to 16% of those with a mortgage.

The ONS figures show that around half (46%) of renters have cut back on food and essentials – compared to 33% of those with a mortgage and 27% of those who own outright.

They are also four times as likely to be behind on their energy bills than those paying a mortgage (8% v 2%), and they’re more than four times as likely to be behind on their housing costs (4% v less than 1%).

Tenants are also more likely to be borrowing more – 29%, compared with 19% overall, and they have less to fall back on too – 50% of renters couldn’t afford an £850 expense out of the blue, compared with 29% overall.

‘Renters are being forced to cut back’

Sarah told Property118.com: “It’s a really worrying sign that renters are being forced to cut back in order to try to manage their rising housing costs and bills.

“It’s only a matter of weeks before we expect another significant hike in energy bills which risks pushing them to breaking point.”

She added: “At the moment, 4% of renters are behind on their rent, which is worrying enough in itself and is significantly higher than the proportion of mortgage borrowers who have fallen behind.

“However, 54% say it’s either very difficult or somewhat difficult to pay the rent – compared with 35% of those paying a mortgage who say it’s very, or somewhat difficult to meet this cost.

“It means rising prices are likely to push even more renters over the edge.”

‘Things are only going to get worse’

Sarah said: “Unfortunately, it appears that things are only going to get worse.

“The HL Savings and Resilience Barometer forecasts for the coming year make for worrying reading for both tenants and mortgagees.

“Those on the lowest incomes and renters will be hit much harder by the cost-of-living crisis than those on the highest wages and will see far more damage done to their overall financial resilience.

“With less to fall back on, they’re more likely to wipe out any lockdown savings and build up even more in debt and arrears.”



Comments

Luke P

12:09 PM, 11th August 2022, About 2 months ago

Guarantors warned that landlords will not struggle in charging them any outstanding rent and to expect to be sued, CCJs and/or heftycharges over their own home...

NewYorkie View Profile

12:34 PM, 11th August 2022, About 2 months ago

“Those on the lowest incomes and renters will be hit much harder by the cost-of-living crisis than those on the highest wages and will see far more damage done to their overall financial resilience..." Now, there's a surprise!

Sarcasm aside, I have been saying for some time that the landlord euphoria over dramatically increasing rents is misplaced. A landlord may believe credit checking has delivered a viable tenant who can easily afford a new higher rent, but that tenant's circumstances can quickly change, and faced with the choice between heating, eating and accommodation, it's likely landlords will be saddled with ever increasing rent arrears, which the already log-jammed courts will take forever and an age to resolve.

As we saw [to my great cost] during lockdown, tenants could not be evicted, and many thousands of landlords are still waiting for evictions to take place. I can see something similar happening again to 'protect' vulnerable tenants, and as always, landlords will be expected to pick up the tab.

I am exiting the PRS, but if I wasn't, I would seriously consider keeping rents at an affordable level, rather than risk pushing tenants into a situation where they are forced to make decisions which will inevitably result in significant losses for me.

As for those with variable rate mortgages, including landlords, what the figures quoted fail to mention is that while a mortgage may be less than a rent, the rent includes all the additional home-ownership costs which the mortgagee must cover, and which are also increasing exponentially. Also, with many home owners having less than 2 months' savings, even the recent rate increases [and there will be more!] are already causing them to have to make hard choices. For a landlord relying on the income from a few BTLs, this could be the end of the line... for them... and for their tenants!

The Forever Tenant

13:48 PM, 11th August 2022, About 2 months ago

It does feel at times that Tenants have this unlimited amount of money with which they can pay their rent each month. Rents can only be increased so much before they become literally unaffordable.

Here in Bristol they are rapidly heading towards that figure and I really do not know how much higher they can go.

I live as frugal life as possible. No nights out, no takeaways, no unnecessary purchases, no subscriptions to services, no holidays etc. Yet even with all that and an above average salary it is now getting to the point where I may have to start thinking about which bill I wont be paying that month.

Now if this is the situation for me, I hate to think of the 60% of people that are earning less than me but yet are in the same situation.

Right now the focus is on the energy companies and the big increase they are due to put into place. If that is resolved somehow then I highly suspect the next group on the radar will be those that are taking the largest sum from a persons paycheck.

Monty Bodkin

14:53 PM, 11th August 2022, About 2 months ago

"The ONS data shows that tenants are less likely to have wiggle room in their budget because they spend 31% of their income on rent, compared to mortgagees who spend 18%."

Comparing apples with oranges.
Renters don't spend anything on maintenance.

Dylan Morris

15:10 PM, 11th August 2022, About 2 months ago

“compared to mortgagees who spend 18%” ……… sorry to be a stickler but the mortgagee is the lender, the borrower is the mortgagor.

moneymanager

16:36 PM, 11th August 2022, About 2 months ago

"senior personal finance analyst" and appparently, from the quality of this ground breaking research, an aspirant rocket scientist.

An analyis that might illuminate is quite where in the regulatory pecking order a PRS landlord, and the related tenant obligation, actually ranks, non-payment of Council Tax is a criminal offence, non payment of energy bills can easily see an earning attachment, government "pandemic" enforced "forbearance" has meant tenants effectivy being told they needn't pay.

Neilt View Profile

18:20 PM, 11th August 2022, About 2 months ago

Reply to the comment left by moneymanager at 11/08/2022 - 16:36
Time for us LLs to step up and reduce the rent, where appropriate. Don't forget that we have a large bonus at the end when all is paid up and retirement beckons.

Luke P

18:35 PM, 11th August 2022, About 2 months ago

Reply to the comment left by Neilt at 11/08/2022 - 18:20
Presumably this is sarcasm?

DSR

10:35 AM, 12th August 2022, About 2 months ago

Reply to the comment left by moneymanager at 11/08/2022 - 16:36
you only have to look at the DWP deductions system. They can take out benefit at source to pay off utilities on behalf of tenant but rent is way down on the priority list....

NewYorkie View Profile

12:52 PM, 12th August 2022, About 2 months ago

Reply to the comment left by DSR at 12/08/2022 - 10:35My tenant stopped paying rent at the start of the pandemic, even though he could afford to pay, and claimed he wasn't getting anything from the DWP. I contacted the DWP and they said they had no record.
After he was evicted, 16 months and £20k later, I found confirmation in his post that he was receiving housing benefit throughout.
By the time I sold that flat, my profit from that BTL for 12 years had been wiped out.
I won't wait for it to happen again, and it will. I've retired and am exiting the PRS! As I said on the BBC, I'm not a social housing provider!

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