The number of tenants in severe rental arrears has fallen sharply to the lowest level in two years, according to the latest Tenant Arrears Tracker by LSL Property Services plc.
In the second quarter (Q2) of this year the number of tenants in severe arrears – those more than two months behind on their rent – fell by 25 per cent on a quarterly basis.
In absolute terms, there are now 23,000 fewer tenants in severe arrears than in the second quarter, to stand at 69,000. This represents the lowest level in two years, since the third quarter of 2011 when this figure last stood below 70,000 tenants.
The proportion of all tenants in such arrears of more than two months has also decreased dramatically. Those in serious arrears now represent 1.7 per cent of all tenancies in England and Wales, down from 2.4 per cent in the previous quarter. On an annual basis, the number of tenants in severe arrears has shown an even more dramatic improvement, falling by 34 per cent since Q3 2012.
Fewer cases of severe arrears come alongside a wider improvement in tenant finances. According to LSL’s latest Buy-to-Let Index, overall tenant arrears also fell in August, with 7.8 per cent of all rent late or unpaid . This compares with 8.2 per cent of all rent in the previous month.
Paul Jardine, director and receiver at Templeton LPA, comments: “This is an important landmark. Tenants in these most severe situations could face eviction – whereas the majority of arrears cases are resolved much more easily. There’s a qualitative difference, which makes this particular improvement so important. Such a dramatic fall in the number of people potentially losing their homes is not just an excellent signal for the private rented sector – but for the entire UK economy.
“There isn’t yet any dramatic sign that the cost of living is improving, but we might be on the turning point of a serious and sustained economic recovery. Hopefully that means inflation can be brought back under target – and economic growth can accelerate in a way that creates jobs. If that happens – and wages, jobs, and lower inflation come together in the right way – this rapid improvement for tenants could be sustained.”
The number of tenants facing eviction through court order has also fallen, according to the most recent data. Consistent with lower rates of severe financial strain, in the second quarter of 2013, 26,759 tenants faced eviction notices. This represents a quarterly fall of almost 10 per cent, down compared to the first quarter by 9.7 per cent
Landlords have benefitted from improvements in tenant finances, with landlords’ own mortgage arrears continuing a long-term downwards trend. By the end of Q2 the number of buy-to-let mortgages over three months in arrears fell to 17,700, down 1.1 per cent since the first quarter, to the lowest level in five years. On an annual basis, the number of buy-to-let mortgages more than three months in arrears has dropped by 18.4 per cent.
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