Buy-to-let
New research has found that fewer tenants are falling into arrears as a result of an improving employment market.
According to letting agents Your Move and Reeds Rains, just 86,200 tenants across the UK are more than two months behind in their rent in the first quarter compared to 89,300 in the previous quarter.
This represents a 4% fall and means that 3,100 households have moved out of serious rent arrears since the end of 2015.
Adrian Gill, director of estate agents Your Move and Reeds Rains, said the fall in tenants in serious arrears reflected 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. 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 most precarious tenant households out of serious rent arrears and onto a more sustainable course.”
The number of tenants more than two months behind with rent has fallen by 16% since the financial crisis despite the expansion of the private rented sector from 3.6 million to 5.8 million households.
“A reduced risk of serious rent arrears will be welcome news for existing landlords, facing so many artificial challenges posed by government meddling. But no-one should be complacent – managing a property is never simple. 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,” said Gill.
Landlords are also less likely to fall behind on their mortgage repayments, with only 9,300 cases of buy-to-let mortgage arrears of more than three months in the first quarter, the lowest figure since 2007.
Gill said that landlords were at risk from anti-renting policies and would need to “build their cash reserves and reassess their business models” to cope with the regulatory change.
“Looking ahead, the next hurdle put up by the government will be the coming changes to the tax relief of mortgage interest. For many smaller landlords and for those without significant external income, the phasing out of tax allowances at the higher rate could be minimal if they don’t fall near the higher tax bands in the first place. But professional landlords with more than a couple of properties could be hit harder.”
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