The number of tenants in severe rental arrears has defied wider improvements in tenant finance, according to the latest Tenant Arrears Tracker by LSL Property Services plc, owners of Templeton LPA, the specialist practice of LPA Receivers.
In Q2 2013, the number of tenants in severe arrears – those more than two months behind on their rent – rose by 3.3 per cent on a quarterly basis. This is despite wider progress in the financial position of other tenants.
In absolute terms, the number of tenants in severe arrears rose by 3,000 to 98,000 in the second quarter. This brings the figure to the third highest level on record, with only the second and third quarters of 2012 seeing any worse.
While still a small minority, the proportion of such tenants has also continued to increase. Those in serious arrears now represent 2.4 per cent of all tenancies in England and Wales, up from 2.3 per cent in the previous quarter.
On an annual basis, the number of tenants in severe arrears has shown a slight improvement, falling in absolute terms by 2.9 per cent. However this leaves severe arrears over the last twelve months 20 per cent above the long-term average.
While severe arrears cases have worsened, there was a wider improvement in tenant finance. According to LSL’s latest Buy-to-Let Index, overall tenant arrears fell in May, with 8.2% of all rent late or unpaid . This compares with 8.4 per cent in the previous month.
Paul Jardine, director and receiver at Templeton LPA, comments: “Tenants as a whole have already shown great resilience to set-backs, and we expect the proportion of all rent in arrears to halve between 2008 and 2018. But a troubled minority is feeling the pinch most sharply. Slower rent rises in the last couple of months have provided some relief. However, the longer-term battle is with other forms of inflation, plus unemployment and anemic wage growth. Consumer inflation is persistently outpacing the Bank of England’s target, and escalating much faster than either rents or wages.
“If 2013 isn’t another false economic dawn then the financial position of these struggling tenants could start to improve later in the year. Until the rising cost of living begins to subside, the number of tenants in severe arrears is likely to mushroom even further.”
Reflecting a growing minority of tenants experiencing serious financial strain, the number facing eviction through court order has also grown. In the first quarter of 2013, 28,473 tenants faced eviction notices, a quarterly rise of 4.9 per cent. This puts evictions at the highest level ever recorded, beating the previous record set only in the last quarter. Evictions in Q1 were 9.4 per cent higher than the same period last year.
Continued falls in overall tenant arrears contributed to a further improvement in landlords’ finances. By the end of Q1 the number of buy-to-let mortgages over three months in arrears fell to 17,900, falling 9.1 per cent from Q4 2012. On an annual basis, buy-to-let mortgages more than three months in arrears fell by almost one quarter (-24.8 per cent).
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