The number of new tenants in severe arrears has increased, reversing much of an improvement in the previous quarter, according to the latest Tenant Arrears Tracker by LSL Property Services plc, owners of Templeton LPA, the specialist practice of LPA Receivers.
In Q1 2013, the number of tenants in severe arrears – people more than two months behind on their rent – rose by 4.8 per cent on a quarterly basis. This overturns much of the improvement in severe arrears seen in the final quarter of last year, when the number of these most severe cases had fallen by 14.5 per cent.
In absolute terms, the number of tenants in severe arrears rose by 4,000 to 94,000 in the first quarter. This leaves the quarterly figure the fourth highest on record, only 10 per cent below the record set in Q3 2012.
On an annual basis, the number of tenants in severe arrears remains down marginally, by 2.9 per cent. However, the level of severe arrears over the last twelve months is now 20 per cent above the long-term average. Such tenants represent 2.3 per cent of tenancies in England and Wales, up from 2.2 per cent in the previous quarter.
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 February, to levels not seen since November 2012, with 7.4 per cent of all rent late or unpaid. This compares with 8.1 per cent in the previous month, and 10.1 per cent in December.
Paul Jardine, director and receiver at Templeton LPA, comments: “Household finances are feeling the impact of spiraling costs, particularly energy bills, which were recently predicted to grow by an average £214 this year. And wallets are under pressure from the other side. According to the ONS wages are creeping along at 1.2 per cent annual growth, well behind a rebounding rate of inflation. Many tenants have finally pulled their finances back together after the strain of the festive period. But for a significant minority the situation is actually much worse than three months ago, and this is reflected in the most severe tenant arrears.
“As 2013 progresses, the ability of tenants to pay their rent will depend on improvements in the labour market and wages in particular. And the number of people out of work has actually risen a little recently, with the percentage defiant at 7.8 per cent. Looking ahead, better pay will remain fundamentally dependent on the performance of the whole economy. But as the UK flirts with a triple dip recession, a vigorous rebound in average wages looks far from likely. Finances will remain strained for some people for many years to come.”
The number of tenants facing eviction through court order also reflects renewed difficulties for tenants’ finances. In the final quarter of 2012, 25,286 tenants faced eviction notices, a quarterly rise of 5.7 per cent. This puts evictions at the highest level ever recorded in an individual quarter, and 10.2 per cent higher than a year before.
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