Struggling tenants risk being locked out of rental market

Renters with poor credit histories, fluctuating incomes or limited access to guarantors are set to find it even harder to secure a home as landlords respond to increased risks under the Renters’ Rights Act.

New data shows the Act is making many landlords reluctant to let to tenants considered ‘higher risk’ of defaulting on rent payments, with polling of NRLA members finding eight in ten landlords (78%) say the Act is likely to make them more selective about who they rent to.

The figues, from research consultancy Pegasus Insight, raise concerns that the Act will end up harming those it set out to help, with tenants those already struggling to access the private rented sector to be hit hardest.

These include people with unpredictable incomes, international students without a UK credit history or UK-based guarantor, and tenants affected by the ongoing freeze in housing benefit rates.

Restrictions

Measures in the Act include restrictions on the amount of rent that can be charged in advance. This will make it more difficult for those with poor, or no, credit history to prove their ability to sustain a tenancy.

Alongside this, the Act makes the vast majority of rental agreements open ended. This will make it harder for many tenants to secure guarantors, given the difficulty of agreeing to guarantee rent for an indefinite period. 

It also allows tenants to build up higher levels of arrears before landlords can take action – three months, up from two months previously.

Court backlogs

The poll also found that 90 per cent of landlords are concerned about the impact of court backlogs when seeking to repossess properties where they have a legitimate reason to do so.

At present, it takes an average of almost eight months for the courts to process and enforce possession cases under section 8, the system which has replaced no-fault evictions. This includes cases related to serious tenant rent arrears or anti-social behaviour blighting the lives of neighbours and communities.

The President of the Law Society, Mark Evans, has warned that without proper investment in the courts and legal system, the Act risks creating injustices for both landlords and tenants.

Reform comes with risk

Ben Beadle, NRLA chief executive said: “Today’s findings paint a worrying picture for many renters and serve as an important reminder that reforming the private rented sector comes with considerable risk.

“Responsible landlords need confidence that tenants can sustain a tenancy. If the system makes it harder for them to seek those assurances, the result will be fewer options for those on the financial margins.

“Likewise, the Government’s failure to publish a clear plan to ensure the courts process legitimate possession cases far quicker than at present is causing considerable concern in the sector.

“Ministers need to set clear targets in which cases should be processed and enforced, with the resources to back this up.

“Without this, the Government risks undermining landlord confidence at the very moment renters need more homes, not fewer.”