Rent arrears double in two years

Published 04th Jun 2010

Unemployment and pay cuts force tenants into arrears, while landlords blame implementation of Local Housing Allowance


Rent arrears have doubled in the past two years, with more than a third of landlords reporting that tenants have fallen behind with payments, according to an in-depth survey.

A total of 34% of private landlords have experienced arrears problems over the past 12 months, according to researchers BDRC Continental, compared with 16% in the third quarter of 2008.

Worst-hit are landlords in the commuter belt of London's suburbs. The survey also found high levels of arrears in the east Midlands.

The good news for tenants is that rising arrears are making landlords think twice about raising rents.

Mark Long of BDRC Continental said: "Although there are indicators in this quarter's research that suggest the private rental market is stabilising, it is too early to refer to this as a recovery. Britain's private landlords still have to cope with uncertain economic conditions and arrears are at the highest level since the research began in 2006.

"The research also shows that two-thirds of landlords don't intend to change the price of the rent charged to tenants in the next three months."

Some landlords blame the new Local Housing Allowance (LHA) scheme, which replaced housing benefit in April 2008, for the rise in arrears.

Under the scheme payments are set at a standard local rate rather than being tied to an individual property, to discourage private landlords from overcharging. The cash is also paid direct to the tenant rather than the landlord. But landlords say that many tenants have not passed on the allowance.

Long said: "There is a strong correlation between the instigation of LHA and arrears. One in four of the landlords we surveyed have tenants on LHA, and they are much more likely to be in arrears.

"Landlords are telling us that the new system of direct payments to tenants is the key barrier to them offering tenancies to people in receipt of LHA."

Cutting the soaring bill for LHA, claimed by 4.5 million people, is likely to be a priority for the new government as it tackles the budget deficit. The total cost of housing benefit, including rents in the private and social sectors, jumped from £11bn in 1998 to £17.4bn in 2008-09. The rise in unemployment, which has forced many families on to LHA, is expected to take the bill above £20bn by 2011.

Private landlords may face tough new limits on rents paid by the taxpayer, as the average rent in social housing is only £72 a week compared with the £108 paid to tenants in the private sector.

Source: ' Guardian '

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