Evictions Soar As Property Owners Struggle With Payments

Millions of property owners and tenants renting property in the Private Rented Sector (PRS) are resorting to extreme measures including high interest pay day loans to avoid eviction as well as trying to make ends meet after falling behind on monthly housing payments.

According to a new report by homelessness charity Shelter, nearly 8 million people in the UK are struggling to keep up with mortgage and rental payments every month.

Shelter’s Chief Executive, Campbell Robb, said “A total of 1.4 million people have already fallen behind, with almost a million resorting to high-interest ‘pay day’ loans to make ends meet. It’s shocking to think that so many property owners with families will be starting the New Year with a huge weight of debt hanging over them, trapped in a daily struggle to keep their home. Payday loans may seem like a quick fix, but the huge interest charges mean things can quickly spiral out of control. It’s vital that anyone who’s having difficulty paying their rent or mortgage gets advice now. Don’t wait until things reach breaking point later in the year – it could leave your family’s home at risk.”

But with interest rates starting 2013 still at a historic low, how will property owners cope when mortgage rates revert to where they were before the double dip recession began in 2008?

Many property owners will eventually start moving towards fixed-rate mortgages and in an interview with Sky News, mortgage expert Paula John said “If you have to take a few days off work because one of your children is ill or there is a problem it puts you in a situation where you just can’t pay the bills. For hundreds of thousands of families it’s only the very low mortgage rates that have been keeping the wolves from the door. Many UK households have really been struggling over the past few years and if mortgage rates were to go back up it would be a real concern. I think people are more financially aware now than they were a few years back and what we will see is a mass movement towards longer term fixed-rate mortgages.”

Shelter said it is seeing a rise in demand for its services and pointed out that people are finding there is little left of the housing safety net that was once there to help them get back on their feet.

For tenants in rented accommodation in the Private Rented Sector (PRS) the situation is also looking bleak. Many tenants have reported that they too are struggling to make ends meet, increasing the financial pressure not only on them but there is also a knock on effect for their landlords too.

Landlords can take preventative measures to help keep monthly rental cashflow constant by utilising Tenant Referencing and Rent Guarantee Insurance to ease the financial pressure on themselves and their tenants.

However further data released by Shelter reveals that the financial situation faced by property owners and renting tenants may be far worse than originally feared, with 1 in every 115 households in England risking eviction due to increasing rent or mortgage arrears.

198,470 individual households were threatened with losing their home in the 12 months to September 2012, equivalent to the number of residential properties in cities the size of Liverpool or Bristol being evicted or repossessed.

Eviction Hotspots

• The top 15 hotspots are all London boroughs, where the risk of repossession or eviction is double the national average, with 1 in every 62 homes at risk
• The nation’s top hotspot, Barking and Dagenham, has more than three times as many possession claims as the rest of the country, 1 in every 37 homes
• Outside London, the regions with the highest eviction risk are the North West with 1 in 112 homes at risk, and West Midlands with 1 in 114 homes at risk
• There is a correlation between unemployment and eviction, local authorities with the most possession claims also have the highest unemployment rates.

Top eviction risk hotspots in London are:

Local authority (Possession rate per number of homes)

1. Barking & Dagenham (1 in 37)
2. Newham (1 in 39)
3. Haringey (1 in 45)
4. Hackney (1 in 46)
5. Southwark (1 in 46)

The top eviction hotspots outside of London are:

1. Wolverhampton (1 in 65)
2. Slough (1 in 66)
3. Manchester (1 in 66)
4. Peterborough (1 in 68)
5. Nottingham (1 in 69)

Campbell Robb, Chief Executive of Shelter said: “It’s truly shocking how many people in this country are living with the threat of becoming homeless. In some areas, the risk of being evicted or repossessed is so high that one home in every street could be affected. This report is a stark reminder that homelessness can happen to anyone, all it takes is one event such as a redundancy or relationship break up, and whole families are at risk of losing their home.”

Landlords are also being urged by the charity to try every other means of recovering rent arrears and to only resort to the eviction process as a last resort, however, allowing tenants to continue to accrue rental debt that will be uncollectable and unpayable does not make good business sense.  

Rent arrears accrue because the tenant’s finacial responsibilities have not been taken seriously, tenants may not have claimed housing benefit on time when their employment circumstances changed, or had LHA (Local Housing Allowance) benefits paid to them that were never handed over to the landlord.

The tenant responsibility issue is at the heart of the debate surrounding the Government’s Welfare Reforms and in particular the effect on the UK PRS with the introduction of the new Universal Credit system, where all payments will be given directly to tenants for them to manage their own budgets and financial responsibilities.