Private & Social Residential Sector Affected…

Latest Landlord News by: Madalena Penny

‘In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.
Friedrich Nietzsche

The budget and spending review by the coalition government last year is now beginning to have an impact on both social and private sector tenants.

In the social rented sector, the implementation of rent rises has come under strong attack by tenant support groups.  Last week, council finance and housing officers received a letter informing councils to raise rents by 6.8% to come into effect from April.  Any local authority choosing to abstain from imposing the full amount on social sector tenants face making up the shortfall through their budget.

Concern is surrounding the hike in rents and is expected to total an average yearly rent by a further £225 more.  As the cost of living rises and benefits cap placed, there are worries that a rise in rents at this time could plunge some households below the breadline.

Chief Executive of the Tenant Participation Advisory Service, Michelle Reid, said:
‘If you’re a single parent living in a council house you’re facing a reduction in your housing benefit, a reduction in child benefit plus an increase in rent. We need to stop and think about the increased pressure on people living in social housing.’

Rent increases in the private sector are also creating concern.  The latest indicator from ARLA (Association of Residential Letting Agents) members reported an increase of tenants struggling to meet the rising rents.

Operations Manager, Ian Potter, said:
“At the beginning of last year we predicted that the number of tenants having difficulties paying rent would increase and unfortunately, this seems to be the case today.

“It is a situation which can have serious repercussions throughout the PRS as, without guaranteed rent income, landlords may also have problems paying mortgages. At worst, it may result in a rise in repossessions.

“While it is difficult for landlords to predict whether current or prospective tenants will hit financial difficulties, our research highlights the importance for landlords or agents to implement a thorough selection process and to conduct reference checks on potential tenants – and to consider the benefits of rental protection insurance.

“The same is true for anyone looking to rent a property – do your research before signing up with a new landlord. And if letting or renting a property through an agent, make sure the agent is a member of an organisation such as ARLA, which ensures landlord and tenant money is protected by a client money protection scheme.

‘Many agents do not have this consumer protection. ARLA agents are also required to be members of an ombudsman scheme which can offer redress if things to go wrong.”

In the last 12 months, Legal 4 Landlords, who services both letting agents and landlords noticed a trend emerging from landlords that rent out property by themselves and not through an agent.

While letting agents are calculating rental values based on the current tenant-demand and increasing rents within the market, landlords acting alone have been reluctant to raise rents, especially in the Northwest and Midlands.

One of the reasons cited is that landlords consider that the level of rent they are charging to tenants is achievable.  Landlords fear that through unemployment, benefit cuts and economic factors, the pressure of increasing their tenants rents may result with more chance of rent arrears accumulating.