The number of tenants in severe rent arrears declined by 15.6% during the final quarter of 2012, according to data released by Templeton LPA, part of the LSL Property Services group.
The data indicates that in the last quarter of 2012, almost 16,000 fewer tenants faced severe rent arrears of more than 8 weeks rental costs, compared with the previous quarter of 2012.
The number of tenants in this situation has dropped for the first time in over a year and could in part be due to improvements in Tenant Referencing and the development and availability of Rent Guarantee Insurance products.
The positive improvement of tenant rent arrears bucks the trend in the preceding four quarters, where the number of tenants in severe rent arrears was increasing by around 11% per quarter.
The number of tenants in severe rent arrears is now at the lowest level since the last quarter of 2011. However, the report shows that despite the improvement, it has not reduced the number of tenant evictions, with court orders for the possession of rental property by landlords increasing by 5.5%.
To put the figures into context, the annual growth in the number of tenants facing severe rent arrears is +0.3% year on year.
Tenants in severe rent arrears represent just 2.2% of all Private Rented Sector (PRS) tenancies in England and Wales, down from 2.5% in the previous quarter.
Paul Jardine, director and receiver at Templeton LPA, said: “Tenants’ finances have suffered a gruelling combination of rising living costs and rental inflation throughout much of 2012. With many budgets balanced on a knife edge, a slight reprieve from rapid rent rises towards the end of the year has been very significant. But the recent strength of the labour market has played the biggest role in halting the upwards climb in the number of tenants in severe financial difficulty.
Spokesman for the UK’s leading landlord service provider, Legal 4 Landlords, Sim Sekhon commented “Many landlords have been worried about the financial situation of their tenants and the impact that would have on their rental income. With improvements in Tenant Referencing and the development of Rent Guarantee Insurance this worry can be diminished. Landlords can accept fully referenced tenants safe in the knowledge that their rental income is safeguarded. The eviction of tenants is usually the last resort for desperate landlords who need to keep their rental income flowing. Many institutions have predicted a drop by as much as 15% in the number of tenant evictions during 2013, however the Government welfare reforms may reduce those estimates disproportionally and we may well see a rise in the number of tenants claiming benefits being forced out of the private rented sector and back into the social housing sector.”