Tenants could face huge rent shortfalls as result of crisis
Families in privately rented homes are more exposed to the current economic shock than homeowners, according to the Resolution Foundation.
It said they could face large rent shortfalls if they lose their jobs, despite government support.
The think-tank notes that renters – particularly social housing tenants – are far more likely to be directly affected by the current crisis than homeowners.
Four in five social housing tenants either work in sectors directly affected by the lockdown (such as hospitality, travel and non-food retail), are unable to work from home, or have caring responsibilities for school-age children. Only half of homeowners face any of these situations.
Homeowners better protected
Overall, homeowners are relatively well protected against big income shocks compared to previous recessions said the Resolution Foundation.
They can request a three-month mortgage holiday, and are already benefitting from record low interest rates.
While many households may be fearful of falling house prices, they are less likely to find themselves in negative equity than in previous recessions as a result of needing to put down larger deposits in recent years.
New owners with high LTVs however could still find themselves in big trouble should they lose their jobs, says the Foundation.
Pressure on tenants
Private renters are far more exposed to housing stress if their incomes fall. They already face the highest housing costs as a share of their income (31 per cent, compared to 13 for homeowners) and private landlords have no obligation to offer them rent holidays.
The Foundation adds that the Government’s welcome boost to Housing Benefit also risks being undermined by pushing more families above the benefit cap, which restricts total benefits paid to couples and or single parents to £20,000 per year, and to £13,400 for single people without children (or 23,000 and £15,410 respectively for those living in Greater London).
Out-of-work couples with two children living in a three-bedroom home priced at the 30th percentile of local rents will now fall foul of the cap in two-thirds of areas across England and Wales.
Lindsay Judge, principal research and policy analyst at the Resolution Foundation, said: “While many homeowners are relatively well-protected in the current crisis via low interest rates and mortgage holiday options, private renters are exposed to rent arrears and even evictions should they lose their jobs.
“The Government has announced welcome support to renters with a £1 billion boost to Housing Benefit. But this help risks being undermined by the benefit cap, which will leave many families with a shortfall in support.
“The Government can help address private renters’ housing pressures by suspending the benefit cap, and extending the grace period landlords must give tenants building up arrears before they can be given notice to leave.”