The furlough scheme has come to an end. The government initiative was designed to protect peoples’ incomes during the pandemic, enabling companies to retain and pay staff even if they’re temporarily unable to work. Now that the scheme is ending, millions of UK renters are going to enter a very difficult period of time.
There is optimism that the worst of the COVID-19 pandemic is behind us and that another lockdown is highly unlikely to happen. The government has, therefore, announced that the scheme must end, despite around one million people still relying on furlough to keep their heads above water.
For the next few months, tenants and landlords alike will likely feel anxious. Yes, COVID appears to be under control, but with the winter months fast approaching, it’s impossible to tell whether or not infection and mortality rates will again start to rise. If they do, many people could once again be temporarily forced out of work and, if the furlough scheme is not reinstated, more and more tenants could be unable to afford rent.
Now, Craig Brown, director for intermediary insurance at Legal & General, has spoken about the potential risks upcoming for renters:
“Our ‘Deadline to Breadline’ 2020 research, which looks at how long people believe they could survive financially if they lost their income, revealed renters are especially vulnerable to any financial instability.
“It found that the average private renter thinks they could last for 30 days if they lost their income, but in reality they are only three days from the ‘breadline’ compared to 23 days for the average mortgage holder.”
So far, the pandemic has forced roughly 9% of rental tenants into rent arrears of at least one month. This means about 431,820 private rental households have fallen into arrears, creating total arrears of more than £365.3m. But because of the furlough protection, landlords have been widely unable to evict arrears tenants so have seen their rental income take a disastrous hit.
As such, it’s increasingly likely that landlords will start screening prospective tenants with much more scrutiny than before. Landlords want as much reassurance as possible that a new tenant is going to be able to afford rent regardless of what happens with the pandemic and furlough scheme.
Many tenants are, therefore, looking for ways to reassure landlords that they are reliable and trustworthy in order to differentiate themselves as quality renters. To this end, many are choosing to sign up to tenant referencing companies such as good2rent and Canopy who provide so-called tenant passports which store all of the background checks, financial checks, and renting history that landlords need to see in order to feel confident that future rental income will be well protected.
For tenants who want to know how to be in a good position to secure a rental property, passports and pre-prepared background checks will put them at the top of the list because, if rent arrears start climbing again with a new winter wave of COVID-19, landlords will place huge value on being able to trust a new tenant.
James Forrester, managing director of Barrows and Forrester, commented:
“The first two waves of the pandemic shook the rental market to the core.
“All of a sudden, many tenants who had no previous problems with paying rent on time found themselves out of work, or at least having their hours significantly cut as employers tried desperately to find a route to survival during an unprecedented moment in modern history.
“We are starting to see normality return to the rental market but this will do little to comfort those landlords who are now severely out of pocket and should a third wave materialise, we will no doubt see yet another increase in the total amount of rental arrears.”
In such cases, it’s the tenants who have done the most to prove themselves as having reliable, pandemic-proof incomes who will have the best chance of securing a good home in difficult times.