Rental Arrears on the Decline
It’s no secret that the pandemic has impacted landlords and tenants in many different ways. From a financial perspective, it has placed additional pressure on a variety of businesses and personal incomes. As such, it’s important to chart these personal journeys and form a better understanding of how such entities are coping.
It’s fair to say that the vast majority of landlords have acted pragmatically in recognising the additional financial strain being placed on some tenants over this period and, thankfully, conditions appear to be improving. In Q2 2021, landlords were suggested to have an average of 1.3 tenants with outstanding rent payments, the lowest number since Q1 2011. The survey, which was carried out on by Paragon Bank and BVA BDRC, showed that following a decline from 1.6 tenants per landlord since Q1 2021, the number of tenants in arrears has fallen consistently after climbing to 2.1 in Q2 2020. In addition, the average amount of outstanding rent reached a four-year low, falling from £2,376 in Q1 2021 to £1,781 in Q2, a reduction of £595. The average amount of rental payments owed to landlords is now said to be at its lowest point since the end of 2017 when it sat at £1,584.
The survey of over 750 landlords found that just over a third (36%) have had a tenant request a change to their rent, most commonly rental holidays (18%) or a reduction in rent of up to 20% (14%). Highlighting the flexible approach taken by landlords in managing their tenancies during the pandemic, agreements were reached in almost all cases as 36% of landlords also said they had granted requests to some form of rental change. Encouragingly, such requests have been declining since the start of the pandemic, with the proportion of those asking to change rental agreements falling by seven percentage points year-on-year.
This pronounced fall in rental arrears provides a real shot in the arm for the industry and can be taken as an encouraging sign for the economy as a whole. We are not out of the woods yet. Landlords and tenants still need to work together to overcome any lingering financial concerns where possible, but it remains highly encouraging to see that these figures are on the decline, and long may this trend continue.