Private renters more exposed to current economic shock

The Resolution Foundation has claimed that families living in private rented accommodation are more exposed to the current economic shock than homeowners.

The think tank’s Housing Outlook examines the impact of the current economic shock, caused by coronavirus, on families across different housing tenures, how this shock differs from previous downturns, and the support available to them.

The report notes that renters, particularly social housing tenants, are far more likely to be directly affected by the current crisis than homeowners. In fact, 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.

Overall, homeowners are relatively well protected against big income shocks compared to previous recessions. They can request a three-month mortgage holiday, and are already benefitting from record low interest rates. In contrast, 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 government has stepped in to boost Housing Benefit by increasing the Local Housing Allowance to 30 per cent of typical local rents. This welcome move – costing around £1 billion a year – will help many private renters with a greater share of their housing costs, but, even with this additional support, many will still face significant shortfall in their housing costs should they lose their jobs.

Lindsay Judge, Principal Research and Policy Analyst at the Resolution Foundation, said: “The current economic crisis is having a profound effect on family incomes, particularly when people lose their jobs. With housing costs often being the single biggest fixed expenditure for families, the ongoing crisis will cause housing pressures to mount as people struggle to pay their bills.

“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.”