New data reveals that renters are struggling the most in this cost-of-living crisis. How can landlords protect their tenants, while guaranteeing financial stability themselves?
Recent data from the Office of National Statistics (ONS) has revealed that 37% of renters are struggling to pay their household bills, compared to 23% of mortgagors. In the context of the cost-of-living crisis, where inflation, energy, fuel, and food bills are all on the rise, this is perhaps unsurprising and somewhat inevitable.
For those with a fixed-rate mortgage, your payments will not have been affected by recent Base Rate changes. However, if you are on a Standard Variable Rate (SVR), on average, your payments have probably increased by 0.2 percentage points, a rise reported by 34% of mortgage holders.
Where renters are more likely to be classified in the lower-income quintiles than those with a mortgage, they are more at risk. In fact, in March, we saw the largest annual increase in private rental prices across the UK since 2016, with 34% of renters reporting an uptick in rental payments. The knock-on effect of this increase is that 39% are finding it very or somewhat difficult to afford the payments, compared to 21% of mortgagors. Furthermore, while just 3% reported being in arrears with their rent or mortgage, this figure doubles when just looking at renters.
Other living costs increases
As mentioned previously, it’s not just rent bills that residents have to manage. Prior to the April energy price cap hike, 83% of all adults had already reported increasing gas and electric bills. Furthermore, 90% of people asked had seen an increase in their living costs this March, 25% up from November. According to the ONS, this has left 23% struggling and finding it difficult or very difficult to pay their bills.
This data split emphasises how this crisis impacts people differently: 13% of renters are now behind on their payments, compared to 3% of those with a mortgage, and just 2% of those who own their home. However, it’s important to remember that these are the minority.
Increase in borrowing
A report from the ONS revealed that a quarter of households are using the savings they managed to put away during lockdowns and the pandemic to get through this cost-of-living crisis. This could be why the ONS are reporting a ‘stable’ increase in borrowing money or credit, at just 17% of adults seeking this short-term finance. While this appears positive, the data follows the same trend of hitting some harder than others.
Adults in the most deprived areas were almost twice as likely to increase their borrowing or use more credit, at 23% compared to just 11%. This contrast in the change of activity between income groups continues when looking at the ability to save. This March, 55% of those in the most deprived areas said they would not be able to save any money in the next 12 months. This is a sharp incline from November 2021, when this statistic was at 39%. On the other hand, 34% of those in the least deprived areas saw themselves unable to save in the next 12 months.
Why is this important for landlords?
Everyone is being affected by the cost-of-living crisis, whether through household bills or increased rental costs. As a landlord, your business is to provide a safe and comfortable home for your tenants, which is an essential part of the UK housing market due to the shortage of affordable housing stock. We know that our clients strive to manage their property portfolios to the best of their ability. As such, increasing the rents on your properties is likely to be challenging for both parties: the knowledge of the financial strain this will put on your tenants whilst also faced with the need to keep your investments profitable to remain financially secure yourself. There are certain things that you can do to mitigate this challenge:
- Be mindful of your tenants
As the pandemic lifted and furlough support ended, we discussed the actions you can take to protect your tenants and your properties. The case remains the same that your tenants may to be struggling financially and under a lot of stress to pay their bills (although many won’t be!). Looking into your other options before increasing your rent may be a good place to start, as no landlord wants to lose good tenants!
- Communicate effectively with your tenants
Be honest with your tenants. If you must increase your rents to cover your own increased running costs, provide as much notice as you can, and offer any support that may be available to them. It may be that your tenants can claim Housing Benefits to make up the payments.
- Explore your options to remain financially secure
It’s also paramount that you keep yourself financially secure and viable. Speaking with an expert mortgage broker may help you to arrange your property finance to be more profitable and manageable during this cost-of-living crisis. Our brokers are on hand to offer advice on your property investments and can look at remortgage options for you to save money where possible. Alternatively, if you’re looking to purchase a new property to maximise return on investments and secure higher rents, we can help you to secure a competitive deal before rates rise again. Call us on 0345 345 6788 or submit an enquiry today.
Source - ONS
17th May 2022