World Homeless Day: The problem with Covid arrears

World Homeless Day: The problem with Covid arrears

This World Homeless Day (Sunday 10 October), we want to shed a light on the private renters bearing the brunt of the recovery from the coronavirus (COVID-19) pandemic and facing homelessness this winter.

For many, the pandemic appears to be ending; people back in offices and city centres, students back at universities and children back at schools and nurseries. While this is great news for lots of us, there are huge numbers of people for whom the battle is just beginning.

During the height of the pandemic, the government rightly stepped in with:

  • a furlough scheme
  • a restoration of Local Housing Allowance (LHA) rates
  • a much-needed uplift to Universal Credit
  • and a ban on evictions

All this contributed to keeping people safe in their homes. However, there were people who slipped through the gaps, who were not caught by this bolstered safety net or for whom it just wasn’t enough. Hundreds of thousands of private renters have built up arrears over the pandemic and now a lot of the support has or is ending, this will only get worse.

How did people still accrue arrears if there was government support?

As we all know, when the pandemic hit last year our whole lives were thrown into chaos. Many faced reductions in income, job losses and perpetual uncertainty. Despite a generous furlough scheme, the number of people needing support from our welfare safety net to stay afloat doubled, and peaked at nearly 6 million in receipt of Universal Credit.

The restoration of LHA rates and the £20 a week increase to Universal Credit obviously helped, but there are limitations. The LHA rates are set to cover the bottom 30% of rents in every local market (the 30th percentile). In other words, housing benefit theoretically covers just 3 in 10 private homes in every locality.

In the face of a global pandemic, alongside sharp rises in claimants, this has not been good enough.

Forced to choose between paying rent or food

When the Chancellor restored the LHA rates to the 30th percentile in March 2020, those who were already on LHA prior to the pandemic would have taken a massive sigh of relief. The rates prior to the pandemic were so far out of line with the real value of rents, it was virtually impossible to rent somewhere without having to make up a shortfall. This was plunging people into financial difficulties as they had to try and make up this shortfall out of already limited income.

In 2019, a third, (36%) of LHA claimants said they had to cut back on food for themselves or their partner to keep up with rental payments. It was also well-documented that the various cuts and freezes to LHA rates were having a direct impact on levels of homelessness. So, when the rates were restored, many of the families already relying on LHA rates could have seen their shortfalls dramatically reduced or disappear completely.

However, the huge rise in private renters claiming benefits included lots who had never claimed Universal Credit before. They could have been people living in bigger homes, even with excess bedrooms, that they’d comfortably been able to afford on their pre-pandemic jobs or income. In April 2020, when there was a big spike in people claiming Universal Credit as lockdown hit the economy, 6 in 10 (58%) private renters newly claiming LHA had a shortfall between their rent and housing benefit. During this period, it would have been difficult to avoid accruing arrears.

One respondent to our research last year described the LHA rates to us:

‘It’s terrible, it barely covers a third of my rent and with a large debt it means even if I do find work, I’ll be repaying debt rather than spending money to help boost the economy.’

We know that hundreds of thousands of renters have fallen behind with their rent during the pandemic. Debt charity, StepChange, warned just last month that around half a million private renters are now battling to stay on top of £360 million in rent arrears. And this astonishing number doesn’t reflect the true story of stress and anxiety that comes with mounting debt.

We see this in our services more and more, such as Sam who is in his sixties and facing eviction after accruing over £11,000 in rent arrears during the pandemic. Working self-employed in events and hospitality before the pandemic meant all his work dried up during lockdown and he struggled to keep on top of his rent. He is back in work now, but the debt that hangs over him is unmanageable, even with a returned income, and so now his landlord has served him with an eviction notice.

Even though the economy has picked up again in many ways, those who have accrued arrears during the pandemic will now face the challenge of trying to clear their debt as well as keeping up with their rent. And at the same time, the limited support from government is being stripped away from them.

Why will it be worse for people now?

Not only has Universal Credit been cut this week but the furlough scheme also ended last week. These have been two vital financial lifelines for people up and down the country and without them, we will likely see a rise in job losses and families in poverty.

This autumn, winter and even into next year, we will see rising costs across the country. Our own research released last month showed that 1 in 4 renters already cannot keep their homes warm, let alone when energy bills start to rise. This, combined with rising food costs and the end of government support, will inevitably mean more people will face rising arrears as a result, on top of the arrears already accrued.

Last week also saw the reduction of eviction notice periods from four months to two months, back to where they stood before the pandemic. This means people can be evicted for no reason much quicker and have even less time to find a new home when they have been evicted. We are concerned that some landlords may have been waiting until the notice period dropped back down to normal before serving notice and with no-fault evictions (Section 21) still in place, your landlord can evict you even with the smallest amount of arrears.

With the loss of a private rental tenancy being a leading cause of homelessness since 2010, this was already an issue before the pandemic. In the year leading up to March 2020, 15,000 private renting households were made homeless or were threatened with homelessness as a direct result of being in rent arrears.

With rent arrears already accrued through the pandemic for hundreds of thousands of people and countless more facing mounting arrears now the support is ending, we face a rising tide of evictions before Christmas. And they’ll be happening faster and faster now the notice period has shortened.

The only way to help renters out of a situation that isn’t their fault is to provide a financial package to clear their arrears and start afresh. The lockdown may have been lifted and the emergency support packages too, but if we don’t act now the aftershocks of this pandemic could be even more devastating.

We believe home is everything. Your campaigning forces those in power to sit up and take notice, making the changes we need to see to end the housing emergency. Join us.