Families who rent ‘more exposed to economic shock than home-owners’

Families living in rented accommodation are more exposed to the current economic shock than home-owners despite Government support, a think-tank has claimed.

The Resolution Foundation said home-owners are “relatively well protected” compared with previous downturns.

They can request a three-month mortgage payment holiday, for example, and are already benefiting from record low interest rates which keep borrowing costs down.

Home-owners may also be less likely to find themselves in negative equity – where their home is worth less than their outstanding mortgage – than in previous crises.

But newer home-owners with low amounts of equity in their property could still find themselves in big trouble should they lose their jobs, the Foundation said.

It argued that private renters are far more exposed to housing stress if their incomes fall.

Housing costs account for nearly a third (31%) of their income typically, compared with 13% for home-owners, and private landlords are not obliged to offer them rent holidays, the Foundation said.

Measures announced by the UK Government in March to support the rental sector included three-month mortgage payment holidays for landlords and the suspension of new evictions from social or private rented accommodation during the national coronavirus emergency. The Government has said landlords should show compassion.

The Foundation’s Housing Outlook report also said that renters – particularly social housing tenants – are more likely to be directly affected by the current crisis than home-owners.

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.

Half of home-owners face any of these situations, according to the Foundation, whose focus is to improve the living standards of people on low to middle incomes.

Government measures to boost benefits will help many private renters with a greater share of their housing costs, but the report said that, even with this additional support, many will still face a significant shortfall in their housing costs should they lose their jobs.

The Foundation added that the Government’s welcome boost to housing benefit also risks being undermined by pushing more families above the benefit cap, which restricts total benefits paid.

It said the cap should be suspended, otherwise it risks hitting the living standards of low-income households who have lost jobs through no fault of their own.

Lindsay Judge, principal research and policy analyst at the Resolution Foundation, said: “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.”

Polly Neate, chief executive of Shelter, said: “The reality is many renters are already struggling, and many more will, as people’s incomes and jobs come under threat.

“At Shelter, we’re receiving daily calls from families across the country frantic about how they’ll pay the rent, keep the lights on and put food in the fridge in the weeks and months ahead. There has already been a surge in people who’ve had no option but to apply for Universal Credit – in many cases for the first time – in a desperate bid to pay for the basics in life.

“To prevent hundreds of thousands of families slipping into debt and stave off needless evictions once the evictions ban lifts, we’re urging the Government to temporarily increase the housing part of Universal Credit to cover the average cost of local rents.”

A Ministry of Housing, Communities and Local Government (MHCLG) spokesman said: “The Government is taking unprecedented action to support individuals, jobs and businesses during the coronavirus outbreak.

“We’re protecting tenants by banning evictions for at least the next 90 days, have launched schemes to keep people in their jobs and support the self-employed, announced a £500 million hardship fund, and have increased the amount of Universal Credit and Local Housing Allowance people receive.”