Surge in tenants in severe arrears

The number of tenants falling into severe arrears has seen a sharp increase in 2013 as more people struggle to cope, a major lettings network has warned.

LSL Property Services estimates that around 4,000 more private sector tenants slipped into severe arrears - meaning they were more than two months behind with their rent - in the first quarter of this year.

LSL said this represents a 5% increase on the previous quarter and brings the total number of tenants with severe arrears to around 94,000 across England and Wales, accounting for 2.3% of all tenancies.

The network, which owns national chains Your Move and Reeds Rains, as well as receivers Templeton LPA, based its projections on the thousands of properties it manages across the country.

Its findings suggest that, while the overall proportion of tenants in arrears has fallen slightly in recent months, within this general improved trend a significant number of people are seeing their finances worsen and are sinking into serious debt. Previous research by LSL found that overall around 7% of all rents were late or unpaid in February this year, which is the lowest figure seen since last November.

Housing charity Shelter recently reported that some under-pressure tenants are resorting to using payday loans and credit cards to cover their rent.

Rents have soared due to strong demand as tenants have found themselves trapped in the sector, because they have been unable to raise a deposit to buy a home or meet lenders' borrowing criteria. However, there have been signs of the situation easing in recent months, amid a pick-up in the housing market prompted by Government schemes to help mortgage borrowers.

Separate research recently published by LSL found that the upward march in rents has taken a pause in recent months. Average rents dipped for the fourth month in a row in February to reach £731 per month - although this is still 3.3% higher than a year ago.

Paul Jardine, director and receiver at Templeton LPA, said: "Household finances are feeling the impact of spiralling costs, particularly energy bills, which were recently predicted to grow by an average £214 this year. And wallets are under pressure from the other side. According to the ONS (Office for National Statistics), wages are creeping along at 1.2% annual growth, well behind a rebounding rate of inflation.

"Many tenants have finally pulled their finances back together after the strain of the festive period. But for a significant minority the situation is actually much worse than three months ago, and this is reflected in the most severe tenant arrears."