Tenant Referencing Crisis on the Cards as COVID Damages Thousands of Credit Scores

The National Residential Landlords Association (NRLA) is warning of a looming tenant referencing crisis as thousands of tenants are facing damaged credit scores caused by legal action over rent arrears in the wake of the COVID-19 pandemic.

The association’s latest survey of over 2,000 private tenants in England and Wales revealed that 7 per cent have built up arrears since the first lockdown of March 2020. A quarter reported that their landlord attempted to reclaim the arrears using a court order. If successful, court orders have the ability to damage a tenant’s credit score, which could make it more difficult or, in some cases, impossible to pass referencing checks for a new property.

Lack of government support means 200,000 tenants could face serious difficulties securing new homes

With no support so far coming from the government to help tenants and landlords navigate their way through COVID-related rent arrears, it has become apparent that over 200,000 tenants are poised to face very serious difficulties in successfully securing a new tenancy in the future.

The data, put together by research consultancy Dynata, uncovered that the average rent owed during the coronavirus crisis is around £900. What’s more, over 80 per cent of renters who are now in arrears had never been behind with their rental payments before the pandemic, and 30 per cent owe £1000 plus. The fact that a lot of tenants do not qualify for emergency housing support from their local council only makes things worse.

Chief executive of the NRLA, Ben Beadle, believes that without urgent help, many tenants will find themselves in a position where they lose their homes, because landlords will not be able to handle the effects of the arrears.

He says: “The government needs to develop a financial package which ensures that benefits cover the rents of those in receipt of them. For those who do not qualify for benefit support, an interest-free, government guaranteed tenant hardship loan should be established, similar to those in Wales and Scotland.”

Until such times as the government comes up with such a scheme, landlords need to seek alternative ways to guarantee their rental income. Whilst lockdown measures are gradually starting to ease, it is clear that the long term economic effects of the pandemic will be around for a while yet.

The guaranteed rent solution

Landlords looking for a way to secure rental income during these challenging times could consider a guaranteed rent scheme.

At homes2let, we offer an exclusive guaranteed rent scheme, secured by letting through our long term local authority housing contacts. The scheme involves us renting your property to council tenants, paying your rent in full every month by standing order, without fail and even when the property doesn’t have a tenant. We bill the local authority for the rent, so effectively we become their corporate tenant. It’s a win-win situation for all concerned, especially the landlord who never has to worry about unpaid rent again.

We offer a full, hands-on property management service into the bargain. You pay no fees or costs and we cover all the legal side of things, tenant sourcing and referencing, property maintenance and inspections. Absolutely everything is included, and your net yield works out higher than it would with a traditional letting agent, whilst your risk is far reduced with your rent being guaranteed.

To discover more about how the homes2let guaranteed rent scheme works, please get in touch with our expert team.