Families living in private rented accommodation are more exposed to the economic shock of the Coronavirus than homeowners, which could mean big rent arrears for the lettings industry.
That’s the warning today from the Resolution Foundation’s latest Housing Outlook report.
It claims that homeowners are relatively well protected against big income shocks compared to previous recessions. They can request a three-month mortgage holiday, and are already benefitting from record low interest rates.
While many households may be fearful of falling house prices, the foundation suggests they are less likely to find themselves in negative equity than in previous recessions as a result of mortgages being issued with lower average loan-to-value ratios in recent years.
However it accepts that owners with high LTVs however could still find themselves in big trouble should they lose their jobs.
But in contrast, private renters are far more exposed to housing stress if their incomes fall.
They already face the highest housing costs as a share of their income - 31 per cent, compared to 13 per cent for owners - and the foundation claims that letting agents private landlords have no obligation to offer rent holidays.
But it warns that even with additional government help through higher Housing Benefit, many private renters in particular will still face significant shortfall in their housing costs should they lose their jobs.
“Private renters could rapidly build up considerable rent arrears in this situation, at which point they are entitled to just three months’ notice from their landlord to vacate in England and Wales, or six months in Scotland” says the foundation.
Lindsay Judge, principal research and policy analyst at the Resolution Foundation, says: “The current economic crisis is having a profound effect on family incomes, particularly when people lose their jobs. With housing costs often being the single biggest fixed expenditure for families, the ongoing crisis will cause housing pressures to mount as people struggle to pay their bills.
“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.”