A housing market analyst is warning of “one heck of a dark cloud on the horizon for the lettings market” as the government’s furlough scheme winds down next month.

Doug Shephard, director of the property website Home and the man behind one of the industry’s leading monthly market indices, makes the warning in his August snapshot of the rental sector’s performance.

He writes: “According to Polly Neate, chief executive of Shelter, which estimates 445,000 private renters are currently in arrears, ‘We could be facing a wave of evictions and homelessness in the coming months unless the government steps in to provide a package of support for people facing COVID arrears’.”

Shephard continues: “The current level of supply of available properties to let is low at around 40,000 per month. If only 10 per cent of those currently in arrears (according to Shelter’s estimate) were evicted in a given month, that would mean another 44,500 new lettings units on the market, more than doubling current supply. That’s one heck of a dark cloud on the horizon for the lettings market and a potential wave of homelessness misery to boot.”

Currently the tapered furlough scheme is supporting 1.9m workers, of which an estimated 687,000 are renting privately. 

Shephard asks: “So how will those 687,000 tenants pay their rent if they have no jobs to go back to? Some will, of course, return to work and others may well be fortunate enough to find new posts, but the likelihood is that many will not find gainful employment and be unable to pay the rent. What happens then is anyone’s guess.”

He suggests that at the root of the problem is a relative lack of lettings stock in most locations of Britain outside parts of London. 

He cites a recent Paragon Bank survey which suggests that rent arrears are currently low – indeed, the lowest for a decade – but he then cautions that some landlords may be taking advantage of deferred mortgage payments offered by some lenders. As with furlough, these are likely to be winding down in the coming weeks.