Huge rise in guarantors as Covid rattles lettings mar...

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14 February 2022

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Huge rise in guarantors as Covid rattles lettings market

The number of prospective tenants asked to provide guarantors ahead of renting has risen by a huge 36 per cent over the past four years.

Goodlord analysed a sample size of 730,000 tenants who took on a rental property between January 2018 and December 2021.

This revealed that requests for guarantors for non-student tenants jumped by a third during that time.

The biggest shift came in 2020, when pandemic-induced concerns and fears around the eviction ban spurred landlords into increasing their due diligence when it came to prospective tenants.

However, rather than reduce as the economy recovered from the initial shock of the pandemic, requests for guarantors have continued to rise.

During the same period, requests for guarantors for student tenants - which has long been common practice - have remained relatively stable.

Blake Richmond, managing director of referencing at Goodlord, comments: “There’s been a notable rise over recent years in the number of landlords requesting tenants to name a guarantor. There are two main reasons behind this.

“Firstly, the pandemic and subsequent evictions ban created a lot of uncertainty in the market in 2020. No-one knew what the economic fallout would be and scores of people were working in sectors hit hard by lockdowns, meaning landlords were being understandably cautious when it came to new tenancies.

“Since then, rents have been rising faster than wages in real terms, meaning more tenants are spending a greater proportion of their salaries on rent and, thanks to the ‘race for space,’ more tenants are stretching their budgets in order to secure properties with spare rooms or gardens. Combined, these factors have shifted market behaviours and landlords are seeking out additional assurances during the referencing process.

“Naming a guarantor can be a positive thing and enable a greater spectrum of tenants to access housing, however it can add complications to the rental process and is something that should only be requested when genuinely needed, lest we create unnecessary barriers to entry in an already competitive rental market.”

The increase in demand for guarantors has been felt more keenly in different regions across the UK.

The biggest increase has been in the West Midlands. In 2018, six per cent of non-students tenants in the region were asked to provide a guarantor. In 2021, this had risen to 14.9 per cent - an increase of 149 per cent.

This was followed by the South West, where requests for guarantors has risen from 11.4 per cent of all tenants to 19.9 per cent - an increase of 74 per cent.

Some 8.5 per cent of tenants renting in Greater London were asked to provide a guarantor in 2021, compared to just 6.2 per cent in 2018 - a shift upwards of 37 per cent.

However, this wasn’t the case in all regions.

The East Midlands has seen a decline in landlords requesting a guarantor, with numbers down by 32 per cent compared to 2018. Wales also recorded a reduction of 15 per cent over the period.