The Resolution Foundation is calling on the government to introduce a Spanish-style loans scheme to help support tenants and prevent the courts being overwhelmed by a surge in repossession cases.
The recommendation is part of the thinktank’s wider appeal for ministers to help more than 750,000 UK households manage housing arrears accrued during the COVID-19 pandemic and reduce the risk of eviction and homelessness.
The thinktank warns that the UK’s housing arrears crisis is likely to get worse in the coming months, despite the vaccine rollout, with the end of furlough and the £20 a week universal credit top-up further straining family incomes.
It says there is likely to be an increase in possession claims as courts attempt to deal with the backlog.
Loan scheme proposal
As part of a solution, the thinktank suggests setting up a £375m tenant loan scheme for struggling families in private and social rent arrears in England using a model first developed in Spain.
Under the Spanish scheme, applicants must not have had pre-COVID-19 rent arrears and must prove hardship in order to access support.
The model has already been introduced in Wales and Scotland.
In Wales, the loan can be repaid over five years at an interest rate of 1% APR; according to the Resolution Foundation, just 22 loans in Wales have been approved since October last year.
More than 450,000 UK families have fallen behind on rent or mortgage since the beginning of the pandemic, the foundation estimates.
Nearly one in 10 families in the social-rented sector were behind with their housing payments in January 2021, compared with 6% of those renting privately and 2% of mortgaged homeowners.
Private renters were far more likely to have had their earnings fall over the past 10 months than those with a mortgage, and more than twice as many private-renters than mortgage-owners entered the pandemic without any savings.
While one in 10 families with a mortgage have been able to take advantage of a mortgage holiday, just 3% of private renting families were able to negotiate a lower rent over the last 10 months.
Lindsay Judge, research director at the Resolution Foundation, said: “The UK is currently experiencing a mounting arrears crisis, with more than 450,000 families having fallen behind on housing payments as a result of the pandemic.
“Renters have been particularly badly hit. Many have taken huge hits to their earnings and have limited savings to fall back on.
“To make matters worse, measures that could ease the pressure, such as discretionary housing payments from local authorities and negotiated rent reductions from landlords, are not getting through to those that need them.
“This situation will worsen without significant government intervention. Ministers must take action by boosting the DHP system, and introducing a UK-wide tenant loan system, to ease the pressure on tenants, landlords and the courts.”
Earlier this week, the government extended the evictions ban for a further six weeks in England.
The ban was due to end on 21 February, but it now scheduled to last till the end of March.
Many private renters and private landlords have criticised the extension for failing to address the heart of the problem of increasing rent arrears.
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