nrla occasional research series may 2020 coronavirus and ... · iv nrla coronavirus & landlords...

Coronavirus and landlords: A follow-up survey

NRLA Occasional Research SeriesMay 2020

i

NRLA coronavirus & landlords (survey 2)

May 2020

Contents About the NRLA ............................................................................................................. ii

The NRLA Research Observatory .................................................................................. ii

Executive Summary ..................................................................................................... iii

1. Introduction ....................................................................................................................... 1

About this survey ........................................................................................................... 1

About the sample .......................................................................................................... 2

2. Many landlords are facing disruption to their rental income streams ............................ 3

Analysis of rent arrears data ......................................................................................... 4

3. The loss of rent is becoming significant for a number of landlords ................................ 5

Analysis .......................................................................................................................... 6

Landlord comments ...................................................................................................... 6

4. But landlords are not planning to use legal redress to reclaim owed rent… ................. 7

Comments from landlords ............................................................................................ 8

5. …instead, most landlords are receptive to tenant requests ........................................... 9

Landlord comments ...................................................................................................... 9

6. Landlords recognise the need to get through this crisis together ................................. 10

7. Mortgage holidays are not a widely used tool (yet)…. ................................................... 12

Landlord comments .................................................................................................... 13

8. …. nor are landlords able to fall back on rent guarantee insurance ............................. 14

9. One-third of landlords have experienced problems gaining access to property ......... 16

Contractors .................................................................................................................. 17

Landlord comments .................................................................................................... 17

10. Many landlords are also suffering with the economic lockdown ............................. 18

11. Summary & policy recommendations ........................................................................ 20

ii


May 2020

About the NRLA

The NRLA represents the interests of landlords in the private rented sector (PRS) across

England and Wales. In April 2020, the merger between the two largest communities of

landlords, the National Landlords Association and the Residential Landlords Association,

was officially completed.

With both organisations combining, the NRLA has over 80,000 members, ensuring

landlords have a unified voice in Whitehall and Cardiff.

We represent a growing community of landlords who trust and rely on us to deliver day-

to-day support, expert advice and government campaigning. They participate in our

learning activities which makes them better landlords. We offer a range of high-quality

services relevant to their needs.

Now and in the future, we campaign to improve the private rented sector for both

landlords and tenants, engaging with policymakers at all levels of Government. Our vision

is to make the renting experience better for everyone involved in the private rented sector.

We continually campaign using evidence-backed positions to achieve this vision and hope

to create an increasingly positive public perception around landlords. In doing so we

reinforce the vital role landlords have in supplying homes across Great Britain.

The NRLA Research Observatory The NRLA aims to provide high-quality research and analysis on the economic, social and

political issues facing the private rented sector.

This will be achieved through the NRLA in-house research team and various projects

commissioned to external research providers. Our activities seek to influence decision

makers and translate into an improved renting experience for all stakeholders.

iii


May 2020

Executive Summary

This survey was conducted by the National Residential Landlords Association (NRLA) over

the first weekend in May.

It is largely, though not entirely a survey of members. Although the survey sought the

views of all, this report considers the responses of the 4,566 current and active landlords

who participated in the survey.

Rental Streams and loss of income

More than 54% of landlords have experienced some form of income drop in at least part

of their portfolio as a direct result of coronavirus.

This income loss is now starting to become substantial. Almost half of landlords have lost

upwards of two or more months of rental income since this crisis unfolded.

Propensity to resort to legal redress

Despite the loss of income and drop in rent payments, landlords are not as yet, preparing

to seek redress through the courts – even in “worst case” examples of tenant debt.

Just 4% of landlords have served a notice under either Section 8 or Section 21 of the 1988

Housing Act.

Tenant negotiation and requests

Where a tenant has requested some change in payment or terms to their tenancy because

of the coronavirus, over 90% of landlords are responding positively.

To date, around 44% of landlords stated they have received at least one request from a

tenant to reprofile their terms and conditions in some way.

Getting through the crisis

The above notwithstanding, landlords have often been more than willing to go the extra

mile and support their tenants. There are many acts of landlord generosity and support –

often at financial cost to landlords.

iv


May 2020

Mortgage holidays & rent guarantee insurance

Very few landlords have applied so far for a mortgage holiday, although there is a greater

proportion giving an application at least some consideration. If a substantial proportion

of those “considering” an application then feel the need to do so, or more tenancies slide

into arrears, then this proportion could rise into something quite significant.

Note that by and large rent guarantee insurance has been, so far at least an irrelevant

factor in landlords’ reckoning on managing their property business.

Access to property

One-third of all landlords have experienced difficulties in gaining access to property to

undertake safety checks, maintenance and home improvements. Gas safety and

scheduled property improvements are posing the biggest challenges and some landlords

are also concerned about falling foul of safety and licensing legislation.

Landlordsʼ own financial position

A substantial proportion of landlords (22%) have themselves experienced significant

reductions in employment income and opportunity in the wake of lockdown restrictions.

A considerable number of landlords also rely on their properties for their own rental

income and these landlords too are often struggling. Landlords also have unexpected

Council Tax bills as void properties remain unexpectedly vacant for longer.

Closing thoughts

The next steps out of lockdown are crucial. As debt and voids rise landlords may find

themselves running out of options, with the risk of a spike in court proceedings and

claims. At present, such a spike is avoidable – though this may depend on how existing

income-based schemes are managed through the withdrawal from lockdown.

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May 2020

1. Introduction

About this survey This survey is the first survey in which all members of the newly formed NRLA have been

invited to participate in.

This means that over 80,000 invitations direct were sent to NRLA members, with a social

media campaign and coverage in the industry press. This enabled an opportunity to

participate in the survey to non-members.

In total 4,718 participants took part in the survey, over 4,600 of whom are members of the

NRLA. Members of the NRLA are not just current landlords but others who have an

interest in the Private Rented Sector (PRS).

However this report focuses on the responses of current, active landlords who

participated in the survey.

Note that this report does not purport to be typical of the landlord community – wider

surveys and analysis such as that undertaken in the English Private Landlord Survey 2018

(published by the Ministry of Housing, Communities and Local Government) – highlights

some differences. It is however, with over 4,500 participants an important snapshot of the

key segment of the landlord community.

The survey took place during the first weekend in May and was conducted online and

anonymised. The survey was undertaken by the NRLA’s Research Observatory team, who

also undertook the analysis.

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May 2020

About the sample In total 4,566 current and active landlords took part in the survey1:

• Most of these – 3,704 (81.1%) – are landlords who own more than one property

• This means 862 respondents (18.9%) are landlords who let just one property.

Note that 111 landlord responses came via social media. These participants are not

necessarily members of the NRLA.

For this survey we asked landlords in which single region did they consider their portfolio

to be focused:

• Over 20% (22.8%) of participants had their portfolios focused in the South East.

• Landlords with portfolios in other regions include London (17.2% of landlords), the

South West (12.5%) and North West (10.1%).

o Landlords with portfolios focused in Wales accounted for 4.6% of all

landlords in the survey.

From previous work undertaken by both the RLA and NLA the average portfolio size is

approximately 7-8 properties. There is no reason to think this particular survey should

differ from previous profiles.

1 Not all landlords answer all questions so totals for individual questions may differ

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May 2020

2. Many landlords are facing disruption to

their rental income streams

Table 1 below shows a summary of experiences of landlords who participated in the

survey:

Table 1: Which of the following statements most closely reflects your experience since

the lockdown began?

No of

responses

Percentage of

respondents

01 My tenants have been paying all their rent as usual 1707 37.5%

02 There are issues with late rent with at least one tenant,

but these ARE NOT related to coronavirus

303 6.7%

03 Rental income has been affected as a result of the

coronavirus

1550 34.0%

04 I have experienced an increase in void periods since

lockdown

158 3.5%

05 A combination of options 03 & 04 above apply 749 16.4%

06 Not clear which of the above apply to me 87 1.9%

Total 4,554 100.0%

Base: All landlords

• More than 50% (54%) of landlords have experienced some combination of rent

problems or unanticipated void issues as a result of the coronavirus:

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May 2020

Analysis of rent arrears data Approximately 40% (37.5% from Table 1 above) of landlords have reported their tenants

have been paying rent as normal since lockdown began.

Based on average portfolio sizes within the surveyed population (typically between 7-8

properties per landlord), if a typical landlord who has stated they have an in debt tenancy

has just one such tenancy, then approximately 8% of the properties covered by this survey

are in debt2.

Similarly, if landlords have on average three such tenancies3, using the same approach as

in the footnote, approximately 24% of the properties covered by this survey are in debt.

2 That is 1/8 of the 60% of landlords who presently have at least either one tenant in debt or a void property. Where the denominator is the average number of properties our members have in their letting portfolio. 3 We felt three was a not unreasonable upper band for this calculation.

5


May 2020

3. The loss of rent is becoming significant

for a number of landlords

Over half of landlords (54%) reported a direct correlation between the coronavirus and at

least one of the following problems: (i) rent payments of at least one of their tenants or (ii)

longer than anticipated void (vacant) periods on their properties4.

The chart below shows the current level of rent arrears landlords are experiencing.

Chart 1: Distribution of landlords’ lost income across their portfolio

Many landlords in the

survey own multiple

properties, so the data

should not be seen as

an estimate of overall

debt or arrears. It

reflects landlords’ lost

rental income.

4 There are three main reasons why voids are a problem at present (i) tenancies come to an end and

landlords are finding it more difficult to find new tenants (ii) renters quit their tenancies early as a result of their health and/or change in labour market status (iii) landlords are unable to complete scheduled improvement or safety works and so cannot offer the property to tenants.

54% Proportion of landlords reporting

coronavirus-related problems with

tenant rent or void property.

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May 2020

Analysis So, almost 60% of those landlords who have declared arrears have experienced at least

the equivalent of one month’s loss of income across their portfolios.

For most landlords, rent is paid in advance – often termly in the case of lets to students. In

other cases, tenants from overseas cut short their tenancies to return home during an

earlier phase of the pandemic. In addition, many self-employed tenants are awaiting

payment from the Self-Employed Income Support Scheme before they can pay rent.

Thus, it is quite possible for landlords to now be facing an income drop equal to several

months of rent.

It also reflects the issues with voids highlighted previously: property which a landlord

would normally turnaround at the end of a tenancy and re-let relatively quickly is now an

asset effectively in suspended animation5.

Landlord comments “[My Property is] Empty, therefore so far 2 months lost”.

“My previous tenant left on 22 March and I have not been able to let the property since due to the lockdown”.

“Currently a loss of one third per month so no idea how long this will continue”.

“No rent received in April or May. Deferred until June. Hopefully arrears will be paid then when our tenant

hopefully gets his Self-employment grant from the government”.

“Previous tenant left at end of Jan 2020. Still vacant due to 100% coronavirus and the lockdown and

suspension of flights”.

5 From the comments accompanying responses to the survey landlords have flagged this issue, rightly, in terms of loss of income.

7


May 2020

4. But landlords are not planning to use

legal redress to reclaim owed rent…

Landlords were also asked whether they had served either (or both) a Section 8 or a

Section 21 notice since the above dates:

Chart 2: Proportion of landlords who have served at least one Section 8 or Section 21

notice since March 26th

The conclusion from this is clear: (i) many landlords are facing substantial arrears (ii) void

properties are at present a bigger issue than usual.

Yes, served a notice

4%

No, have not served a

notice95%

Dont know

1%

Base: All landlords

8.9% Proportion of landlords with an

outstanding claim under Section 8,

Section 21, or both prior to suspension of

court process on March 26th/27th

8


May 2020

However, landlords are not at present looking to use the courts to seek compensation for

lost income.

• Only four percent of landlords have issued any kind of possession proceedings in

anticipation of the reopening of the courts.

• Even amongst those landlords who are owed the most by tenants, legal remedies

are not currently being pursued6.

Comments from landlords “I need to serve notice on 2 tenants who are just not paying and will not communicate. I also have 2 properties

empty needing repairs which I can’t get done. All in all, I am nearly £3,000 per month down”.

“As I am shielding, I cannot go to the property. However, one of the tenants is carrying out both gardening and

additional cleaning in lieu of rent, which is very helpful”.

“Bailiffs arrived to execute a warrant of possession before lockdown to find a notice saying tenant was self-

isolating. The tenant was already 5 months in arrears and hadn't bothered speaking to us or attending court

months earlier. He continues to reside, paying no rent, with virtually no hope I will ever recover it”.

“Tenants are flaunting the law. I am now powerless to protect my interests as no longer have the Court to

protect me”.

“There seems a general feeling that it’s ok to protect tenants in this hard time, but landlords just deserve to put

up with the loss. I cannot afford months and months without rent”.

“I have decided to work with my tenants in order to keep them housed and agree a payment plan for rent

arrears”.

“One tenant, now 5 months in arrears, where notice might encourage opening dialogue, but I do not feel able

to issue notice in the current environment. Ultimately, I would prefer to help her through anyway”.

6 For example only 6.8% of those landlords who are owed the most in rent (equal to two months or more) have issued court proceedings to reclaim owed monies.

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May 2020

5. …instead, most landlords are receptive

to tenant requests

Landlords were asked whether tenants had approached them to request support. If so,

they were asked about the nature of the request or requests and how they had responded

to it.

Landlords were asked whether tenants had approached them for any of the following:

• Rent reduction of up to 20% of rent

(this figure chosen as it reflects the

government’s furlough scheme);

• Rent reduction of more than 20%;

• A rent-free period;

• A deferred rent arrangement - rental

holiday;

• Early release from a tenancy;

• Refunds on services (HMOs).

In response to the question:

• In total, 2,018 landlords received such a request from at least one tenant.

o This is equal to 44.2% of all landlords who participated in the survey.

• Of this group of landlords, 1,824 landlords granted at least one request from the

above list.

o This is equal to 90.3% of all landlords responding positively to at least one

of the above tenant requests.

Landlord comments “3 out of 6 tenants (young professionals) said they couldn’t pay their full rent, so I have subsidised 50% with a

review for June”.

“50% deferred payment until tenant can return to work as he is self employed”.

“Agreed to reduce rents to pay back later over the period of the lease”.

“By agreement as we are all in this together”.

10


May 2020

6. Landlords recognise the need to get

through this crisis together

The survey asked landlords about the additional support they had given tenants during

this current crisis.

Almost 80% of landlords identified from a list at least one way in which they had

supported tenants.

The most common answers are set out below:

Proportion of landlords who

have checked up on vulnerable

tenants since March 26th

Proportion of landlords who

have served a notice seeking

possession for rent arrears or

damage since March 26th

28% 4%

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May 2020

Chart 3: Common ways in which landlords supported tenants (multiple responses)

Source: All landlords

In addition to supporting tenants through agreeing rent reductions:

• Almost 30% of landlords have checked up on vulnerable tenants.

• Though not shown above more landlords have run errands for self-isolating or

vulnerable tenants (over 6%) than have served notice for rent arrears.

• Almost one-in-five landlords have offered some form of rent-free period.

Of those “Other” answers, examples landlords provided includes:

• Providing access to landlord's gardens to allow tenants exercise.

• Allowing tenants to leave furniture at end of tenancy.

• Forgoing of usual end of contract inspection.

• Provided reassurance over bills.

• Offered help and even paid utility bills.

• Provided interest free loans.

• Paid for removal and cleaners.

15.3%

18.2%

27.0%

28.7%

30.4%

0% 5% 10% 15% 20% 25% 30% 35%

Other

Offered

rent free period

Shown flexibility

on tenancy duration

Checked up on

vulnerable tenants

Reduced rent

for tenants

12


May 2020

7. Mortgage holidays are not a widely used

tool (yet)….

Landlords who have been facing coronavirus issues with rental income were asked

whether they had applied for a mortgage holiday:

Table 2: Likelihood of landlords applying for a mortgage holiday

No of

responses

Percentage of

respondents

Percentage of

all active

landlords7

01 Yes - applied and received a mortgage

holiday

253 13.8% 5.6%

02 Yes - applied for a mortgage holiday but

not yet agreed

50 2.7% 1.1%

03 No - have not applied but considering

doing so

386 21.1% ---*

04 No - no plans to apply for such a holiday 1,138 62.3% ---*

Total 1,827 100.0% 100.0%

Base: Active landlords with rent problems & who have a mortgage/ All active landlords

Even though this is the proportion of landlords who have experienced difficulties with

rental payments due – only a small proportion of landlords to date have applied for a

mortgage holiday:

• Approximately 7% of all landlords in the survey have applied for a mortgage

holiday.

7 Not all landlords have been asked this question. This is especially important for those answers marked “*”.

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May 2020

However:

• A not insignificant number of landlords are considering making just such an

application.

• This could be an indicator that the financial position of landlords is somewhat

perilous:

o If a significant proportion in this group did make an application, then the

total level of applications soon ratchets up and a significant proportion of

PRS landlords – as many as one-in-ten – could be applying for such a

holiday8.

Landlord comments “I do have a deferred mortgage payment agreement with my Lender, but the balance of the rental income is

what I live off, plus my State Pension. I am now having to borrow money to live…. Therefore- I am suffering”.

“Easy and simple process. Thankfully. Basically, no questions asked - which was unexpected”.

“It was done by text, which was surprising. Answer given quickly but don't know what happens after 3 months”.

“Mortgage provider unwilling to assist as mortgage product is an old-style arrangement that is no longer

supported”.

“My mortgage provider has agreed to a mortgage holiday (large portfolio loan) but only when I provide

evidence that more than a portion of my tenants are not paying. This makes cashflow and planning harder

than it needs to be”.

8 This thought is strengthened by the recognition that a deterioration in finances could result in more landlords not included in the question making a request.

14


May 2020

8. …. nor are landlords able to fall back on

rent guarantee insurance

Few landlords have rent arrears insurance. Roughly half (44.6%) of those that do have rent

insurance have tenants in debt.

But even for these landlords there are a range of reasons why landlords have decided not

to pursue claims9. As a result:

• Fewer than thirty landlords in the sample of over 4,500 landlords have attempted

to make a claim.

9 These reasons include: uncertainty of terms and conditions; excess charges and the need to start legal proceedings on tenants as a condition of a claim.

16% Proportion of landlords who had taken

out insurance to protect them from

tenant rent arrears

1.5% Proportion of landlords with insurance

who have made a successful claim

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May 2020

• Just eleven landlords have made successful claims – ten of which are for rent

arrears:

o This covers just 0.4% of all landlords who are owed monies as a result of

coronavirus.

Claims have been rejected for a number of reasons including:

• Pandemic exclusion clause.

• The impact of government intervention invalidated claims.

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May 2020

9. One-third of landlords have experienced

problems gaining access to property

The survey asked landlords whether, because their tenants had wished to shield, isolate

or otherwise maintain social distancing, they had experienced difficulties gaining access

to one of their properties.

Around one third of landlords reported themselves as having no need to access any of

their properties. A further one-third of landlords reported no problems in gaining access.

However, one-third of all landlords have experienced difficulties in gaining access to

property to undertake safety checks, maintenance and home improvements. The chart

below shows the proportion of ALL landlords reporting instances where access had been

an issue:

Chart 4: Accessibility problems because of coronavirus (Multiple answers)

Base: All landlords

4.8%

3.9%

4.1%

4.6%

6.0%

7.6%

13.0%

14.3%

0% 2% 4% 6% 8% 10% 12% 14% 16%

Other

Licensing requirements/

inspections

Energy Performance

Certificate

Checkout inventory

for tenant deposit

Urgent repairs

to property

Electrical and/or

fire safety checks

Scheduled property

improvements/general…

Gas safety

certificate

17


May 2020

Thus, gas safety and property improvements were proving particularly difficult for

landlords. These were almost twice as likely to cause problems than other reasons

landlords may need access to a property.

Contractors The survey also asked landlords about difficulties in getting a contractor to work in one of

their properties.

The pattern was near identical:

• Around one third of landlords had not needed the services of a contractor since

lockdown began.

• Another third had not had any issues getting a contractor on-site.

• Of the one third of landlords reporting difficulties getting contractors to attend a

property, gas safety certification and property improvements had proved to be the

biggest problems.

Landlord comments “Contractors concerns about attending flat with tenant confined within flat”.

“Have had to leave final repairs to water heater for a month due to virus but tenant is managing ok”.

“Letting agents furloughed their staff and the remaining workers had difficulty managing the work”.

“Contractor needs all in property to confirm directly they are Covid-19 free. This is hard when there's multiple

tenants”.

“Could not get plumbing services for 6 weeks. They cancelled all appointment due to lack of staff”.

18


May 2020

10. Many landlords are also suffering with

the economic lockdown

The chart below reflects on how the coronavirus has impacted on landlords economically,

outside of their rental incomes:

Chart 5: Impact of lockdown on labour market position of landlords

Base: All landlords10

A significant proportion of landlords have suffered in employment terms, in a not

dissimilar fashion to their tenants:

• Over one in five landlords have faced some form of negative employment

consequence11 as a result of coronavirus.

• Of those in the largest group, a considerable proportion will rely almost entirely on

their rental income and so will also be facing some kind of hardship.

10 Excludes “Other” responses. 11 This is an amalgam of responses to a question about whether the landlord had been furloughed, laid off or forced to cease business trading.

Landlords who have faced in-work

difficulties 22%

Landlords whose work has carried

on much as before26%

Landlords not in employment/

self-employment 52%

19


May 2020

For example:

• Over half (51.7%) of all landlords in the largest of the above groups stated they had

experienced difficulties with rents and voids as a result of the virus.

Finally:

• Around a quarter of landlords who responded (23.7%) stated they had

unexpectedly become liable for unanticipated Council Tax payments as a result of

the coronavirus

20


May 2020

11. Summary & policy recommendations

At the beginning of May a picture is emerging of a Private Rented Sector in which a

high proportion of landlords, like many of their tenants are feeling the strain:

• More than half of all landlords are reporting either some levels of rent arrears or

unanticipated void periods on their properties.

• For a substantial proportion of landlords, rent arrears are now increasing- with

debt levels more likely to be higher in the capital.

• A substantial proportion of landlords have also seen their labour market position

deteriorate as their own businesses and jobs have suffered under the current

lockdown.

• Even where insurance products have been put in place, they have largely proved

ineffective at protecting landlords.

However, the majority of landlords who fall into the above categories are showing

resilience. Alongside the government interventions which have been put in place,

the actions of landlords mean a housing crisis has so far been averted:

• When approached by tenants they have been highly likely to respond affirmatively

to tenant requests for rent support.

• Statistically they are far more likely to have checked up on and run errands for

vulnerable and self-isolating tenants than they are to have instigated legal

proceedings to reclaim rents they owe.

• There are numerous ways in which landlords have supported tenants financially

and through providing in-kind support.

The next steps though are crucial. As debt and voids rise landlords may find

themselves running out of options.

21


May 2020

At the moment, our assessment is that the stay on possession proceedings could probably

be lifted on 25th June without the fear of a large spike in claims. This is largely based on

the impact of the Self-Employed Income Support Scheme due to be paid before the end of

May which will cover the period of the lockdown so far. This could reduce debt levels in

the system.

At the same time the continuation of the furlough scheme should ensure, though debt in

this instance will rise, landlords and tenants should be able to reach agreement without

turning to the court system.

Easing of the special lockdown measures for the property market will also mean it now

becomes easier to find contractors and potential new tenants who will visit property.

Government – national and local – will however need to show continued pragmatism on

access and licensing enforcement to allow capacity to recover.

In the end it is inevitable many landlords, like their tenants, will take a hit from this crisis.

Many landlords accept this. The work of our predecessor organisations shows that the

relationship between landlord and tenant is in most cases positive.

The challenge for government in the private rented housing market, as with other

economic sectors, is to withdraw economic support for sector participants as painlessly

as possible.

National Residential Landlords Association212 Washway Road

SaleM33 6RN

T: 03330 142 998

nrla occasional research series may 2020 coronavirus and ... · iv nrla coronavirus & landlords...

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