Chancellor must set up a Covid Rent Debt Fund

Feb 02, 2021 3:23 PM

Coronavirus has seen one in three private renters lose income, and Universal Credit is nowhere near enough to cover average rents. As a result half a million households are now in rent arrears of £730 on average, according to Citizens Advice.

We are calling on Rishi Sunak to use his Budget next month to create a Covid Rent Debt Fund to clear rent arrears and keep renters in their homes. 

This afternoon, the House of Lords debated the Government’s extension to the “Christmas truce”, which stops bailiffs from evicting tenants until 21 February, except in limited circumstances. Labour’s Lord Kennedy and Liberal Democrat Baroness Grender criticised the new regulations for reducing the arrears threshold, which means that tenants who got behind on rent because of the pandemic are now vulnerable to eviction. The House of Lords voted to rebuke the government for "contravening" its original promise made in March that people wouldn't lose their home because of the pandemic.

The ban extension also fails to deal with the mountain of debt which is causing landlords to issue eviction notices up and down the country.

In August last year, 36% more private renters were relying on Local Housing Allowance (LHA) to pay their rent than in February. Because 42% of private renters now receive LHA but it only covers the cheapest 30% of homes, we estimate that 538,000 private renter households in England are not receiving enough in LHA to cover their rent.

Last month Citizens Advice estimated that half a million private renter households were in arrears by November, owing their landlords £360m.

As well as being grounds for eviction, rent arrears can also lead to a County Court Judgment which makes it more difficult to find a new home, and damage your credit score which can make it difficult to apply for mobile phone contract or credit card in future.

Under our proposed Covid Rent Debt Fund, the government would clear renters’ arrears, keeping them in their homes, while allowing landlords to apply for compensation up to 80% of the original monthly rent. This would cost around £288m, based on Citizens Advice's estimates.

While the idea of simply cancelling rent has raised concerns about landlords’ property rights, legal experts have backed Generation Rent’s proposal as a proportionate way of dealing with debt that balances the interests of landlords and tenants. Lawyers from Garden Court Chambers and the Housing Law Practitioners Association recommended our scheme to the Commons Housing Committee as the "most equitable...and the easiest to administer".

The government’s measures to increase support through the benefits system have failed to prevent half a million households racking up rent arrears, which will be impossible to pay back even when the economy recovers - Citizens Advice estimates it would take someone 7 years on average.

While most struggling renters are not at immediate risk of eviction, they are still being forced to pay the price of the pandemic and face the prospect of homelessness without further action. To get these people back on their feet, we need Rishi Sunak to step in and clear these arrears with a Covid Rent Debt Fund.

Read our full report on ending the Rent Debt Crisis here.

Ask your MP to demand a Covid Rent Debt Fund in the Budget.