Financial struggle triggered by the COVID-19 pandemic could lead to millions of tenants with poor credit histories and without a job seeking to rent a home.

New research for the London School of Economics and charity Trust for London disclosed the fall-out from coronavirus could prompt 700,000 tenants to fall into rent arrears during the next 12 months.

A separate study for specialist lender Pepper Money shows 6.81 million – one in eight of the population – have recent arrears, missed bill payments leading to county court judgments and defaults against their names in the past three year.

Rent arrears set to surge

The LSE study predicts that the number of private tenants in rent arrears will surge and may lead to three times the number of evictions in the coming year despite the government orders to the courts and bailiffs to hold off possessing rented homes.

COVID-19 could lead to 700,000 landlords and tenants facing financial hardship, researchers added.

However, no early spike in evictions is likely as the courts are not listing possession hearings, bailiffs are delaying executing court orders and landlords face giving a minimum notice period of six months.

Christine Whitehead, emeritus professor of housing economics at LSE, said: “We’re likely to see a slow burn of evictions that will go on at least into 2022. This will leave more and more tenants – and sometimes their landlords – facing months of insecurity, mental stress and hardship.”

More evictions will mean more renters needing financial support, with possibly 30,000 more households going into temporary accommodation, according to the research Where Now For The Private Rented Sector?

COVID chaos could last years

However, not all rent arrears lead to evictions, says the report, as many renters look for a cheaper home or move in with family or make arrangement to reduce their debt with landlords.

Susie Dye, Grants Manager at Trust for London, said: “The research brings into sharp relief what we already knew about the private rented sector, particularly in London but also across England.

“Tenants’ lack of security mean that those losing income, maybe for the first time due to COVID, are at risk of debt and losing their homes. It might not happen rapidly due to the welcome measures the government and local authorities have taken, but stress for those affected is real.

“We’d love to see the government’s promise to stop no fault evictions enacted in the Renters Rights Bill, and as recommended here, benefits and local authority homelessness prevention being strengthened, so that the system is not overwhelmed.”

Dye added that fall-out from the pandemic could scar landlord and tenant finances for years as they chalk up adverse credit problems.

1.1m with adverse credit

The Pepper Money data reckons nearly 1.1 million people with adverse credit want to buy a home with nearly threequarters concerned that lenders will reject their mortgage applications because of their credit problems.

One in three people have missed an unsecured credit payment in the last six months, while one in seven have missed several payments in a row.

The figures are based on a February 2020 survey conducted before the first lockdown.

Since then employment figures have worsened, with the Office for National Statistics confirming a record 314,000 people losing their jobs in the three months to September. Many more are likely to face redundancy at the end of the furlough scheme in in March.

Paul Adams, sales director at Pepper Money, said: “We last carried out this study earlier in the year, ahead of the first national lockdown to combat Covid-19, so it’s really encouraging that the number of people with adverse credit has actually fallen since then.”

He forecast many may have spent less during lockdown, giving them a chance to repay debts from the money they were saving.

More eviction guidance published

Meanwhile, the government has clarified lockdown guidance for landlords and tenants in England.

The guidance confirms landlords must give six months’ notice before starting possession proceedings. Although the courts started hearing the most serious possession cases in September, bailiffs have been told not to execute court orders or warrants for housing cases until January 11 at the earliest.

Exceptional reasons for taking a case to court include illegal occupation, anti-social behaviour, fraud, and where a property is unoccupied following the death of a tenant.

Read the latest eviction guidance for landlords and tenants

COVID-19 finance problems for landlords FAQ

With research predicting landlords and tenants could face arrears and eviction problems for years to come, the real impact of COVID-19 on the private rented sector is yet to emerge.

The picture suggests landlords may have to consider taking on tenants with adverse credit or housing benefits.

Here are some answers to the most asked questions about renting homes from landlords.

What can I do if a tenant can’t pay the rent?

The government advises taking two initial steps –

  • Talk to your lender about a mortgage holiday, bearing in mind the credit implications that could come with the arrangement
  • Agree a plan to repay arrears with your tenant, but if they have lost their job, this is unlikely to resolve the problem

Eviction might not be an option for months to come and even if a tenant leaves, this could result in issues finding another renter with no adverse credit.

Can landlords still evict tenants?

Technically, yes, but in practise the courts and bailiffs can’t act until the spring and even then, a massive backlog of cases leading to more delays are expected.

The London School of economics report predicts many evictions may have to wait until 2023 for resolution.

Can I advertise a home to rent during lockdown?

Yes, marketing a property for sale or rent and moving home is allowed under lockdown rules in England and Wales, providing COVID-19 guidelines are followed.

You can read the COVID-19 rules for England about renting a home here or moving home here

The rules for Wales are here

Can landlords charge renters for credit checks?

No. Landlords and letting agents in England, Scotland and Wales are barred for charging for credit checks and must bear the cost themselves.

More information

We have more information available on our Coronavirus hub page.