The coronavirus pandemic has hit the buy-to-let sector hard, leading to an estimated £437m in rent arrears.

Twice as many landlords are planning to sell properties as those who are looking to expand their portfolios over the coming year, following a steep rise in rent arrears caused by the coronavirus pandemic.

Three out of 10 private sector landlords plan to sell one or more properties, compared with 16% who expect to buy at least one more in the next 12 months.

This is despite the fact that 35% of buy-to-let investors said they had seen increased tenant demand during the past three months, according to the National Residential Landlords Association (NRLA).

Unsurprisingly, nearly two-thirds of landlords said their businesses had been negatively impacted by Covid-19, with 18% saying the pandemic had had a significant negative impact on it.

Why is this happening?

The pandemic, lockdown and the resulting negative impact on jobs and earnings has led to a steep increase in the number of tenants who have fallen behind on their rental payments.

The NRLA estimates that private sector rent arrears in England as a result of coronavirus stand at £437m.

This increase in rent arrears, combined with rising costs as a result of regulatory and tax changes, has made the sector less profitable, leading many landlords to review their portfolios and sell properties.

Who does it affect?

The fact that nearly a third of landlords are planning to sell properties is bad news for tenants in the private rental sector.

There is already a mismatch between supply and demand, and a further reduction in the number of properties available to let is likely to drive rents higher.

What’s the background?

Landlords are calling on the government to help tenants in England who have fallen behind with their rent.

Suggestions include offering interest-free or low-cost hardship loans to cover arrears, similar to those available in Wales and Scotland.

Currently, if landlords are struggling to pay mortgages because their tenants are in financial difficulties, they can apply for a mortgage payment holiday of up to three months, with the interest they would have paid added to their outstanding debt.

Landlords are advised to try to work with their tenants to establish an affordable repayment plan for any rental arrears once the tenant’s finances have improved.

Landlords are also advised to ask their tenants if there are any benefits they may be entitled to that they are not currently claiming. For example, Universal Credit and Housing Benefit have been increased since the start of the pandemic to cover at least 30% of market rents in the claimant’s local area.

The ban on tenant evictions has also now been lifted, although landlords still have to give tenants six months’ notice in the majority of cases.

Top three takeaways

  • Three out of 10 private sector landlords said they planned to sell one or more properties during the coming year, compared with 16% who expect to buy one

  • The selloff comes despite 35% of landlords seeing increased tenant demand during the past three months

  • Nearly two-thirds of landlords said their business had been negatively impacted by the coronavirus pandemic, with 18% saying it had had a significant negative impact on it.

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