Calls for Spanish-style loan scheme to help UK households in arrears

Ministers should step in to help more than 750,000 UK families – including 300,000 with dependent children – manage housing arrears built up during Covid-19 and reduce the risk of eviction and homelessness, according to the Resolution Foundation.

The thinktank calls on the government to introduce a Spanish-style loans scheme to help provide a breathing space for tenants and prevent the courts being overwhelmed by a glut of repossession cases.

The UK’s housing arrears crisis is likely to get worse in the coming months, it warns, 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 over the next few months as the courts seek to deal with a backlog. “This is a daunting prospect for a system that was already under stress prior to the pandemic,” it says.

Rather than simply “muddling through,” the thinktank urges ministers to set up a £375m tenant loan scheme for struggling families in private and social rent arrears in England using a model first developed in Spain and since introduced in Wales and Scotland.

Under the Spanish scheme applicants must not have had pre-Covid-19 rent arrears, and must prove hardship in order to access support. 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.

More than 450,000 UK families have fallen behind on rent or mortgage since the beginning of the pandemic, the foundation estimates, based on its survey of 6,000-plus UK working age adults in January 2021.

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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 just 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. More than twice as many private-renters than mortgage-owners entered the pandemic without any savings to draw on.

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 ten months (a further 5 % were refused).

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.”

Meera Chindooroy, deputy policy director for the National Residential Landlords Association, said: “We welcome today’s report which agrees with the need for tenant hardship loans to tackle the rent debt crisis we now face. Simply banning repossessions is doing nothing to address this underlying problem which renters and landlords are struggling to cope with.”

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