The government made another U-turn last Friday when it extended the moratorium on evictions in England and Wales until September 20th. At the same time, they extended the notice period that landlords must give to six months, excluding cases where there is evidence that the tenant is causing serious problems affecting others, such as anti-social behaviour and domestic violence.
This means that, with these few exceptions, at the end of March 2021 almost no legal evictions will have taken place for a year – including cases which were already complete before the lockdown.
The issues around extending the moratorium on evictions are not as simple as they may appear. In this piece, we argue the Government has just delayed action and potentially created an increasingly difficult future scenario. More positively, the government now has a short breathing space.
To use this period effectively, they must think strategically about how to transition to a better functioning eviction system, fairer to both tenants and landlords, that takes into account the nuances of people’s circumstances.
Rationale for the extension – and the longer notice period
The initial reason for the ban on evictions was the lockdown. No-one was allowed to move and neither the justice system nor the market were working. Now, the extreme form of lockdown is over and the market is open – and in some areas easing – so the original rationale does not apply. So why extend the suspension?
The most obvious reason is that the justice system is not yet functioning and the rules under which courts will operate when proceedings restart are still under discussion. Moreover, even before lockdown, completing proceedings took months. Without a conscious effort to speed up proceedings, even the most egregious cases could take well into next year to be resolved.
So the month’s delay changes little in terms of outcomes. It just builds up a longer queue. But the time could be used to set the rules and rights around judges’ discretion, so the system can function more smoothly. Priorities should be set. For instance, after cases where serious offences are involved have been processed, the next group might be pre-lockdown re-activated cases; followed by those where safety is involved or where the tenant is argued to be at fault.
The rationale for extending the notice period to the end of March almost certainly lies in concerns about the economy and potential unemployment. Together these could result in large numbers of people struggling to pay their rent. This would potentially lead to a spike in evictions proceedings early next year as well as rising homelessness associated specifically with Covid-19 –something the government has promised will not happen. But it does raise the spectre that, once an eviction order has been served, there is limited incentive for tenants to pay rent – and some landlords are in the position of having not received rent since they started proceedings well before lockdown. This will put increasing numbers of landlords into financial difficulties (especially when mortgage ‘holidays’ run out). But the change also reduces the time pressure on tenants to try to sort out their problem.
This could leave tenants with larger debts, and at risk of long-term damage to their credit records and ability to secure a future tenancy.
Are evictions inevitable?
The evidence from our survey of London boroughs is that, up to now, there has been very little increase in the numbers approaching local authorities as a result of illegal evictions. The problems are mainly among people in informal arrangements – e.g. living with family, sofa surfing or unofficial lodging – who have been asked or forced to leave. Local authorities have also identified an increase in rough sleeping for similar reasons. Whether this lack of illegal evictions from formal tenancies will last for another seven months is a different matter, and must depend on whether people can and will pay enough of their rent to satisfy their landlord.
The evidence on rent payments is also relatively positive. The latest survey by the National Residential Landlords Association (NRLA) indicates that, although some 70% of landlords have been negatively affected by the pandemic, 87% of a more broadly based survey of tenants have been paying their rent in full with a further 8% having made an arrangement with their landlord to defer or reduce payments. On the other hand, 1% of tenant respondents said they had been issued with an eviction notice. This can be compared to Shelter’s latest survey, in which around 2% of tenants stated that they had already been threatened with eviction. These are potentially very big numbers even if many will be resolved without formal eviction proceedings.
While they tend to get less attention and sympathy, there is a question how landlords who are not being paid can cope. In 2018, around 28% of individual landlords received more than half of their income from rents and 9% received over 75% (source: Private Landlords Survey, 2018). Over 60% of owners had outstanding mortgage debt. Thus, large numbers of landlords could face significant financial difficulties if the rent is not paid. Some may also struggle to sell a property with a sitting, non-paying tenant they cannot evict.
Looking to a more strategic approach
We suggest that a more nuanced approach, taking into account the circumstances of tenants and landlords, is required to address significant equity issues.
On the tenants’ side, key groups are:
- those subject to no fault eviction at the end of their lease (under Section 21 of the 1988 Housing Act) who face automatic eviction;
- those with rent arrears of more than 8 weeks who can also face automatic eviction (under Section 8 of the same Act);
- tenants who cannot pay the rent because their circumstances have changed because of the pandemic; and
- those who are not paying the rent for other non-Covid related reasons.
We can break down landlords into:
- those who depend on rental income for their daily expenditures;
- those who depend on the income to pay the mortgage but not their living expenses; and
- others for whom rent provides supplementary income [We should also note that Housing Associations are affected].
Again we distinguish between landlords who are losing money or waiting for payment; and those who are currently receiving the rent in full.
How the changes affect each group of landlords depends not only on their own income level but also on how many units they rent out. For all there is a question of how the changes affect their risks and returns in the short and longer term.
How can these different needs be addressed? We suggest:
Proceed with evictions that were commenced before lockdown -
unless there is another lockdown for public health reasons, evictions that were either underway or going through the process should be given priority.
Delay Section 21 evictions -
place a moratorium on Section 21 evictions until after promised legislation goes through Parliament.
Offer support to tenants who have fallen behind -
a strong case can be made for mediating agreement between landlord and tenant, where tenants have fallen into arrears, but a long-term solution can be envisaged. The Government could incentivise such mediation, via a low-interest, government backed loan to landlords which has already been put in place in Wales.
Prevention support -
tenants who will be unlikely to be able to repay need to be encouraged to use their local authority’s homelessness prevention service put in place under the Homelessness Reduction Act. They may also be able to benefit from Discretionary Housing Payments funded by central government and allocated by local authorities.
London local authorities that have been able to support and expand their prevention services have found that landlords are being responsive to local authority intervention. More generally, helping tenants to find options that they can manage must be better than them simply building up debt. But this is a big ask for local authorities, tenants and landlords alike.
Another six-month delay is surely worse than a strategy that takes account of problems facing different groups of tenants, landlords and taxpayers. Such a strategy builds on existing successful policies but will involve more resourcing, particularly for local councils, in the short term. Nonetheless it almost certainly more cost-effective in limiting the projected spike in homelessness early next year, as well as reducing longer-term damage to individuals as well as to the private rental market as a whole.
We will be working on three fronts:
- Estimates of the possible costs and benefits of different policy instruments to avoid homelessness;
- Understanding how London local authorities are addressing the homelessness challenge and the costs they are incurring; and
- Examining how the private rented sector might respond to the post pandemic environment.