5 million renters have no plan in place to protect their ability to pay their rent if they became too ill to work, relying on the state to bail them out
When you consider the cost of renting property in the UK, it’s no wonder tenants can be paying equal to that of homeowners who have mortgages. With a considerable percentage of wages going towards rent, the biggest single expense for individuals and families, it came as a shock that 5 million tenants have no plan in place to pay their rent if they can’t.
As we know thanks to insurers repeatedly reminding us that accidents or sickness can strike at anytime, too many consumers fail to protect their income in the event they are unable to work through sickness or injury. This lifeline can help pay vital bills whilst you recover and able to restart work, however, renters risk breaching their tenancy agreement by failing into arrears as they fail on mass to protect their income.
With some tenants trapped in a vicious cycle, struggling to save for deposits whilst paying high rents, it’s no surprise a survey by YouGov, commissioned by Royal London found five million renters risk going into arrears, or worse eviction in the event they cannot work for three months or more. It is not as if tenants can rely on the government these days due to cuts in housing benefits and welfare reforms whichtenants also put tenants at risk.
This is despite the fact that over a quarter of renters in paid employment (27%) said they knew someone who had struggled in this situation. More than one in three renters in paid employment (34%) admit they don’t know how long they could survive, and six in ten people (60%) who had some idea said they could only survive on their savings for three months or less.
Their first port of call would be to apply for state benefits (53%), followed by reducing their household expenses (47%) and then dipping into their savings (39%). Worryingly, fewer than one in ten (7%) renters in paid employment have ever consulted a financial adviser. The most common place people turn to for financial advice is their family and friends.
Some people would not get their rent paid in full if they lost their income. This includes those with £16,000 or more of savings or those with a partner who earns a reasonable income.
In addition, several recent cuts by the government in their attempts to reform the welfare state have extended the number of people who would not get their full rent covered if they were off sick. These are
- Extension of the ‘shared accommodation rate’ policy from the under 25s to the under 35s;
- most single people under 35 can now only get housing benefit to cover the cost of a room in a shared house, even if they are actually renting accommodation of their own;
- The ‘bedroom tax’ which means that people renting from councils and housing associations cannot get their full rent covered if they have a ‘spare’ bedroom this principle is already part of the rules for private tenants who can only claim up to the rent for a house of the size that they are deemed to need;
- Private tenants are only able to claim up to a ‘Local Housing Allowance’ in their area, which is based on the lowest 30% of rents previously the reference rent was based on the lowest half of rents;
- There are overall caps on the amount of benefit that a family can receive, and these caps are being steadily lowered any excess is deducted from an individual’s housing benefit entitlement.
Debbie Kennedy, Head of Protection for Royal London Intermediary, said: “Renters who assume that housing benefit will be there when they need it could find the reality is very different. A series of cuts to housing benefit means that more people would not get their rent paid in full if their income fell unexpectedly.
“It would be bad enough to be taken ill without the added anxiety of getting behind with the rent and facing possible eviction. Income protection may be more affordable than people realise and can provide a financial safety net and enable people to focus on getting better.”
Economists predict over the next ten years the UK will experience falling levels of home ownership and rising levels of private renting. In ten years’ time, 59% of 20-39 year olds will rent privately, up from 45% in 2013. A further 15% are in social housing, renting from housing associations or local authorities.