The Covid crisis has opened up a wealth divide between richer and poorer families. Wealthier Brits saved money during lockdowns as they cancelled foreign holidays and saved on commuting costs. In contrast, many poorer families face financial hardship and have mounting rent arrears caused by job losses and reduced income. Across the UK, rent arrears add up to a staggering £360 million according to charity StepChange.
What is behind the rent arrears crisis? Is it likely to continue? And what you can do if you are facing financial difficulty and can’t pay your rent? Here’s what you need to know.
Why is there a rent arrears crisis?
It’s simple: if you have no money, you can’t pay the bills. And that’s what’s happened for thousands of lower-income families during the Covid crisis. As their money ran out, many poorer families faced escalating rent arrears. Factors leading to the rent arrears crisis include:
- Many private renters have lost their jobs or seen their hours reduced during the Covid crisis. According to the StepChange report, “half of private renters have suffered a hit to their incomes due to Covid leaving them particularly vulnerable to financial difficulty.”
- Poorer private renters typically have less in household savings than more wealthy families. This means they can cope for less time with a significant loss to their income.
- Renting families with low incomes often live in smaller houses than more wealthy families. This has made it particularly difficult for them during the Covid crisis. Some space-strapped parents have found it hard to work from home or had to work fewer hours due to home-schooling during the lockdowns.
- There is a cost of living crisis for families at the moment. Food costs, energy bills and housing costs are all rapidly increasing. This makes it harder for families who are already struggling financially.
- The government changed the rules for landlords during the Covid crisis and made it harder for them to evict tenants. This led to a spike in rent arrears as families could stay in accommodation for longer before being evicted.
Is it likely to continue?
The cost of living crisis looks set to continue during the winter. HGV driver shortages and increased wholesale gas prices are driving up costs for customers. It going to be a long, hard winter for struggling families, and things will probably get worse before they get better.
What can you do if you fall behind with your rent?
If you are struggling financially and can’t pay your rent, positive steps you can take include:
- Making a detailed budget to see if you can make cost savings elsewhere. Zero-based budgeting is a good budgeting method to use if money is really tight.
- Keeping good records. Make sure your landlord is asking you to repay the right amount.
- Speaking to your landlord. They may agree to a repayment agreement where you repay the arrears slowly over several months.
- Asking for help. Charities like Citizens Advice and StepChange can help with advice about clearing debts and dealing with rent arrears.
- Making sure you understand your legal rights as a tenant. You have the right to be protected from unfair eviction.
The post Wealth divide: Covid rent arrears crisis hits poorer families appeared first on The Motley Fool UK.
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