Recent research by The Resolution Foundation indicates that a third of 18 to 24-year-olds are earning less today than they were before the Covid-19 crisis. Further research by Flatfair shows that across the UK half of tenants are aged 16 to 34 and young workers are expected to be disproportionately impacted by rising unemployment as government support is wound down. To illustrate this further, close to half of the 2.8m retail workers are aged 16 to 34 and six in 10 working in food and beverage outlets are of the same demographic.
Significant demand for Oxford buy to let homes is drawn from 16 to 34 year olds, for example those visiting the City for under-graduate and post-graduate studies, undertaking research projects and young adults drawn to live and work in the City but for whom home ownership is an unaffordable dream.
As the job retention scheme requires contributions to employee wage costs by employers from August, many commentators are predicting a return to 10% unemployment - a level not seen since the 1970’s. Whilst we all hope that the worst predictions are not realised, it seems certain that many current Oxford tenants will suffer financially due to reduced working hours or because of unemployment.
At the same time it now seems certain that Section 21 notices will be repealed denying landlord’s access to an accelerated eviction process, with some commentators believing that the current 3-month notice period will become the norm. This will force landlords to rely on the Section 8 notice for re-possession which is both slower and more bureaucratic during normal times and is expected to take several months once Housing Courts re-open and work through the current backlog of cases. Should unemployment spike as predicted, there will be growing pressure on government to protect tenants from eviction for longer, which seems certain to force landlords to cope with prolonged periods of reduced or zero rental income.
It has become a cross-party political norm to disregard the interests of landlords, and instead favour tenant protections. There are after all far more votes cast by tenants than there are by landlords! This means that Oxford’s landlords should act now to protect their financial interests by committing to rent protection or rent guarantee insurance for each of their tenancies. Whilst these policies are not cheap, the income protection that they offer and the legal and eviction support that is embedded will prove to be invaluable over the coming months and years for those landlords whose tenants fail to pay their rent.
Savvy landlords will recognise that their property assets will be a stable and secure safe-haven during the economic uncertainty to come. Mitigating the risk of exposure to tenant financial difficulties is a sensible strategy to protect and secure rental income as unemployment rises.
