After months of speculation, the UK's "age of austerity" has begun; the government has announced the results of its Spending Review. HomeLet, the market leading provider of tenant referencing and Rent Guarantee services warns landlords these results could result in additional job losses and tenants defaulting on rent.
The coalition Government has put deficit reduction at the heart of its economic policy, arguing that the poor state of the UK's public finances poses a greater threat to economic recovery than cuts in spending.
According to the independent Institute for Fiscal Studies (IFS) the government's Budget measures will cut 77% of the £86bn through spending cuts, and the remaining 23% through tax increases.
It’s likely the spending cuts announced yesterday will come mostly from the public sector, these cuts are likely to have a huge impact in most areas of the UK and in particular Liverpool.
In Liverpool the problem is exaggerated by the fact that almost 40% of all employment is in public sector which faces the most change, this is an additional burden on the economy of Liverpool – hindering its recovery from the effects of the worst recession in living memory.
The number of tenants defaulting on their rent is likely to soar following minimal change in the rate of unemployment which is currently standing at 7.8% and additional job cuts which are likely to feature as a result of public sector spending cuts.
HomeLet processes around 30,000 tenant references every month, a majority of which are for applicants aged between 18 and 24.
“Youth unemployment is at its highest rate for 15 years and it will get worse over the next few months as the affects of spending cuts start to have an impact on local economies,” said John Boyle, HomeLet’s Managing Director.
“This could have a significant impact on the private rented sector in regions which rely on young people entering full-time employment and moving into rented accommodation, rather than staying in the family home”
“For landlords, particularly those who rely on the monthly rental income from their property to pay the mortgage, even one month’s arrears in this financial climate can spell disaster.”
“To avoid becoming a victim of these spending cut changes John encourages landlords who are concerned about rent arrears to consider taking out rent protection insurance.”
“In 2009 HomeLet paid out £3 million in Rent Guarantee claims and I anticipate that this figure will continue to rise during the remainder of 2010 as more and more tenants find themselves out of work and unable to meet their financial commitments" John commented.
“But, we also understand that finding a rented property whilst you’re unemployed can be hard, that’s why HomeLet Rent Guarantee can even cover unemployed tenants,” said John.
HomeLet’s Rent Guarantee policies, available through approved letting agents, cover rental payments for up to 12 months and all legal costs incurred in evicting the tenant as a result of non-payment of rent up to a maximum of £50,000, depending on the policy.
HomeLet is the UK’s largest tenant referencing, Rent Guarantee and specialist insurance provider for the lettings industry and has around 3,000 approved letting agents nationwide.
HomeLet pays out an average £3m in Rent Guarantee claims every year.
HomeLet have been shortlisted for the 2010 Landlord & Letting Awards.