Banning rental evictions won’t fix tenants’ real problem

The issue is that tenants are running out of cash owing to the recession and social distancing. 

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The Conservative government has halted rental evictions in England, extending the current ban by another month to 20 September. (Similar protections have already been put in place in Scotland and Wales by the devolved administrations.)

The move will prevent a wave of evictions over the coming days and delay a spike in homelessness, but it is difficult to see what the government expects to materially change between now and 20 September. The reason why so many tenants are falling into rent arrears is their incomes have been slashed and, in some cases, extinguished, either by the coronavirus recession or through social distancing measures rendering their businesses unprofitable.

The only way to restore their incomes is to end social distancing. But in practice, even if a medical breakthrough allows the British economy to return to normal much faster than expected, the central problem remains: many tenants are in arrears, they have no plausible path to paying those arrears off, and as a result they and their landlords are facing the possibility of a sharp and painful default.

One option is simply to remind landlords that the value of their investment can go down as well as up, and allow them to lose out. In practice, this is where we are heading: there is no meaningful hope of recovering arrears from tenants once they get past a certain size, because the short-term consequences of a tenant default are less painful than being overwhelmed by the debt and unable to move. Both from a pure free market and an anti-landlord perspective, this is a superficially attractive option. However, it ignores how painful a sudden and rapid exit of landlords from the market will be for landlords, tenants and everyone else. This is one area where George Osborne had the right idea: he had a suite of policies designed to force many landlords to leave the market, but gradually, avoiding a sudden exodus.

[see also: What one family’s plight tells us about the crisis in temporary housing]

The only way to avoid that event is to give tenants money – to increase the eligibility and generosity of Universal Credit, because otherwise the government is looking at a very painful landing for tenants and landlords and everybody else, sooner or later. Ministers can delay the date of repayment as long as they like, with mortgage holidays and regulatory tweaks to protect tenants, but the central problem  – of tenants with no money – can only be addressed by either giving tenants more cash or weathering a painful crash. Both approaches have one important thing in common: acknowledging that the economic consequences of coronavirus will be with us for some time.

Stephen Bush is political editor of the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics. He also co-hosts the New Statesman podcast.

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