This scheme will close on the 30th September. Will this mean tenants’ income dropping and rent arrears growing?
The Coronavirus Job Retention Scheme (commonly referred to as the Furlough scheme) has been a hugely successful and critical lifeline for companies and employees during the pandemic since its introduction in late April 2020.
The scheme has replaced 80% of furloughed workers salaries up to £2500 per month, with the government providing these funds. There have been several time extensions to this support. Following a winding back of the scheme most recently, employers have been expected to contribute 20% with the government contribution dropping to 60%. As part of the government’s plan to slowly wean the country off all financial support measures, the scheme is set to end completely on 30th September, at which point employers will once again be responsible for all staff salaries.
Whilst widely publicized and universally anticipated, this does represent a financial cliff edge for many companies and workers alike. It is anticipated that many of the furloughed roles will disappear at this point, once companies who have been using the scheme become liable for full payment again. The economy and fortunes of individual companies have changed radically since the scheme was introduced and many furloughed roles may no longer be viable. Whilst unemployment has recently dropped and a record number of jobs are currently being advertised, it is anticipated that unemployment will none-the-less start to tick up again in the autumn.
So, what will the impact be on the rental sector?
There is obviously an increased risk of tenants having difficulty paying their rent if they are impacted due to the end of the furlough scheme. The exact magnitude of this problem is difficult to forecast but it is important for Landlords and Lettings Agents to be aware of the situation and plan accordingly as at the start of the pandemic in 2020.
For those self-managing landlords, our advice is to keep in regular contact with your existing tenants and to intervene early if problems arise. Rent debt repayment plans can potentially be agreed with your tenants if any are struggling. For those filling voids in their properties it is vitally important to properly vet all applicants’ financial situations and confirm affordability – now and in the future.
For those landlords who use a lettings management service your agent should be performing these steps for you. So it is important to ask them what plans they have in place for the end of the furlough scheme and managing referencing and rent collection.
If you are a Landlord and you think you might be impacted by the end of the scheme on 30th September then please get in touch with us at Lifeboat Lettings for an informal chat either by phone on 01233 802803 or by email.
