Tenant referencing checks are now more important than ever. With over 840,000 tenants in arrears, it’s important that agents and landlords have a robust system in place for referencing tenants.
The upcoming months will reveal lots for tenants; whether the roadmap out of lockdown will bring economic prosperity, or if we will come to face new Covid variants and a pause on the next stage of the roadmap out of lockdown. As a transitional period, we await to see how furlough's end, coupled with a hope for a growing job market (all amidst global Covid concerns) will affect tenants' circumstances.
How did our Referencing adapt during the COVID-19 period?
COVID-19 plunged the UK economy into the deepest recession since records began – it goes without saying, tenants’ circumstances were impacted. When lockdown struck, we adapted our referencing so that it could (and continues to) account for:
The furlough scheme
It's important to determine exactly how much income the renter receives from furlough – full-time or part-time pay – and whether their employer tops up their pay to 100%. It helps us to create a better understanding of the renter's affordability, more so than just using bank statements.
The Eviction Ban and 6 months’ notice
We have seen longer tenancies due to the Evicton Ban and 6 months required notice, and the fact that especially in the earlier months, less tenants were willing to move. We upped the upfront payment amount for if a tenant doesn’t pass their affordability, to account for longer tenancies.
We have always ensured our referencing takes into account self-employed tenants. In the gig economy, we are seeing more people renting who have irregular earnings or a varied structure of employment – so our referencing takes these renters into account without immediately failing them. We also monitor furlough for self-employed tenants, especially for those who became self-employed during the pandemic (the dates they can qualify for a furlough payment etc).
We’re partnered with Alan Boswell Group, one of the largest insurance brokers in the UK, to provide a Rent Guarantee product to our letting agents. Many rent guarantee products were forced to shut down during the first lockdown, with some never returning or severely hemorrhaged. Alan Boswell’s longstanding reputation meant that we were able to maintain cover throughout the whole Covid period for our existing agents, even with the increase in claims.
Tenants on Universal Credit
Covid saw an almost doubling of Universal Credit claimants. Understanding that every tenant is different, it's important that we ensure that all information gathered is considered in the tenant referencing process – without sweeping checks that can potentially discriminate against certain tenants.
But with the roadmap out of lockdown, we’re not out of the woods just yet.
How will our tenant referencing change with the roadmap out of lockdown?
Tenants’ situations are incredibly nuanced, especially with all of the upcoming government and economic changes. As we enter what we expect to be the most precarious time for renters, the roadmap out of lockdown, we will ensure our referencing takes every check and possible change into account.
The Coronavirus Act: Eviction Ban and 6 months notice will end at the end of May
A year on from the start of the Eviction Ban (which was momentarily lifted during the summer months), 31 May is set to be its end date, alongside the removal of the 6-month notice period that must be served to tenants before eviction proceedings.
With this in mind, our risk scoring will continue to reflect the fact that landlords may be locked into tenancies for longer than they anticipated.
Employers start contributing to furlough in July
Announced at the Budget 2021, furlough will end on September 20 2021. Also, from July, the government will introduce an employer contribution for the cost of unworked hours: 10% in July, 20% in August and 20% in September.
This could be an incredibly risky move from the Chancellor; will workplaces be able to contribute to their employees' salaries from as early as July? This will put a test on the stability of the job market, especially for the industries that have relied so heavily on furloughing their staff such as retail, service and hospitality. Employers may even question whether they still need the same number of employed staff come July. And although we're hopeful that the roadmap out of lockdown will continue without a hitch, if the Prime Minister puts the brakes on the next stage, this could severely jeopardise job market recovery.
The rise in unemployment caused by COVID-19 has already led to a rise in Universal Credit claimants. While the roadmap out of lockdown bodes well for unemployment rates, we will still hold at all of these variables together, to provide agents and landlords with the most accurate and safest risk scoring for tenants in the coming months.
The job market seems to be recovering with lockdown easing
We are currently seeing a growth in employment in the UK. The number of people in pay-rolled employment has risen for a third consecutive month, with an increase of 68,000 last month as found by the Office for National Statistics. We can only expect this to rise even further with the roadmap out of lockdown. However, even with job market recovery and a hopeful decrease in unemployment levels, referencing needs to take into account the elevated risk of tenants in their probation period.
It is estimated that almost one in five new employees fails to get through their probationary period. Therefore, we will continue to find out all the necessary information regarding the renter's probation to determine the risk levels of renting to them.
RentProfile offers a tenant referencing product that adapts to tenants' circumstances
As we await the rental market's seasonal growth alongside a hope for economic and job prosperity, we will continue to adapt our Referencing in line with changing factors, for our agents and landlords.
If you have any questions or would be interested to learn more, please contact us at email@example.com.