Many landlords both in the private and social sectors are concerned that the upcoming welfare reforms will lead to more tenants falling into rent arrears. However, it has been reported today that around twenty-five thousand housing executive tenants in Northern Ireland are already in rent arrears, meaning that the landlords and local authorities are already struggling with making sure tenants pay their rent on time.
The Housing Executive has said that it is extremely concerned by the fact that a third of their eighty-eight thousand tenants are already in rent arrears, especially as the average debt per household is around five hundred pounds. Furthermore, there has been an increase in tenants relying on pay-day loans and doorstop lenders in order to pay their rent which often charge extremely high interest charges.
Chief Executive of the Housing Executive, John McPeake has claimed that around five thousand tenants living in Northern Ireland currently rely on pay-day loans in order to pay their rent. He went on to say: “Many social tenants in Northern Ireland are elderly, disabled or without work and indeed four tenant households out of five have nobody in paid employment. Those people on the economic margins can’t access the routine finance that others may be able to often feel they have no alternative but to turn to pay-day lenders or other doorstep lenders.”
“We believe roughly 5,000 of our tenants rely on pay-day lenders to pay their rent but beyond that, we have a particular problem here of unregulated door-step lenders who are coming along, often, it is alleged, connected to a criminal fraternity and they are putting tenants under extreme duress.” Pay-day loans have already been criticised by many financial bodies across the UK, as they are accused of praying on those that are most vulnerable due to financial difficulties. They depend on the fact that some members of the public may not be able to get any other type of finance, and therefore charge extortionate interest rates for their services, meaning that many customers often end up in more debt than they started with.
As a landlord, it is important that you discuss with your tenants the dangers of pay-day loans, as not only could they lead to your tenant experiencing financial difficulty but also yourself. Investing in a landlord insurance policy which includes rent guarantee insurance is a good way to protect yourself from the impact of rent arrears, but having open discussions with your tenants may also prevent problems from occurring in the first place.