Challenging conditions for landlords and letting agents could cause rent arrears to rise and this scenario is something landlords should be wary of, according to RentalStep.
The PropTech startup says that if rents continue to rise and wage growth remains stagnant, some tenants may find it more difficult to meet their monthly payments which could cause long-term problems for landlords.
According to data from Your Move, the number of tenants in arrears increased for four consecutive months between January and April. The agency reported that the proportion of its tenants in arrears increased from 8.4% to 9.4% during this time.
Meanwhile, Belvoir recently reported that a fifth of its offices had four to 10 tenants in arrears during the first three months of the year.
It has been estimated that rent arrears collectively cost landlords somewhere in the region of £900 million each year. As tougher conditions and increasing regulation start to affect landlords and agents, the number of tenants in arrears could continue to increase – particularly if rents keep rising – throughout the year.
“Rent arrears are a real and serious issue for the nation’s landlords and they need to do everything in their power to protect themselves from being seriously affected,” says Mike Georgeson, founder and chief executive of RentalStep.
“Many industry commentators predict that rents could rise as a result of the incoming ban on tenant fees. Landlords need to be aware of how this could impact on rent arrears and prepare accordingly.”
One of the most crucial processes for landlords, therefore, is to carry out comprehensive checks on prospective tenants.
“Making sure you let to tenants who have been fully referenced and credit checked is absolutely vital,” says Georgeson.
“Of course, you’ll never be able to completely avoid rent arrears as any change in circumstance could cause a tenant to miss a payment, but you must do everything you can to make sure you partner up with reliable renters.”
RentalStep has created the TenantPassport for precisely this reason. The digital rental history profile, which includes a tenant’s rental history, employment details and references, can be shared with landlords and letting agents.
“We’re aware that it can be time-consuming and expensive for landlords to carry out the right checks on prospective tenants and that’s why we’ve developed an free and effective alternative,” Georgeson adds.
“At RentalStep, we are also passionate about making sure that all tenants’ rental payment histories are included in their all-important credit scores.”
To this end, the startup has been competing in the government’s Rent Recognition Challenge which was launched to encourage startups to use technology to help share renters’ payment histories with lenders and credit reference agencies.
After being named one of six winners of the first stage of the competition, RentalStep recently took part in round two by pitching to the Treasury. A total of £1.4 million will be made available to the winners of the competition to develop their product.
“Making it a formality for rent payments to be included in credit scores is key to securing the financial future of the next generation,” concludes Georgeson.
RentalStep, which allows landlords to list available properties on Rightmove, Zoopla and PrimeLocation for a fraction of the normal cost, has recorded landlord user growth of around 150% per month since the start of 2018 and expects to have over 5,000 tenants using its platform by the end of the year.