Average earners at risk of rental market freeze out

Research suggests landlords harbour ‘unrealistic’ income expectations.

Average earners in the UK risk being priced out of the rental housing market due to unrealistic income expectations harboured by landlords, research has suggested.

A report by tenant referencing and insurance agency Landlord Secure found that while the average annual salary in the UK is around £27,600, nearly one in five landlords (19%), would expect any applicant to be earning at least £30,000 a year before they would consider their application.

Nearly one in 10 admitted they would be unlikely to progress an application from anyone earning below £50,000, with some of those saying applicants should be earning £100,000 to be in with a chance of success.

A lack of understanding about the UK credit market has been suggested as one reason for these high wage expectations, with 47% of landlords believing that those on higher wages will automatically have better credit scores and a better financial footprint – which is not always the case.

However, despite this, there are some landlords that do have more realistic expectations for their applicants and 26% would be willing to consider tenants earning at least £15,000 a year while nearly one in five would not dismiss those on minimum wage.

Steve Burrows, managing director at Landlord Secure, said: “Landlords obviously want to feel secure that any new tenant is able to meet their rent commitments over the course of a lease agreement but it is unrealistic to only accept tenants on higher wages.

“Choosing the right tenant should be based on their current financial stability, which is not always linked to earnings and those earning less but with a history of meeting payments should be given equal consideration.

“Enabling landlords to access an applicant’s credit score should be an integral part of any financial check and it would serve as an incentive for tenants to pay their rent on time if they could build a better credit score in the same way those with a mortgage can.”

The same report also revealed how long landlords would expect an applicant to have been in a stable financial position, with most – 28% – expecting any new tenant to have been in a ‘strong’ position financially for at least six months prior to their application.

Others would be much more cautious when it comes to an applicant’s financial history, with 21% expecting any applicant to have sound finances for at least a year before signing a rental agreement with them.

Much more stringent are the 14% of those surveyed who said they wouldn’t expect an applicant to have ever gone through tough financial times, and would consider not signing an agreement with them unless they could show an impeccable financial history.

Burrows said: “Most landlords do not currently have access to an applicant’s financial history but this is clearly an important issue for them.

“Landlords should challenge their letting agents to ensure they are conducting thorough credit references on tenants, including detecting arrears and non-payments.

“The market also needs to do more to provide the kind of products that allow landlords to get the full picture of their tenants’ financial status so they can make better decisions that work for them and ultimately the tenant.”

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