Risk to landlords and tenants - rent arrears

 

The continued rise in rental arrears is creating significant challenges across the private rented sector, with consequences being felt by both landlords and tenants. 

 

Although recent figures from Reposit suggest arrears growth is beginning to slow, the record average arrears figure of £2,281 highlights the ongoing financial strain within the market. 

 

 

For landlords, higher arrears levels increase financial risk at a time when operating costs remain elevated. Many buy-to-let investors are already facing higher mortgage repayments due to interest rates remaining at 3.75%, alongside rising maintenance, insurance and compliance costs. 

 

 

When tenants fall behind on rent, landlords may struggle to cover mortgage payments and other property-related expenses. This can be particularly difficult for smaller landlords who rely on rental income as a primary source of cash flow. 

 

The introduction of the Renters Rights Act and the removal of Section 21 no-fault evictions are also contributing to greater caution among landlords. 

 

Without the ability to regain possession quickly, many are tightening affordability checks and placing greater emphasis on tenant referencing and financial stability before agreeing tenancies. 

 

As a result, some renters may find it harder to secure accommodation, particularly those with lower incomes, irregular employment or previous arrears histories. 

 

Landlords may also increasingly turn to: 

 

• Rent guarantee insurance 

• Deposit alternative schemes 

• Higher income thresholds for applicants 

• More detailed affordability assessments 

• Professional property management services 

 

Some industry observers warn that growing regulation and financial pressure could encourage more landlords to exit the sector altogether, potentially reducing rental supply and placing further upward pressure on rents. 

 

Consequences for Tenants ... part 2 

 

For tenants, rising arrears levels often reflect wider affordability pressures caused by inflation, rising living costs and higher household bills. 

 

Falling behind on rent can have serious consequences, including: 

 

• Damage to credit profiles 

• Difficulty securing future rental properties 

• Increased stress and financial hardship 

• Legal action for unpaid rent 

• Risk of eviction proceedings where applicable 

 

Even where landlords are willing to negotiate repayment plans, prolonged arrears can create tension within landlord-tenant relationships and lead to instability for renters. 

At the same time, increased landlord caution may make the rental market more competitive. Tenants could face stricter affordability criteria, larger guarantor requirements and more intensive referencing checks. 

 

The growing gap between traditional deposits and average arrears may also leave some tenants struggling to raise upfront moving costs, particularly in high-rent areas. 

 

 

Both landlords and tenants are increasingly looking for solutions that balance affordability with security. 

 

Alternative deposit schemes, flexible payment arrangements and improved tenant screening are becoming more common as the sector adapts to changing legislation and economic pressures. 

 

Ben Grech said the market is entering a period where financial resilience and flexibility will become increasingly important for all parties involved. 

 

As the rental market adjusts to new regulations and continued economic uncertainty, the ability to manage risk while maintaining affordability is likely to remain one of the sector’s biggest challenges throughout 2026.  

 

 

source https://www.lettingagenttoday.co.uk/breaking-news/2026/05/rent-arrears-reach-new-high-latest-figures/