As the covid crisis was developing in March 2020 I argued that one of the first requirements from the government was rent holidays. As I said on 4 March 2020, well before the government took any action on coronavirus:
There are three groups who should [bear the cost of coronavirus in addition to the government]. Firstly, landlords should. I have already suggested that should the epidemic spread then as a matter of statutory right any tenant should be provided with a minimum three-month rent-free period to ease the stress upon them whilst this crisis last. I would suggest that the grant of that rent free period should be automatic to anyone who does not make a due payment of rent on the required date during the period of the epidemic. They should be automatically granted this by the landlord without having to make any further application or to complete any additional paperwork.
I stress that the cost of this will fall directly upon the landlords in question. I am quite deliberately suggesting that they should bear the heaviest burden of dealing with the epidemic. The reason is simple and is that whatever happens they will still have an asset at the end of this period, and no other sector can guarantee that at present. As a consequence they have the greatest capacity to bear this cost. And, if it so happens that some landlords do fail as a consequence, the assets that they have owned will still exist after this failure and so the economy can manage the consequences of this.
I correctly suggested that there would be a rent crisis arising from coronavirus as a result, as part of the overall economic crisis that I also correctly predicted at that time.
Now that rent crisis is about to come out from the shadows. The FT has now noted that only 70% of commercial rents are currently being paid on time. And they are predicting that when the moratorium on evicting commercial tenants who have arrears ends on 30 June this year there will be mayhem in the commercial property market as rent arrears of around £6 billion have now arisen, and the threats of eviction will be appearing all over the place.
I have long said that the reopening from the lockdowns will be the hardest period for many businesses seeking to survive coronavirus. Many of the businesses with rent arrears are on the High Street and in hospitality - which will be far from back on its feet by 30 June. But the government is now going to let landlords evict these businesses from their premises - favouring wealth and rental income interests instead of real business and the needs of the economy and society, plus employees.
This conflict was always present in the coronavirus crisis. Now it is very real. And there could be significant economic casualties still to come. For all these who think we are on a healthy rebound I suggest a little longer period for appraisal is required. We may not have seen the mayhem as yet. The government is about to let that happen.
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Are you the sole source of this pivotal discussion on the planet, Richard! The two policies that would have saved the greatest number of businesses, employees and unadulterated human grief have always been an across the board rent and interest moratorium. Not holiday, moratorium. The economic pain would then have fallen where it can best be borne. But, of course, any policy decision that requires the elite to pay the greatest price raises immediately the much broader question of wealth disparity and the political implications of that are to be avoided like the plague (which we haven’t avoided of course!).
I have seen few others demand the absolute cancellations that I did
Now we will pay a high price for that indifference
Adam Smith made a point about landlords always getting paid irrespective of what happened to the tenant, so Richards point is not a new one.
I didn’t claim originality
My only prize would be for spotting it early this time
This is on a bit of a tangent but has some relevance. A big problem is brewing up for home owners of flats in blocks where cladding needs to be replaced. Very large sums of money are involved, flats have been valued at £0 but mortgages still have to be paid as does to cost of the cladding replacement. Many bankruptcies and repossessions are likely. I predict a feeding frenzy on vacant properties by those with capital, presumably after someone else has paid for the remedial work. Yet more housing moving into the hands of landlords. Personally I would fund local authorities to correct and take ownership of these properties where things have already gone too far for the current owners.
I think this is a local authority priority – including offering people homes
Those who should be paying for the safety issues in flats are the building companies that put them up in the first place. It is crazy that they have been absolved of all responsibility and are being protected from prosecution by Government decree. Who else could get away with selling goods not fit for purpose. Oh yes Government sponsored PPE suppliers.
The right answer is that the government funds the necessary works as a matter of urgency (helpfully employing people to do the work: I wonder what the multiplier is) because otherwise people will be living in fear in perilous conditions. And then we throw the book at the developers for building unsafe buildings – changing the law if necessary to trace and recoup their profits, because many of the SPVs involved will have done the works, granted the leases, transferred the freehold, and been wound up. They will squeal that retrospective rules are unfair and it wasn’t their fault anyway but rather the government’s due to ineffective regulation, or more to the point ineffective enforcement by local authorities. But they have pocketed the profits and they should pay.
Approaching four years later, and this is still an accident waiting to happen. https://metro.co.uk/2021/05/07/fire-breaks-out-in-canary-wharf-flats-with-same-cladding-used-on-grenfell-14537101/
Once an existing business is evicted, who is going to take a new lease? I expect landlords hoping to secure new tenants paying higher rents may have an unwelcome surprise. I can’t see “unlocking” turning into a consumerist boom. Better a sitting tenant paying something than a vacancy.
I would entirely agree
You are assuming rational landlords, especially of smaller tenants
I am not sure that is a good assumption
The question that immediately comes to my mind is “Are there enough businesses with sufficient revenue to replace the tenants threatened with eviction?”
If not, wouldn’t landlords be cutting off their noses by ignoring the potential economic recovery of their sitting tenants and having empty unlettable premises? If you see what I mean…
I see I’m not the only person thinking this.
A jewellery shop (part of a small local chain) has just had to vacate premises on my local High Street after thirty years as good paying tenants because the private landlord insisted on a significant rent hike this year.
I read this when you wrote it last year. It made such good sense that I immediately stopped charging rent to my one tenant. Most of my income is as a self employed music teacher, and covid cut my income by about half; with my teaching having to be online I didn’t have as much timetable time as pre covid, and living in the Lake District some pupils had poor broadband, and some didn’t like online lessons. I was however one of the lucky ones who benefited from SEISS. It wasn’t a lot but it kept me going and made it possible to give the rent holiday. I think I’d have thought of it eventually but your wise words were a strong prompt to do it asap. I don’t like being a landlord at the best of times and was mortified at the prospect of others suffering because of my inaction. So thanks, Murphy,
Thank you
I appreciate that landlords will try to evict tenants but surely that will only ensure that they lose any hope of getting arrears paid. I also fail to see who they will relet the premises to. It’s not as if there are queues of tenants lining up for commercial property
https://www.theguardian.com/money/2021/may/08/rent-arrears-put-thousands-at-risk-as-end-of-eviction-ban-in-england-looms
I suggest the same for tenants of residential property as well