More than one in four landlords have experienced rent arrears in the past year, according to new research from Pegasus Insight, which found 26% of landlords encountered late or missed payments during the 12-month period.
The figure, while significant, represents a sustained decline from 42% recorded at the peak in 2020, marking a six-year downward trend in rental payment defaults.
The data emerges five months after the introduction of the Renters’ Rights Act, which has reshaped the regulatory landscape for the private rental sector.
Portfolio size impacts arrears exposure
The research indicates that arrears are concentrated among landlords with larger holdings. Two-thirds of landlords with 11 or more properties experienced arrears in the past year, compared to lower rates among smaller portfolio holders.
This disparity suggests that larger lettings portfolios face greater exposure to tenant payment issues, despite potentially having more resources to manage cash flow challenges.
Void periods persist across sector
While arrears have declined, void periods remain a consistent challenge for landlords. The study found 41% of landlords experienced a void period exceeding seven days in the past 12 months, with an average duration of 66 days.
Void periods were more prevalent among larger portfolio landlords and houses in multiple occupation (HMO) operators, affecting 68% of those with 11 or more properties compared to 35% of smaller portfolio holders. This trend contrasts with recent activity in the buy-to-let financing market, which has seen continued investment despite operational challenges.
Bethan Cooke, director of Pegasus Insight, said: “Rental arrears falling to 26% is encouraging, particularly after the financial pressures experienced by tenants and landlords over recent years. But it is important not to interpret this as evidence that those pressures have disappeared.”
She added: “Most renters are continuing to meet their housing costs, but many household budgets remain stretched. With inflationary pressures persisting and landlords facing higher operating and regulatory costs, the position remains finely balanced.”
Market implications
The findings suggest that while tenant payment behaviour has improved since the pandemic peak, landlords continue to face operational pressures from both void periods and regulatory changes. The concentration of arrears among larger portfolios may influence investment strategies, particularly as institutional landlords expand their holdings.
Cooke noted that the priority should be “to avoid adding further pressures that could ultimately feed through into rents or reduce the supply of homes available to tenants.”
