EXCLUSIVE: More tenants failing reference checks as cost-of-living bites

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The number of tenants passing referencing checks has dropped off drastically as the cost-of-living crisis bites.

Rent guarantee firm Housing Hand reports that about 35% previously passed checks, but that the number is dropping and could now be as low as 25%. Another 40% will get accepted using a guarantor, but that means up to 35% will fail to achieve either.

“Referencing has become more stringent and it’s partly about ID checks, which shouldn’t be a problem for legitimate renters, but it’s also about their financial capability,” COO Graham Haywood (pictured) tells LandlordZONE.

David Coughlin, director of the Landlord Sales Agency, says he knows of one instance where a landlord has sold a property and the letting agent is trying to find his tenant a new home – however, this tenant has failed to pass current credit checks which are now more stringent than when he moved in years ago. Despite having paid his rent on time, the task is proving impossible.

Salary test

“We’ve heard of similar cases,” says Haywood. “Paying your rent on time doesn’t necessarily give you a financial qualification.

“Referencing firms would typically base their test on three and a half times a would-be tenant’s salary but as rents have gone up, that can be four or even four and a half times their salary.”

He adds that in the last six months, Housing Hand has seen a 50% rise in applications for guarantees and that it’s not just young people who need to use its services, but older – even elderly – renters as well, particularly if they’re not in full-time employment.

“People are being challenged in terms of their income not going up,” says Haywood.

“There are also pressures on landlords paying higher mortgage rates, and the next few months aren’t likely to get any easier.”

Read more: ultimate guide to referencing.

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