The average value of rent arrears has soared by nearly a quarter year-on-year, rising to £2,237 in the first quarter of 2025 – a 23% increase from £1,818 in Q1 2024.
The jump represents a 56% increase in average arrears since the first quarter of 2023, reflecting a broader deterioration in affordability.
Persistently high interest rates and inflation are exacerbating pressures on household finances.
According to the Office for National Statistics, two-thirds of adults surveyed between 5 and 30 March 2025 reported a rise in their cost of living.
LETTINGS MARKET IMPACT
The impact on the lettings market is increasingly visible in formal disputes. Analysis of data from the Tenancy Deposit Scheme (TDS) by FCC Paragon found that rent arrears were cited in 20% of all disputes in 2024. A total of 9,784 disputes involved unpaid rent, marking an 80% increase compared to the previous year.
At the same time, landlords face significant regulatory changes under the forthcoming Renters’ Rights Bill.
The legislation, which will abolish Section 21 ‘no-fault’ evictions, will introduce tougher thresholds for reclaiming possession under Section 8.
LANDLORD DUTY
Landlords will be required to prove tenants are at least three months in arrears – up from the current two months – or 13 weeks in arrears for those paying weekly or fortnightly.
This tightening legal environment appears to be accelerating landlord attrition, adding further pressure to already constrained rental supply.
Figures from TwentyEA reveal that the number of available rental homes across the UK fell to just 284,000 at the end of Q1 2025 – an 18% drop from Q1 2024 and 23% below pre-pandemic levels recorded in 2019.
As supply dwindles, rents continue to climb. The average monthly rent now stands at £1,095, according to Reposit, reflecting continued upward pressure in a market increasingly defined by scarcity and financial instability.
COST PRESSURES
Ben Grech, Chief Executive of Reposit, says: “Landlords have been facing sustained cost pressures for some time and as rents have continued to rise, their exposure to tenant arrears has increased.
“The average cash deposit now stands at £1,261 which is £976 less than the average arrears value and underscores the inadequacy of traditional deposit schemes which offer just five weeks of protection.”
And he adds: “Our data also shows that the average charge for damages and cleaning (excluding arrears) reached £1,355 in Q1 2025 – up 18% since last year.
“With the Renters’ Rights Bill requiring landlords to accommodate tenants’ requests for pets, concerns over potential property damage are growing.
“In response, interest in our FCA-regulated product – offering eight weeks of comprehensive protection – has grown among landlords and letting agents.”
