UK'S Critical Rental Property Shortage and its Impact on Landlords and Tenants

The severity of the rental market crisis in the UK made the government recognize the issue, which is the consequence of a series of tax hikes and policies. The government's strategy of boosting growth by raising taxes impacts investments in the Private Renting Sector and worsens rental property shortages.

Disturbing statistics

There is high demand for private rented housing, which is growing by 142 percent over the five-year average. Supply is also plummeting at a rate of 46 percent as small landlords leave the private rental market. An established trade body reports an average of thirteen prospective tenants in the queue for each available rental property. Rental homes are likely to become scarcer because the high costs of complying with upcoming energy efficiency legislation will force many buy-to-let investors out of the market, besides steep hikes in mortgage payments. Presently, the number of properties for sale is four times the number of available rental homes. The number of private rental properties in the United Kingdom has decreased by 49 percent since 2019.

Private renters and rent hikes

The rise in the price of private rentals was 3.6 percent in the year ending Sep 2022. Most private renters have to pay almost a third of their income on rent. Those who cannot afford such rents have to live in substandard homes that have issues like mould build up and unsuitable bathrooms and kitchens. The tenants have no choice but to pay the higher rate or leave the property in search of another, more insecure, and cheaper home.

The average rent in the UK, according to HomeLet, is £1,113, showing growth of 9.4 percent over the previous year. Rent hikes hover around 21 percent in some parts of the UK. Rent and deposit increases encourage renters to stay in their rental homes longer. Many landlords with debt-free properties enjoy the benefits of rent hikes because there are no mortgages to pay.

Many renters reluctantly move to the private rental sector as there is a severe shortage of social housing in the UK. Due to inflation in house prices, lower-income families can only dream of owning a home. Shifting to larger cities to avoid the commute and the influx of more foreign students into universities is leading to overcrowding in the private rental market.

Landlords face higher costs

The cost of running a buy-to-let property is skyrocketing with a broad spectrum of higher expenses, such as stamp duties, insurance premiums, and property taxes. There is a possibility of higher mortgage rates, with rising interest rates adding to landlords' woes. Safety hazards and a lack of energy efficiency are common issues with older homes. Landlords must comply with safety norms and energy efficiency standards to rent such properties legitimately.

The impact on the lettings market

The critical shortage of UK rental property is severely impacting tenants struggling to find another home if their landlord hikes the rent. Unfortunately, there is no rent control in the UK, which raises the likelihood of future rent hikes. Running buy-to-let properties or joining the market by purchasing such properties may be profitable, as rental homes will be in high demand. Delay in resolving the housing crisis is a boon in disguise for investors in the PRS market.

In conclusion

The present situation in the UK's rental market favours investors and landlords. The rental property shortage is seriously affecting tenants as hundreds and thousands of people are likely to become homeless because of rent hikes and the cost-of-living crisis. Housing experts and campaigners are calling on the government to address the deteriorating private rental sector in the UK.