Rental Crisis 2023 - The Real Picture

Despite the attempts by the authorities to paint a rosy picture of the UK real estate sector, facts keep emerging which reveal that not everything is right here. The real picture is different. Without a doubt, more families are renting due to of a variety of reasons. Renting might suit their employment pattern, or they may need to save more before buying their own home. However, data emerging from letting agencies reveals a different story. The recently released census data does not agree with the claim that the rich and the well-off are the reasons for the growth in the private rental sector. Hamptons, estate agents, says households renting privately have grown by huge numbers over the last decade.

Growth in private rented homes

The growth in private rented homes between 2011 and 2021 was led not by millennials enjoying the London life but by the most deprived areas of England and Wales. Their analysis shows:

1. An increase in privately rented households living in the 10 percent most deprived areas of England and Wales between 2011 and 2021.
2. 23 percent of households in the poorest 10 percent of the country rent their home privately. A decade ago, this figure was 18 percent.
3. At the other end of the spectrum, 10 percent of the most affluent areas of England and Wales saw the private rented sector add fewer new households than anywhere else in the country. The number of households renting in these areas rose by just over half the increase in the least affluent areas.
4. In the 10 percent of the most affluent areas, just 13 percent of households rent their home privately, up by three percent compared to a decade ago.

To sum up, around 60 percent of all privately rented homes in the UK are found in the 50 percent least affluent areas. Or put another way, the rich are getting richer and the poor are getting poorer. While homeownership rates plunged across the country over the last decade, they were more steady in the country’s affluent areas. This is probably due to the bank of mum and dad, the equity provider for many baby boomers, propping up the first step onto the housing ladder for many.

These figures have a message

The private rental sector is attracting tenants who would have been in social housing some years ago. It also reveals that social housing is declining rapidly in terms of quality and size. This trend is going to get worse as the greening agenda turns the social housing sector to have to upgrade and make energy efficient and/or fire-safe their older housing stock, following decades of their focus being on grant funding and new homes.

Figures released by the Department of Levelling Up, Housing and Communities reveal that social housebuilding is down to its lowest rate in a long time. Right to Buy, local council funding shortfalls and other factors have caused a significant loss of social homes in England. Consequently, more people are denied social housing and pushed into private rentals. Politicians hammering the private rental sector have little to say about the shortage of social housing, which they have been controlling for decades. They have even less to say about the fact that they have caused the mass exodus of private rented sector landlords that they have taxed out of the market.

Ringley advises to UK Build to rent

Whilst Ringley advises many of the top UK tenants-what-it-means-for-the-uk-build-to-rent-sector'>Build to rent developers, it will take some time for UK BTR to fill the void caused by the falling supply of both social housing and private rental stock. The surge in institutions announcing the start of single-family housing is welcomed as this takes institutional quality rental stock out of city centers and into every town.

That said, as of March 2023 construction activity is falling due to the price of money and many developers are worried about loan covenants. Therefore, it is going to be a hard climb for the UK to provide sufficient stock to enable rents to normalize and residents to feel comfortable that their rent is a fair proportion of their monthly income.