Author : Oliver Hopkins
Rents in the UK continue to surge northwards. There appears to be no sign of any respite for households. According to the Office for National Statistics, the median rent in England was circa £800 between October 2021 and September 2022. The Renters Reforms Bill promises to protect the right of renters, but action needs to be seen to be taken in controlling or managing rising rents.
There is a need for nearly 230,000 new rental homes if the current pace of demand continues. This shortage of new housing has been persistent for the past many years and needs are increasing. The high growth in home rentals has forced many people to rent for longer as they wish to avoid being caught in a challenging situation, as new homes are hard to find within their budget. Property Mark, the leading membership platform for property agents, has reported that an average letting agent branch had 142 applicants registered on their books in February 2022, indicating a 73% year-on-year increase from February 2021.
Many factors affect the private rented sector, further impacting rental home stocks. The rising rent prices may make the industry look that all is good for investors. However, deeper analysis and other factors reveal that the yields from the sector can be much lower than what is apparent on the surface. The situation will unlikely improve shortly, as many landlords struggle with recently introduced legislative pressures. Increased interest rates and repair and maintenance costs are also leading to this drop in yield rates. Added to this, the Renters Reform White Paper has made it clear that the Government will introduce more changes. This is leading to a situation of uncertainty around the UK home rental sector. According to the Office for National Statistics, private rental prices rose 4.7% in the year leading up to February 2023. Scotland reported the highest rises despite a rent freeze applied in the last two months of the year. Rents rose in the East Midlands by almost 5% compared to a 4% rise in the West Midlands. London has seen the lowest annual percentage change in recent years. However, rents did rise by 4.6%.
Rents are rising not only in the private rental sector but also in social housing. There has been a growing demand by the Social Housing Action Campaign for a freeze on rents and service charges for 2023/24. The Government stepped in to cap rent increases at 7% instead of the forecasted 11%. Chancellor Jeremy Hunt had refused to accept alternative options to limit rent rises to around 5%. He says the 7% rent cap will save tenants up to £200 a year.
Reasons Why UK Rents Remain High
The simple reason is a shortage of affordable housing. Successive governments still need to find ways to build enough homes to counter the lack of rental home units. The problem has been further compounded because of the decision to sell off social housing stock to the private sector through the Right to Buy. Some stocks were demolished and not replaced.
What Is Expected In The Short Term?
Rising rents are impacting tenants across the UK. Data released by the Ministry of Justice (MoJ) shows that private landlords are evicting more tenants after falling behind on rent than ever before. The MoJ found there were 5,409 landlord possessions between October and December 2022. That’s almost double the same period in 2021. We predict that rents will continue to rise as the Government shows no sign of tackling supply issues. We expect that many landlords could sell up their properties ahead of incoming rent reforms. This will, potentially, further reduce supply.
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