Although consumers have struggled with increased living costs and despite inflation and mortgage rates finally falling, rents continue to rise for tenants. In February, the average London rent hit £2,026, with tenants now paying 38.8% of their income on rent.
In part, increased rents are caused by the exodus of landlords from the sector, forced out by both taxation and legislative changes that have left many wondering if it’s all worth it. We’ve seen this rush to sell firsthand and share the frustrations faced by landlords. It’s a problem that’s accelerating ahead of the Parliamentary progress of the Renters’ Rights Bill with yet more regulatory changes to come.
This pressure on rent values may seem like good news for those landlords left in the market. However, it’s important to consider the affordability ceiling for tenants which is worryingly close.
The supply/demand imbalance
Demand for rental properties in London is still strong. Affordability to buy is still a challenge for many and until mortgage rates fall further, they are choosing to continue to rent instead. Meanwhile, companies mandating back-to-the-office working are making living in London a high priority again.
Supply has always been a challenge in the capital but the government forcing landlords out with ill-thought-out changes doesn’t help. The Renters’ Rights Bill aims to improve standards in the sector and give tenants a fairer footing. Yet for the majority of landlords who already operate high quality properties, the balance has shifted too far. Instead of being an equal partnership the tenant will now call the shots, leaving landlords exasperated.
Meanwhile, changing regulations around the Minimum Energy Efficiency Standards, as well as a revamp of Energy Performance Certificates as the government strives for net zero, have left landlords in the dark about how much such changes will cost. Even those wanting to expand their portfolios rather than sell up, face added costs after stamp duty was raised in October’s budget. It’s no surprise they’ve had enough.
The impact on tenants
Tenants have little choice but to pay the higher rents but with affordability ceilings close there’s little wiggle room over how long they can do that. Meanwhile, another feature of the Renters’ Rights Bill will be tighter controls on the rents that can be charged, which must be in line with the market. Increases will also only be allowed once a year and tenants will have greater power to object to what they see as unfair rises.
Meanwhile, rental bidding will no longer be allowed, making demand for well-priced properties even more intense. Landlords will no longer be able to capitalise on this excess demand by asking for or accepting higher bids.
Navigating the rental market in London over the next few months will be a challenge unless the government becomes more supportive of landlords and remembers that they are in business to make money, not to give it away. Quality will be key and competition for properties fierce, especially in commuter-friendly areas of the city which will see particularly high rental demand. We are as frustrated by the changes as our landlords, but we are always here to help navigate these challenges.
We’re sharing some of our thoughts about what we’re seeing here at Living in London:
“The exodus of landlords from the market is something that started several years ago, but with each anti-landlord decision that the governments have made, more and more landlords have had enough.
The intention of improving standards and eradicating ‘rogue landlords’ is one that we 100% agree with, but rather than doing this, it is simply leading to all landlords leaving and from our experience 95% of these are good and professional landlords who take great care to deliver quality housing to tenants.
There could have been much easier/simpler and more targeted actions taken to remove any ‘rogue landlords’, but now we are left with a drastic undersupply of rental properties which is only causing rents to rise and harming tenants.
Bringing in further legislation that negatively impacts landlords will yet again be the final straw for some of the landlords who have remained, but there is only so much they will take before also exiting.
The government really should speak to and be guided by real industry experts, and they need to come up with policies to help keep existing and attract new landlords otherwise things will only worsen. We hope they realise this sooner rather than later.”
If you’re thinking of buying, selling, letting or renting a property and would like to discover more about how a 5-star rated multi-award-winning agency can help, we’d love to hear from you;
welcome@living-london.net
0207 231 0002
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020 7231 0002
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