Rents are increasing at the fastest rate in five years, and the signs are that they will rise further, unless significantly more is done to boost the supply of much-needed rental homes.
The latest Office for National Statistics figures show that the average newly advertised rental price has reached £969 a month following gains across the UK.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Rents are rising faster than any time in the past five years, forcing tenants to choose between squeezing their spending even harder, or uprooting their life. Either way, they’ll end up worse off.”
Conscious of the widening supply-demand imbalance and the impact it is having on the private rented sector (PRS), the Association of Independent Inventory Clerks (AIIC) is now calling on the government to include the provision of more new rental homes in all parts of the country, as part of its levelling up agenda.
The AIIC says that, in certain parts of the country, the PRS is coming dangerously close to running out of homes completely, and as a result the Boris Johnson government must extend its flagship policy to the rental market as well.
“We’ve had reduced social housing for the last 20 years, and at the same time the many restrictions on landlords have reduced the growth of the PRS as a compensatory mechanism to fill this shortfall,” Daniel Evans, chair of the AIIC, said.
“We also need to look at how unaffordable housing across the country has locked many first-time buyers out of getting on the property ladder, leading to the average first-time buyer age going up to the mid-30s.”
Further to this, he adds, is the larger demand for rental homes from the younger generations – who in many cases have to, or want to, rent for the long-term.
“All of these things taken together means demand is very, very high – probably as high as it’s ever been for many decades – while supply just simply isn’t keeping pace. Such a gap between supply and demand can not be sustainable for the long-term,” Evans added.
While Evans says that Build to Rent is helping to plug this gap somewhat, it is mostly focused on central urban areas and prime postcodes to maximise ROI – and still only accounts for about 2-3% of the overall market.
He continued: “On its own, BTR is nowhere near enough to address the chronic stock shortage, particularly in suburban and countryside locations where the stock shortage is most acute and where BTR schemes are much rarer.
“Add to this a lack of brownfield and greenfield sites for development and you have a major problem when it comes to creating enough stock.”
Evans believes that the long-term problem with such a dichotomy between supply and demand is that prices continue to soar. “Rocket-like rent rises will simply end up making rental properties similarly unaffordable to generation rent, and they may decide to stay living with their parents for longer.”
The stock shortage, which is already severe, could be made even worse by further restrictions on landlord, including the removal of Section 21. This could serve, Evans says, to drive more landlords out of the market, worsening the stock-side crisis even further.
The AIIC believes that the government needs to create policies to promote affordable housing development (with open space available) in non-urban areas.
“It also needs, as the National Residential Landlords Association has pointed out, to encourage investment in the PRS rather than further legislation to remove landlords and reduce profitability,” Evans explained.
There also needs to be an uptick in social housing, to reduce the burden of pressure on private landlords, and offer incentives to landlords when it comes to improving the eco-friendliness of their homes – with many landlords fearing the improvements required will cripple them financially.
Evans added: “Landlords also need a major say in the rental reform outlined in the Levelling Up White Paper, which is expected to be fleshed out in the White Paper on Rental Reform in spring.
“We can’t completely disincentivise landlords, because the PRS will start to crumble and more rogue landlords will be able to slip through the net. New legislation and reforms can be welcome, but only if they bring everyone along and have long-term benefits for all parties – instead of merely being used to score political points.”
Comments (16)
‘We told you so’ should be the heading and ‘its going to get worse’.
It is not limited to Westminster, the devolved powers, SNP and Labour Wales have wrecked their PRS, with England about to catch-up.
Oh yes WoodenTop, and the Govt know it, they refer to it by removal of Section 21 as ‘ unintended consequences ‘ [ sic ] lol, L.A’s won’t know what’s hit them.
Chronic shortage of rental properties in our town and surrounding area while demand remains incredibly high, leading to frustration all round. Challenging to say the least trying to operate a letting department with barely anything available to let….year on year the stock gets less…
@Vicars04 – yes, and still so-called tenant support groups and Govt carry on deluding tenants ( who are the real sufferers )
about ‘ them nasty landlords ‘ ( despite 84% being satisfied, – which is a much higher % than satisfied with Members of Parliament who are the culprits – sitting in the House of Rogues )
@PeeBee, the ‘real ‘ irony is those who do Not provide housing or ‘Shelter’ criticising those [ landlords ] that do.
All this was predicted in 2015 when the ludicrously stupid Section 24 was announced. So, so obvious to everyone with a brain cell what would occur, but now this obvious elephant in the room is completely invisible to the govt, charities and journalists who seem strangely unable to even acknowledge it. They wanted this, so let them own it.
I remember when Thatcher attacked the teaching profession, an attack from which teaching is still suffering. Osborne started the attack on the letting profession creating the mass exodus of landlords. Tenants will suffer the loss of rental properties for decades to come.
There was about as much justification for the war on landlords as there is for Russia to invade Ukraine.
But the teaching profession is a joke.
I have interviews young people this week who cannot spell, have no idea about grammar or punctuation and cannot talk without saying LIKE or KINDA every 2 seconds they are only going to get low paid jobs.
The issue with this is that, this ‘kinda’ behaviour isn’t just a matter of them being taught in schools, it is also them having the support and guidance of engaged parents at home!
@JanByers, indeed teaching is a joke, because of what Govt has done to run down the profession – just like they’re running down the rental market.
As for ‘some areas becoming dangerously close to running out of rental properties ‘ – I had to laugh. – How many dozens and dozens of Tenants are chasing Each rental property that becomes available. !
Definition of irony:
Running janbyerss’ post through a grammar and punctuation checker.
I love you, PeeBee.
I love you too, DefnitelyNotMW.
@PeeBee and DefinaitelyNotMW, – you two should get a room Lol 😉
What has your first paragraph got to do with this article? Yes teaching is a joke today. Just like any industry, the good the bad and the ugly. Very few fit the first and far too many in the latter with 20% of children unable to read after sitting in front of a teacher and bad behaviour. What did Tony Blair & Co do!!!!!
I was endevouring to make a comparison with what Thatcher did to teachers and the far reaching effects and what Osborne et al did to landlords and the anticipated far reaching effects on tenants.
Govt & Councils should be coming to us & saying:Mick, what can we do for u that is going to make u not sell all your houses and what can we do to entice more landlords in as we in the **** here, our hostels are full too and not emptying.We’re sorry we wanted all your 50 year old houses to have New build standards, we din’t realise that would result in impossible rents for benefit tenants.