What is Causing 15 Months Consecutive Rent Rises over 10%pa?

Figures released by Zoopla have show that rents have risen for the 15^th consecutive month above 10%.  Currently, the annual rate of rent inflation is 10.4% pa.

Rent rises are still below the 12% pa rise we saw in August 2022 but are still incredibly high.  It is most difficult in London with rents averaging 40% of household income but in all regions, rents are still well above the average of 25% of household income.

• Rent inflation is still expected to grow faster than wages inflation, as it is currently, meaning even greater share of household income going on rent.

This is now forcing many younger people to return ‘home’ to parents as well as many landlords thinking of selling up creating an even greater shortage of available rental property with 1 in 10 properties now on the market for sale being former tenanted properties.

What has caused the rent spike?

• During the pandemic, many landlords built up areas on their mortgages as well as tenants being allowed to build up rent arrears with eviction banned.  These have now been removed.
• Many younger people then left home after the pandemic ‘lockdown’ to rent creating a surge in demand driving availability down and rents up.
• Energy performance certificates (EPC) forcing landlords to get energy efficient in rental properties up to a minimum grade c by April 2025 for new tenants and by April 2028 has forced some landlords to sell off energy inefficient homes that will cost many £000s to improve.  Even social housing groups are selling off energy inefficient properties creating even more scarcity of rental properties.
• Tax increases by reducing the amount a landlord can claim for mortgage interest expenses has again forced some landlords to sell.
• Stamp duty additional 3% levy has forced many landlords to not buy additional property to make them available to tenants.
• Fire Safety Regulations (England) 2022 are forcing many flat owners to spend £000s on fire safety with new fire doors, fire alarm systems and cladding checks to ensure tenant safety.
• Local authorities now have the power to increase council taxes on 2^nd homes and in some cases looking to double or treble council tax for a 2^nd home meaning in addition to the above EPC and fire safety requirements, some 2^nd homeowners will no longer rent out their properties to tenants when they are not there e.g., in Winter months.
• New House of Multiple Occupation (HMO) registration rules (usually bed sits with shared facilities) started in 2021 with registration if 3 people or more live in the same property and share facilities as well as yearly gas safety certificates, 5 yearly electrical certificates, up-to-date smoke alarms, EPC rules and to be mould free.  Sleeping accommodation need to be a least 6.51 sqm for 1 adult, and at least 10.22 sqm for 2 adults.  Landlords also must make sure that every tenant has the 'Right to Rent' in the UK i.e., the landlord must check that you have a right to live in the UK.
• Interest rates have risen for 12 consecutive months now, meaning that landlords with buy to let mortgages coming to their end of term face double and even higher mortgage payments when they remortgage.

As you can see, there is pressure from multiple additional costs and demand that have created a rental inflation market and we do not expect this to ease.

We must all get used to higher rents and higher mortgage payments being here to stay for a while.

Cannot afford the rent increase?

• Talk to your landlord to see if you can negotiate a more affordable rent.
• If the landlord cannot reduce the rent increase, you may have to seek alternative accommodation or move in with friends or relatives.
• Look at our video “10 Tips to Manage Mortgage Rate Increases” as many of the tips will be relevant to those renting as well as those with mortgages.

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