Rents in the UK are rising at the highest rate for decades. Will they keep going up?
With record average rent rises becoming the norm, The Big Issue looks at whether renters face more surges as the cost of living crisis continues to hit households.
Rents in the UK are now at the highest rate on record.
Households are facing rising energy bills and food costs as part of the cost of living crisis but there is no respite when it comes to housing costs.
Tenants are feeling the pinch regardless whether they move or stay put, according to new data showing rent increases on property sites Zoopla and Rightmove, while the Office for National Statistics has also recorded steep increases to rents mid-tenancy.
The median monthly rent in England between October 2021 and September 2022 was £800 – higher than at any other point in history, according to the Office for National Statistics.
While the Westminster government has announced reforms to protect renters’ rights through the Renters Reform Bill, there has been little action on the issues driving rising rents, namely high demand for properties and a lack of supply.
How much is rent in UK?
Around 4.4 million households use the private rented sector in England alongside 340,000 in Scotland and just over 200,000 in Wales.
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Renters are facing record prices with rents growing at the fastest annual rate for more than a decade.
Private rental prices paid by UK tenants rose 4.7 per cent in the year leading up to February 2023, according to the Office for National Statistics.
The highest rises were seen in Scotland – despite a rent freeze that covered the last two months of the year – with rises of 4.9 per cent recorded compared to 4.5 per cent in England and 4.2 per cent in Wales.
There were considerable differences across England with the East Midlands seeing rents increase almost 5 per cent compared to 4 per cent in the West Midlands. London has seen the lowest annual percentage change in recent years due to the impact of the pandemic but rents rose 4.6 per cent.
Asking rents jumped almost 10 per cent in 2022 outside of London according to Rightmove.
Monthly payments have continued to rise in 2023. The national average asking rent outside London hit a new record of £1,190 per month and has now risen for 13 consecutive quarters, the property site said in its most recent quarterly update.
Rightmove also reported that average asking rents in London have surpassed £2,500 per month for the first time.
Zoopla found there was an 11.1 per cent rise in rents for newly let properties in the year up to March 2023, albeit down slightly from the 12.3 per cent peak seen in mid-2022.
That still means asking rents have increased by 20 per cent in three years with landlords pocketing an extra £2,220 a year on average, according to the property portal.
It’s not just the private rental sector that has seen rent rises, tenants in social housing saw their rents rise by 7 per cent as of April 2023. The rate at which housing associations can increase or decrease rent is set annually at one per cent higher than the current CPI inflation rate.
With inflation higher than 10 per cent in late 2022, the Social Housing Action Campaign called for rents and service charges to be frozen for 2023/24.
The government stepped in to cap rent increases at 7 per cent rather than the forecasted 11.1 per cent. Chancellor Jeremy Hunt, who rejected alternative options to cap rent rises at 3 or 5 per cent, announced the cap at his Autumn Statement insisting the measure will save tenants up to £200 a year.
The short answer to why rent is so high is because there is a shortage of affordable housing.
There is a housing crisis in the UK because not enough homes have been built by successive governments in the last few decades at a time where social housing stock has been sold off to the private sector through Right to Buy or demolished and not replaced.
An estimate from the National Housing Federation and Crisis found around 340,000 new homes should be supplied in England each year with 145,000 them to be affordable.
The Conservative government has previously targeted 300,000 new homes in England – a 2019 manifesto commitment – but is yet to hit that mark. In 2020/21, 216,000 new homes were supplied, down from 243,000 in 2019/20 largely down to the impact of Covid.
Meanwhile areas like Cornwall where tourism has seen a surge in short-term lets through the rise of Airbnb in recent years faces even more pressures on demand.
The private rental sector has picked up the slack in the meantime. While the number of people relying on the sector for a home fell in England between 2016 and 2019, the sector has grown again since the pandemic hit.
Demand for homes has continued to greatly exceed supply. Zoopla reported that rental demand was more than 50 per cent higher than the five-year average while there has been just a one per cent increase in the number of private rented properties over the last five years.
Rightmove said the number of tenants enquiring about a move on the site is 4 per cent higher in April 2023 than it was in the previous year and 48 per cent higher than pre-pandemic in 2019.
Terraced houses have the biggest gap between supply and demand with four times as many tenants enquiring about these properties than the number available on the market. Flats are currently finding a tenant the quickest, said Rightmove’s director of property science Tim Bannister.
“Properties in popular areas within an affordable asking rent range of that local area are likely to be snapped up almost immediately, and on average homes are finding a tenant much more quickly than this time in 2019,” added Bannister.
“Although there are some early signs that the gap between supply and demand is starting to narrow a little, it will still feel very competitive for tenants trying to secure a home.”
Letting agents Foxtons said almost 30 applicants were competing for each property in London in September 2022.
The stiff competition has seen rents on the market increase but many landlords have kept pace by putting up rents for existing tenants.
The Office for National Statistics collects data of rental prices from properties in England then revisits every 12 months to assess changes in price.
When statisticians returned to homes in February 2023 they found half had experienced a rent increase. The year before 36 per cent of tenants had seen their rent rise.
Renters in London were most likely to see their rent rise with 66 per cent of tenants in the English capital reporting an increase in their monthly payments while a third had seen hikes of more than 10 per cent.
Will rent prices go down in 2023?
Rising rents are having an impact – the latest Ministry of Justice (MoJ) figures show the number of tenants evicted by private landlords after falling behind on rent is continuing to surge.
The MoJ found there were 5,409 landlord possessions between October and December 2022. That’s almost double the same period in 2021.
Matt Downie, chief executive of Crisis, said: “The devastating impact of the cost of living crisis, rising rents and low wages has once again been laid bare as thousands more renters are faced with eviction and the very real threat of being left with nowhere to go.
“With rents rising at their fastest rate in 16 years, the government cannot continue to look the other way as more and more people are forced into homelessness.”
Experts predict rents will continue to rise with no sign of the supply issue being tackled while renters also face knock-on effects from rising mortgage rates.
Landlords could pass on increased mortgage payments through higher rents while there is likely to be increased competition for rent homes as would-be first-time buyers cannot afford to get on the housing ladder.
Meanwhile, landlord lobby groups have warned landlords could sell up ahead of incoming rent reforms, reducing supply further.
Craig Webster, managing director of Tiger Sales & Lettings in Blackpool, said some landlords are already exiting the market.
“The rental market remains very busy, with multiple applicants competing over a shortage of property to rent,” said Webster.
“We’re seeing more tenants staying put in their current home, which is having a knock-on effect for the rest of the market and contributing to the shortage.
“We are also seeing some of our landlords decide to sell up for a variety of reasons – more legislation to navigate, higher mortgage costs, or because they can now get a good price for their home.”
A landlord exodus could see rents rise despite cost-of-living pressures, particularly as some first-time buyers may no longer be able to afford to stop renting as rising interest rates mean a mortgage is unaffordable.
Soaring rents and the wider cost of living crisis saw the Scottish government freeze rents over the winter with rent increases now capped at a maximum of 3 per cent across Scotland.
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