The Tumultuous UK Rental Market
08th Nov 2022
The cost-of-living crisis has engulfed the UK and has been at the centre of the news agenda since Russia’s invasion of Ukraine in February 2022. In July 2022, the UK’s inflation rate rose to 10.1 per cent, the highest annual increase in more than 40 years. The country has also seen interest rates rise to 3 per cent in November 2022, energy bills spiralling out of control, and a generally bleak economic outlook.
The rental market is no exception to this turmoil. As reported by Rightmove in October, rental prices, outside London, rose by 11 per cent in the period from September 2021 to September 2022, and prices in the capital rose 16.1 per cent in the same period. This sharp climb in prices for renters is explained, by Rightmove, as being driven by the severe shortage of available rental properties, combined with extremely high demand. Analysis conducted by Sky News found that the number of advertised properties has fallen considerably since 2019, with listings falling by almost a third from September 2019 to September 2022.
As well as falling supply, rising interest rates are additional factors contributing to the increase in rental prices. A survey of UK residential landlords carried out by Superscript in October found that 90 per cent of landlords had increased rents – or were planning to do so – due to rising interest rates, and that 50 per cent of respondents had already increased rents following rising interest rates earlier in the year.
Amidst the economic upheaval, soaring rents are becoming increasingly unaffordable for tenants, including those on housing benefit. As of October 2022, just 8 per cent of private rental properties in England are now affordable to those on Local Housing Allowance, according to research conducted by Crisis and Zoopla.
The Scottish Parliament has taken the decision to introduce rent freezes across the private, social and student rental sectors, through the Cost of Living (Tenant Protection) Act, which is currently in force until 31 March 2023.
The UK government is also considering how to ease the pressure for tenants, announcing the launch of a consultation at the end of August on a proposed rent cap for social housing, with a decision expected later this year. However, landlords have hit back saying that this would delay efforts to increase safety efforts and hinder green ambitions.
Worries regarding the cost of renting are just one of many areas that must be considered when assessing the property market. An equally important aspect, once a tenant is able to afford to rent a property, is the quality of the property itself. According to a Government consultation paper published in September 2022, over a fifth of the 4.4 million households that rent privately endure poor conditions and lack security and control over the homes they pay to live in.
A major proponent of increasing the standards for renters is Michael Gove, the Secretary of State for Levelling Up, Housing and Communities. Gove set out a series of recommendations in the policy paper titled ‘a fairer private rented sector’ in August 2022, and has recently reaffirmed in Parliament that his department will be pushing ahead with the so-called ‘Renters’ Reform Bill’. The core aspect of this is that “all tenants should have access to a good quality, safe and secure home”. The plans are due to be introduced by the Government in 2023.