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 – and the Office for National Statistics (ONS) has recorded the biggest annual increase since its records began eight years ago.
ONS statisticians recorded a 5.3% rise in rents paid by tenants in the year up to July. That’s the largest increase since the statistics body started tracking rents in 2016.
There is little sign of rents falling any time soon, as demand for private rentals continues to grow out of proportion with available housing supply.
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 April 2022 and March 2023 was £825 – higher than at any other point in history, according to ONS.
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Rents are now at their most unaffordable point for a decade, according to Zoopla. The property portal found rents across the UK have been growing faster than earnings and now account for more than 28% of average pre-tax earnings. That’s higher than the 10-year average of 27%.
Rental affordability is at its worst for a decade in seven out of 12 regions in the UK while in London rents equate to around 40 per cent of gross earnings. In the year up to July 2023, the ONS reported London’s annual private rental price growing by 5.5%, compared to 5.2% in the rest of the country.
While the Westminster government has announced reforms to protect renters’ rights through the Renters Reform Bill, which is making slow progress through Parliament. But there has been little action on the issues driving rising rents, namely high demand for properties and a lack of supply.
The devolved countries in the UK have engaged with the issue more directly than Westminster. The Scottish government has limited rent increases and banned evictions since September 2022 while the Welsh government is currently consulting on the idea of bringing in rent controls.
How much is rent in UK?
Around 4.6 million households use the private rented sector in England alongside 340,000 in Scotland and just over 200,000 in Wales.
The private rented sector is now the second biggest tenure of housing in England behind owner occupiers, making around a fifth of all households in the country.
Renters are facing record prices with rents growing at the fastest annual rate for more than a decade.
That has seen renters paying out a higher proportion of their income on housing costs. The English Housing Survey found private renters spend around a third of their household income on rent (rising to 41% in London). That’s more than 10% higher than the proportion paid by owner occupiers.
Renters are almost five times more likely to experience financial hardship than people who own their own home outright, according to ONS.
As of May 2023, around four in 10 renters told statisticians it was difficult to afford their rent payments while almost half of renters and mortgage payers said they had seen their payments increase in the last six months.
Private rental prices paid by UK tenants rose 4.8% in the year leading up to February 2023, according to the Office for National Statistics.
The highest rises were seen in Scotland – despite a form of rent controls – with rises of 5.2% recorded compared to 4.7% in England and 4.8% in Wales.
Asking rents jumped almost 10% 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 now reached £2,567 per month in the second quarter of 2023, surpassing the £2,500 for the first time in the first three months of the year.
Zoopla found there was a 10.4% rise in rents for newly let properties in the year up to June 2023 – the 15th consecutive month in which rental inflation was in double digits – albeit down slightly from the 12.3% peak seen in mid-2022.
That means renters have, on average, faced £2,820 a year increase in rental costs over the last five years.
It’s not just the private rental sector that has seen rent rises, tenants in social housing saw their rents rise by 7% as of April 2023. The rate at which housing associations can increase or decrease rent is set annually at 1% higher than the current CPI inflation rate.
With inflation higher than 10% 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% rather than the forecasted 11.1%. Chancellor Jeremy Hunt, who rejected alternative options to cap rent rises at 3 or 5%, 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 2021/22, 232,000 new homes were supplied.
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 and has doubled in size over the last two decades.
Rightmove said the number of tenants enquiring about a move on the site is 4% higher in April 2023 than it was in the previous year and 48% higher than pre-pandemic in 2019.
The stiff competition has seen rents on the market increase but many landlords have kept pace by putting up rents for existing tenants.
While generally speaking there is a shortage of private rental properties across the UK, the difference between supply and demand changes from region to region.
“We’re seeing fast-rising private rents and reduced availability of rental properties against a backdrop of continuing cost of living pressures and London’s long-standing shortage of affordable housing,” said Darren Rodwell, London Councils’ executive member for regeneration, housing and planning.
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% of tenants had seen their rent rise.
Renters in London were most likely to see their rent rise with 66% of tenants in the English capital reporting an increase in their monthly payments while a third had seen hikes of more than 10%.
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 continuing to surge. There has been a more than 40% increase in no-fault evictions since 2022, with 2,228 households served a section 21 notice between April and June this year alone.
Rent arrears evictions are also surging, with research by Shelter reporting 275,000 households had received an eviction notice or were behind on their rent between November and December 2021.
And low-income tenants are being left with increasingly fewer places to rent as local housing allowance has not kept pace with increasing payments to landlords.
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.
The RICS UK Residential Survey from July 2023 found that, of its respondents, more than half reported an increase in tenant demand. Paired with a 6% decrease in the number of landlords offering up properties, the survey reported an enduring mismatch between demand and supply, which could see further price increases.
“Demand shows no signs of letting up, supply remains constrained and that means rents are likely to continue rising sharply despite the cost-of-living crisis,” said RICS chief economist Simon Rubinsohn.
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.
Richard Donnell, executive director at Zoopla, said the supply of homes available to rent remains between 20 and 40% below pre-pandemic levels in most regions in the UK.
Donnell said: “Renters continue to face a relentless increase in rents, compounding wider cost of living pressures and making home moving decisions ever more challenging, especially for singles and those on lower incomes.
“The chronic imbalance between supply and demand continues to push rents higher but we expect increasingly stretched affordability will start to reduce the pace of rental growth into 2024.”
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.
However, Zoopla found a “steady, constant flow” of private landlords selling up but there were no signs of an acceleration since 2018.
Meanwhile, there has been continued new investment in rented homes which means Zoopla has not seen an overall change in the number of privately rented homes since 2016.
But some landlords with mortgages will be hit by higher interest rates and may be forced to sell.
Zoopla’s Donnell said: “A proportion of landlords continue to sell but talk of an exodus is overstated. The real pressure of higher mortgage rates on landlords hits the 20-30% with the highest loan to value mortgages where landlords may need to inject extra capital when they refinance or look to sell.”
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% across Scotland.
Those protections, which have also seen evictions banned, were extended for a final time in June 2023 and will now run until the end of March next year.
Tenants’ rights minister Patrick Harvie said: “As the cost of living crisis continues, these measures are giving important support to tenants, providing them with much-needed stability in their housing costs and additional eviction protections.
“The final date of 31 March 2024 would be as long as the rent cap and eviction protections could run if approved by Parliament. The necessity of these measures is being kept under review and we will continue to assess whether they remain justified, balanced and proportionate based on the financial pressures rented households and landlords are facing.”
The Welsh government could soon follow suit. Welsh ministers have opened a consultation calling for evidence on fair rents and affordability.
The consultation, which runs until September, delivers on a commitment made as part of Labour’s co-operation agreement with Plaid Cymru to explore measures to tackle rising rents, including rent controls.
Julie James, minister for climate change, said: “The green paper is a call for evidence so that we can better understand the rental market in Wales, in particular what factors influence landlord behaviour in setting rents and taking on tenants and what do tenants consider is an affordable and adequate property.”
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