Can Anything Actually Stop Private Rent From Spiralling?

How private housing rental prices have changed

Being a tenant in the UK is particularly tough right now.

Landlords seem to be hiking up private rent prices everywhere, because inflation is at a 40-year-high while interest rates are at 4.25% – meaning their mortgages just might be going up.

After all, the cost of living crisis is squeezing everyone.

But, many renters already felt like they were getting the raw end of the deal, forced to pay ever larger portions of their pay packets without seeing a substantial salary increase themselves.

The Office for National Statistics (ONS) found the median monthly rent in England between October 2021 and September 2022 was £800, higher than at any other recorded point.

High demand and low supply has also encouraged the rise in rental prices as competition between potential tenants skyrocket.

With 19% of households renting privately between 2021 and 2022, this is serious issue. Will we ever break out of this spiral of climbing prices?

Haven’t rent prices always been high?

No, it wasn’t always this way – and the change seems to have driven by the sheer number of people looking to rent.

The private rental sector has nearly doubled since the early 2000′s. And in the 15 years since 2008, there have been more new private rented lettings per year than new sales.

Rented homes have made up approximately a fifth of English households since 2013-14. And, with more available tenants, rent prices were able to go up.

And according to residential property analysts HomeTrack, the average cost of rent per month had increased by 19% between 2007 and 2017 for private rents in England and Wales.

At the time, five million households (20%) were rented in the UK from a private landlord.

The number of people renting in the UK has actually decreased since then – but only marginally. Now, 4.6 million or 19% of households are rented, while the number of social renters is at 17% of households.

But, as new stats from the Department for Levelling Up, Housing and Communities found, private renters now spend a third of their household income on rent. That’s the highest percentage spent on housing of any tenure type ever.

A survey from Generation Rent found that half of all respondents in December 2022 had been called upon for a rent increase. Nearly all worked out to be over £50 a month.

Index of Private Housing Rental Prices from the Office for National Statistics

How private housing rental prices have changed

Why is increasing rent such a problem?

Rent is climbing at a rate which most people’s wages cannot keep up with.

The Office for National Statistics (ONS) showed average weekly earnings declined in real terms in the 12 months to December 2022 by 3.1%.

Meanwhile, private rental prices in the UK increased by 4.4% in the year up to January 2023. That’s the largest jump since that data started being collected.

ONS found the average rent outside of London was £1,172, compared to £2,480 inside London.

Why are rents going up?

Despite high prices, demand has continued to grow.

According to the Big Issue, real estate company Zoopla said that the rental demand was more than 5% higher than the five-year average right now.

Similarly, letting agents Foxtons said almost 30 applicants were competing for each property in London in September 2022.

Meanwhile, the ongoing housing shortage means there are just not enough properties to go around.

Zoopla also suggested there has been just a 1% increase in the number of private rented properties over the last six years.

The government has fallen short of the 340,000 new annual properties the National Housing Federation and Crisis suggested was necessary to end the housing crisis. In 2020- 21, just 216,000 new homes were built instead.

Airbnbs have also stopped so many rental properties being available, with landlords opting to offer homes as short-term rentals for higher income.

The anti-poverty organisation Joseph Rowntree Foundation said: “Homeownership has fallen to the levels of the 1980s, and social renting to those of the 1940s, while private renting has jumped to the levels seen in the 1960s.”

People are spending around a third of their paychecks on rent
People are spending around a third of their paychecks on rent

What does this mean for landlords?

Property website Zoopla said there had been an 11.1% increase in rents for newly let properties in the year up to March 2023.

Asking rents have increased by 20% over three years, with landlords pocketing an extra £2,220 a year on average.

To tackle 40-year-high inflation, the Bank of England introduced high interest rates (currently at 4.25%), the highest level seen since 2008 – meaning the cost of borrowing, like mortgages, becomes more expensive.

Landlords may therefore be passing on higher mortgage payments to their tenants.

Meanwhile, as the Resolution Foundation showed, private (and social) renters were “much more likely to report falling behind or struggling with their housing costs” than mortgagors “feeling the effects of higher interest rates”.

The government also pointed out, since 2013-14, there have been more outright owners (35%) than mortgagors (30%).

Does the government plan to tackle rent?

Even levelling up secretary Michael Gove admitted to the i newspaper that it was “unacceptable” that tenants sometimes end up choosing between rent hikes or losing homes.

But, he did not indicate that the UK was going to follow in the footsteps of Scotland, where the government has implemented an emergency rent freeze to assist renters managing rising living costs.

The government has instead drafted a Renters’ Reform Bill. This would:

  • Scrap “no fault” evictions
  • Create a register of landlords
  • Introduce a private rented ombudsman to enforce renters’ rights
  • Make it illegal for landlords and agents to refuse to rent properties to people who receive benefits’
  • Give local authorities more power to protect renters’ rights.

What do campaign groups suggest to reduce rent?

A February report from the Joseph Rowntree Foundation suggested that the issues stem from house prices being far too high – and so this needs to be tackled, immediately. The current economic problems won’t bring it down on their own.

“The sheer scale of house price inflation in recent years, on top of entrenched assumptions that prices will always rise, means that the current market downturn is unlikely to reset prices to more affordable levels,” it claims.

Meanwhile, Generation Rent’s Wilson Craw told HuffPost UK it all came down to regulation.

He said: “Some form of rent regulation is needed to stop landlords using an unaffordable rent increase to force a tenant out of their home, for example if they have asked for repairs.

“Right now many people are experiencing rent increases in excess of inflation, but we need caps in place to make sure that any rent rises are affordable.”

That’s not the only solution needed right now, though.

He explained ”while rent controls might address the symptom, they won’t address the underlying cause”, adding: “To improve the supply of homes the main answer is to build a lot more, particularly social homes.”

Will anything change?

It’s hard to predict the future and it seems as though only seismic events – like the pandemic and national lockdown – is enough to shift the entire market.

It also seems unlikely that rent caps will be introduced any time soon.

The National Residential Landlords Association says it is “vigorously opposed” to rent caps or freezes, because it would “fuel the supply and demand crisis”.

Landlord organisations have also warned that landlords may sell up ahead of the rent reforms – further reducing supply.

Meanwhile, the Ministry of Justice has found that the number of tenants being evicted by private landlords is increasing, just for failing to reach their rent.