Worrying research finds a ticking time bomb in the PRS

Research from June 2016 conducted by building society, Kent Alliance, found that 40% of landlords planned to raise their rents by an average of 5.6% within the next 6 months – with three quarters blaming new Government legislation for the increase.

Related topics:  Landlords
Warren Lewis
13th October 2016

Research from the Residential Landlords Association (RLA) earlier this month also shows a majority of landlords planning to raise rents on their tenants, with 56% planning to do so within the next 12 months and the majority blaming new Government legislation and changes to mortgage interest relief.

However, new research from property classifieds site, TheHouseShop.com, has found that almost half (42%) of private renters would not be able to afford an increase of up to 5% in their monthly rent costs – showing quite how precarious the UK rental market has become.

The YouGov survey of over 1000 renters and mortgage holders asked people to estimate the minimum percentage that their monthly mortgage or rent payments would have to increase before they became unaffordable. Shockingly, even an increase of up to 1% would be unaffordable for 16% of private tenants, demonstrating how many tenants are already paying the upper limit of what they can afford.

In comparison, homeowners (with mortgages only) were much more likely to be able to withstand smaller increases in their monthly payments: with just 3% saying they could not afford an increase of up to 1%, compared to the 16% of private renters who said the same.

Mortgage-holders were more able to absorb larger increases in monthly payments, with 24% saying monthly mortgage payments would have to increase by more than 20% before they became unaffordable, compared to just 7% of private tenants who said the same of their monthly rent payments.

Across both mortgage holders and renters, more than 1 in 5 (22%) said they could not afford an increase of up to 3% in their monthly housing costs. Interestingly, more men (18%) than women (12%) said that housing costs would have to increase by more than 20% before they became unaffordable. 18 – 24 year olds were least likely to be able to absorb higher monthly increases, with just 6% selecting the “more than 20%” bracket – under half the average for all respondents. In fact, 16% of this age group said that even an increase of up to 1% would not be affordable.

By comparing the survey results with average rental prices in the UK, we can determine the potential monetary increase that corresponds to the percentage increases listed in the survey results. As shown in the table below, taking the average UK rent (excluding London) for July 2016 of £779 per month, the survey results suggest that 16% of private renters outside of London could not afford an increase of up to £7.79 per month. 27% would be unable to afford an increase of up to £23.37 per month, and almost half (43%) would struggle to afford an increase of up to £38.95 per month.

Nick Marr, Co-founder of TheHouseShop.com, comments: “We all know that the rental market is highly competitive right now, and tenants’ budgets are already stretched to breaking point. Therefore the prospect of any further rent rise is a real concern, and as our research shows, even a relatively minor increase in monthly rent payments could push tenants over the edge.

The fact that 16% of renters said that they would struggle to afford even a 1% increase in monthly rent is especially worrying – this could equate to as little as £7.79 extra per month based on average UK rents.

The results also show that more than 1 in 4 (27%) renters would struggle to afford an increase of up to 3%, or a potential monthly increase of £23.37. These figures are totally at odds with the various surveys and research papers showing that the majority of landlords are planning to raise rents on their tenants within the next 12 months.

This demonstrates that there is a ticking time bomb in the Private Rental Sector and with the number of people renting from private landlords already at a 30 year high - we could quickly find ourselves in a very precarious position with wide-ranging consequences for both tenants and landlords up and down the country.”

Green Party member of the London Assembly, and Green London Mayoral Candidate in both 2008 and 2016, Sian Berry, has been campaigning for better standards in the private rental sector and stronger renters' rights.

She commented on the relevance of the results for the situation in London: "It is clear that leaving the private rented sector in its current state is not an option. In my recent Big Renters Survey, difficult rent increases were the most common problem reported by renters in the last three years. The Mayor needs to do much more at a national level - go out and campaign, to tell the Government we need rent controls. Rail fares are capped at inflation at the moment by Government and I don't see why the London Mayor shouldn't have the power to do the same for the homes we live in."

Dan Wilson Craw, Policy Manager at Generation Rent, warned that landlords attempting to raise rents will be met with resistance from tenants: “Rents are already taking a huge bite out of tenants’ incomes, so any attempts to raise them further will be met with resistance. With only a third of privately rented properties mortgaged, tenants should be prepared to negotiate hard on any attempts to raise rent, and remember that there are many landlords out there who won’t be affected by the tax changes”

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