The cost of living crisis has heightened the demand for rental properties, with around 8.5 million households renting in the UK. In London – a city which remains a target destination for many – the number of renters is estimated to rise by 122% by 2030, with a higher percentage of gross income being spent putting a roof over their heads.
It’s not easy for renters in today’s climate. Competition is fierce too, with a supply-demand imbalance which means that landlords and letting agencies are registering somewhere between ten and thirty tenants for every property they have on the market. All of these factors combined are making people ever more conscious of what they’re getting for their money.
This intensifies consumer demand. Value-added services that make life easier and more convenient are becoming extremely desirable, and landlords need to be able to understand and adapt to the market as it evolves in order to meet tenant expectations.
Here, we look at several trends we’re likely to see in 2024.
The rise of the flexible lease
Offering more flexible leases can be a win-win for both landlords and tenants. Traditional long-term leases of a period of a year or more can be advantageous due to the stability and predictability they give, however, in the midst of the cost of living crisis renters have become hyper-aware of their spending habits.
Renters cutting their accommodation budgets can lead to landlords becoming stuck with vacant properties because they struggle to find enough tenants willing to enter into a long-term commitment, which has a negative impact on occupancy rates and overall net operating income (NOI).
For tenants, shorter leases can be both convenient and liberating, allowing them to ‘up and move’ should they want or need to.
Guests are usually happy to pay more for the flexibility on offer too, which is why operators should be encouraged to offer a range of lease terms and provide the best of both worlds.
Home, sweet sublet
Permitted subletting — such as that offered by the Airbnb-friendly buildings programme in the US — is a growing trend, allowing tenants to monetise their rental property when they aren’t there.
According to one study, one in eight tenants admit to letting out part or all of their rented property — but nearly half of renters did not disclose this to their landlord.
Even more, renters did not review their existing lease agreements to determine if subletting was permitted before doing so.
Operators can get ahead of this trend by permitting tenants to sublet transparently while being in control of any limits or restrictions. Restrictions may include limiting the length of the sublease either to a specific period of time (e.g. six months) or to a percentage of the original lease term (e.g. 50%), prohibiting certain types of subtenants and charging a subletting fee.
The amount of money a landlord gets from this arrangement will depend on a number of factors such as the type of property being sublet, the location of the property and the current rental market in the area.
Subletting provides renters with a valuable source of income that can cover the cost of a holiday, for example, or help make rent more affordable. This is expected to become an increasingly popular amenity, particularly among younger generations who have grown up with Airbnb.
In addition, with subletting, both the renter and the landlord are ultimately contributing to the local economy by ensuring the property remains occupied. This not only benefits the immediate community but also fosters a sense of economic resilience, creating a positive ripple effect beyond the property itself.
‘Third spaces’ to protect mental wellbeing
As a society, we’re more tuned into our overall well-being than ever before and the link between our physical and mental health is now better understood.
With around 25% to 40% of UK employees working from home to some extent, there are blurring lines between where someone works and lives. Landlords need to be responsive to this by offering ‘third spaces’ where people can go to get out of their apartments, such as dedicated coworking areas. There is also a growing appetite for other social spaces such as bars and cafés where renters are encouraged to connect with others in the community.
Many renters will be happy to pay a premium for access to such facilities — which includes other well-being amenities such as a gym or on-site exercise classes — particularly if it saves them money (for example, if the cost of a local gym membership is higher). The convenience of it all being included within the same building is also hugely attractive.
Pets have been proven to help with our physical and mental health too. Operators are under pressure to actively embrace this and curate pet-friendly communities. If they don’t, they may be forced to soon anyway, with the proposed Renters (Reform) Bill. Part of the proposed legislation aims to ensure landlords cannot “unreasonably” block tenants’ requests to have a pet.
Future-proofing with technology
Employing a multichannel approach to customer service is key. It’s unreasonable to expect that all tenants are happy to pay their rent or get in touch with a member of staff the same way, for example. Consumers value being given a choice and being able to do what suits them when it suits them.
A dedicated resident app can help to facilitate this by providing tenants a means to pay their rent, report an issue or send an enquiry at the touch of a button. Operators that embrace technology to its fullest can offer renters a best-in-class experience, ultimately leading to a better landlord-tenant relationship.
And we can’t talk about technology without mentioning AI, can we?
AI can help to deliver a far faster resolution for basic issues and questions and can help with other day-to-day functions such as the check-in and check-out process.