Figures just out show that private rents increased in the past 12 months at a rate well above inflation. At the same time, as prospects seem to be diminishing of the renters reform bill passing before the election, record numbers of tenants are being forced to move.
It might seem at a casual glance that this is all great news for buy-to-let owners, but it’s actually not that simple. If you’re a private landlord, you’ll be likely to have problems too, and the squeeze on tenants could ultimately result in a squeeze on you.
Why Are Rents Rising?
According to the Office for National Statistics, in the 12 months to March 2024 average private rents rose by 9.2%, up from 9% the previous month. This compares with the official inflation rate of 3.8% over the same period. The biggest rises were in London, at 11.2%, with Kensington & Chelsea showing the highest average monthly rent in the country, at £3,305.
This isn’t just a matter of landlords raking it in, though. Part of the issue arises from soaring costs for buy-to-let owners, from sharp rises in mortgage repayments to extra obligations the government has been piling on landlords.
There’s also a growing shortage of available properties to let. This is partly due to demand, since fewer people can afford mortgages as first-time buyers, but also partly due to increasing numbers of landlords being forced by rising costs and extra regulations to sell up.
Rise in Renters Forced to Leave
It’s not surprising that rising rents coincide with large numbers of renters being forced to move. This covers fixed-term tenancies coming to an end, tenants being priced out by a rent increase, tenants served an eviction notice, or else being asked to leave more informally. In the past 12 months, around 83,000 individuals or families have had to move, making up 40% of all renters.
This comes at a time when proposed legislation to ban no-fault evictions seems to have yet again been put back. It’s been a government promise for a few years, and until recently they were pledging to have the bill through Parliament before the general election. Over the past few days, though, this pledge has been quietly dropped.
What Does This Mean for You?
So does this mean that, as a landlord, you can charge what you like and evict tenants as and when you need to? Well, not exactly. The problem with high rents is that renters are usually on lower incomes than homeowners, and eventually no-one will be able to afford these rents.
At the same time, a high turnover of tenancies isn’t good for you. While you clearly need the freedom to get rid of bad tenants, each changeover of tenancy brings extra costs and lost revenue. Your ideal would be to have stable tenancies, with renters who are willing and able to pay regularly.
What you want, to keep your business model stable, is to be able to pursue renters who are refusing to pay, while working with those who desperately want to pay to find a way of avoiding another costly change of tenancy. Give me a call for help with both.
