Landlords Corner – Dealing With Rental Affordability
Rental affordability in the UK has reached its most challenging point in over seven years, with tenants in London now spending nearly 30% of their income on housing.
Recent data shows that in July, rent on new tenancies accounted for 28.8% of renters' gross income, according to figures from PriceHubble, published by the Office for National Statistics (ONS).
The ONS considers rent "unaffordable" if it exceeds 30% of income, and this percentage has risen by 2.2 points over the past year, marking the highest level since 2017.
Pressure grows on the Government to act
As affordability worsens, pressure is mounting on the Labour government to address the growing crisis in the rental market, which is currently facing a shortage of supply and record-high rent increases. Average private rents across the UK rose by 8.6% in the year leading up to July, maintaining the same rate as June and close to the peak increase of 9.2% recorded in March.
While wages grew by 5.4% over the three months to June, marking the slowest growth in nearly two years, rental costs continue to outpace income growth, particularly in areas like London where rent accounted for 31.7% of incomes in July.
What Landlords Should Consider in the Next 6 to 12 Months
Given the current market conditions, London landlords need to be strategic in the coming months to navigate these affordability challenges effectively. Here are some key considerations:
Understand the Affordability Pressure: With rental affordability worsening, particularly in London where rents now consume over 30% of tenants' incomes, landlords should be mindful of setting rent levels. While the market may support higher rents, pushing too far could lead to increased tenant turnover or difficulties in finding new tenants.
Plan for Regulation Changes: The government has pledged to introduce regulations aimed at preventing bidding wars, capping "unreasonable" rent increases for existing tenants, and ending Section 21 "no-fault" evictions. Landlords should stay informed about these potential changes and prepare to adjust their practices accordingly.
Focus on Tenant Retention: With affordability pressures high, keeping good tenants may become more challenging. Offering fair rent increases and maintaining a strong landlord-tenant relationship will be crucial. Consider offering longer-term leases or incentives for renewals to ensure stability in your rental income.
The standard of service tenants receive is vital in retaining them, which means landlords need the best possible letting agent by their side. As local agents, we are on hand, we are experienced in the area, and we have a track record you can trust.
Evaluate Your Investment Strategy: While the government has ruled out imposing rent controls, the ongoing crisis may lead to other forms of regulation or shifts in market dynamics. Assess whether your current portfolio aligns with these changes and consider diversifying or adjusting your investments to reduce risk.
Enhance Property Appeal: In a competitive market, properties that stand out in terms of quality and amenities are more likely to attract and retain tenants. Investing in improvements or ensuring that your properties are well-maintained can make a significant difference.
Stay Informed on Local Developments: In London, where rent affordability is already a major issue, Sadiq Khan, the Labour mayor, has been advocating for rent control powers. While the government has resisted this, local developments could still impact the market.
We are more than happy to help you stay up to date on all property and rental matters. However, as Leytonstone letting agents, we focus on the local lettings market, and we’ll ensure you make informed decisions.
The next 6 to 12 months will be critical for London landlords. By staying informed, planning strategically, and being responsive to both market conditions and regulatory changes, landlords can navigate this challenging period and position themselves for continued success in the rental market.
We know many landlords have concerns and questions about what comes next for them, and we are more than happy to offer guidance. We know the Leytonstone market well, but we also stay in touch with what is happening across the UK rental market.
If you are looking for guidance on the Leytonstone rental market, or you just want a helping hand in complying with rental market regulations, we are always here to assist you.
Click here for an online Valuation (a starting point)
Click here for a Desktop Valuation (a more detailed option)
Click here to book a Home Visit Valuation (the full works)