- Rent Affordability Crisis: Tenants Struggling with Rising Rental Costs
- Regional Disparities and Rent Increases
- Impact on Homeownership and Rental Market Dynamics
According to the property portal Zoopla, this means that people are spending a greater proportion of their income on rent than at any point in the past decade.
In addition, the average rent for new rentals has increased by 10.4% over the past year, making it difficult for people to afford housing.
Chris Ward and his fiancée reported having difficulty finding a rental in London despite having a monthly budget of £1,750.
The 31-year-old stated, “I don’t have a car, I don’t go on vacations, and I can’t save for a house.” “There is a necessary support for the poorest, but young workers are also struggling right now.”
Richard Donnell, the executive director of Zoopla, stated that there were indications of financial “stress” among tenants, especially those with low incomes.
Inflationary shock
This has resulted in a decade-long decline in the affordability of renting in the majority of the United Kingdom.
Currently, rent accounts for an average of 28.3% of income, up from 27% over the past decade. A modest percentage increase can still have a substantial impact on people’s finances.
It was stated that a first-time buyer’s mortgage on the same property would consume 26% of their income.
The proportion of income consumed by rent differs by region. Even in London, where rent has historically consumed a greater proportion of income, it still accounts for 40 percent of gross earnings, the greatest in the United Kingdom.
Over the past 12 months, rents have risen significantly. Those on a fixed rent would not have seen a change, but those who signed new contracts or moved to a different property are likely to have experienced significant rent increases.
Tenant costs have increased due to the burden of rising mortgage rates on landlords, as well as a greater demand for housing than the number of available units.
For fifteen consecutive months, the average increase relative to the previous year has exceeded 10%.
London rent rose 13.5%, Scotland 13.1%, and the North West 10.5% in April.
Mr. Donnell stated, “The impact of higher rents is not uniform, with those on low incomes bearing the brunt and showing increasing signs of stress.”
Those attempting to transition from renting to homeownership have a more difficult time procuring a mortgage. According to the financial information service Moneyfacts, the number of packages available for a 5% deposit has decreased from 347 at the beginning of June last year to 199 now.
Even though Mr. Ward has a reasonably well-paying job, he is one of the renters experiencing the squeeze.
He stated that he and his girlfriend’s monthly budget of $1,750 was considered modest by real estate agents, so they felt priced out of London.
He stated that the situation was even more “absurd” due to the fierce competition for real estate. For a higher quality of living, the couple is contemplating obtaining a visa to work abroad.
The fact that there are a large number of tenants vying for a limited number of rental properties is one of the primary causes of rent increases.
According to Zoopla, there are 20% to 40% fewer rental properties in most regions than there were before the pandemic. In the meantime, there are significantly more tenants than the average of the last five years.
This situation was likely to worsen as summertime demand traditionally increases.
Edinburgh and Glasgow rank highly in the rental league table, in part due to their high scores for quality of life and robust employment markets, but there is more to the story.
Universities in these cities have been aggressively recruiting international students, putting pressure on the rental market.
Rent regulations could disrupt the market under SNP-Scottish Green government ministers.
In September of last year, rents and evictions were placed on hold until March. In addition to aiding households confronting rising costs, rent increases are now capped at 3% until March of next year. Patrick Harvie, a Green MSP and minister for tenants’ rights, is drafting additional and permanent rent controls for Holyrood legislation expected later this year.
However, there are no restrictions on the rents that proprietors may advertise for new tenancies. So, according to real estate experts, newly-advertised rents have increased, as landlords look to protect their income against the impact of future restrictions once tenants have moved in.
Published every three months, Zoopla’s rental sector survey tracks the rents that landlords request when listing a property. But analysts also adjust the figures to reflect the rent that is ultimately agreed upon.
Rising mortgage and interest rates have hurt homeowners and the buy-to-let industry, which has even higher rates.
Interest rates are rising faster than expected, affecting one-third of landlords with large mortgages.
Savills stated this week that landlords are making their lowest profits in 16 years due to rising interest rates.
In a recent report, the Royal Institution of Chartered Surveyors (Rics) stated that higher interest rates and stricter regulations have prompted some landlords to contemplate selling their properties. This would result in a further shortage of available housing, which could increase rental costs.
