Flatshare site, SpareRoom, reveals that the crisis facing the UK rental market is being fuelled by a huge backlog of renters, who are now flooding the market following the pandemic. While this is a temporary phenomenon which will eventually ease, supply has been consistently dwindling since 2017, other than a brief spike during the pandemic as renters stayed put or moved home to live with parents. Section 24, which stopped landlords from claiming tax relief on their mortgage interest, alongside a 3% stamp duty surcharge for second properties, has also made it harder for many smaller landlords to make ends meet.
In a recent SpareRoom poll, 94% of landlords said they had no confidence in the current government’s approach to housing. These are the key reasons why:
1: Changes to government policy/taxes - 81%
2: Future changes to legislation/taxes - 75%
3: Rising energy costs - 58%
4: Rising interest rates - 46%
With this in mind, it comes as no surprise that 36% of landlords polled revealed they plan to reduce their portfolio this year and a further 16% plan to leave the rental market entirely by the end of 2022, reducing supply even further.
This is all contributing to rising rents, with the average UK room rent now at an all-time high, increasing across every UK region in Q3, with Scotland up 20%, London up 18% and Northern Ireland up 16%.
The results reveal every one of the UK’s 50 largest towns and cities saw rents increase, with Edinburgh (+31%) seeing the biggest jump, due in large part to rents increasing during the Edinburgh Festival. Sunderland (+22%) and Glasgow (+21%) also saw high rent increases from Q3 2021 to Q3 2022.
Many of the UK’s biggest towns/cities saw rents hit record highs again in Q3 2022, including London with an average monthly room rent up 18% from £729 to £857 – the combined effect is a market that’s incredibly difficult for tenants.
A recent SpareRoom poll also revealed that 40% of renters have had to pay over the advertised price for their current room, rising to 47% for London renters. The main reason given was that the landlord put the rent up (60%) followed by 37% saying they ended up in a bidding war. In order to secure their rental 47% of renters surveyed said they had to decide on the room at the viewing, 20% had to pay several months’ rent upfront and 12% paid a deposit before viewing the property.
Matt Hutchinson, SpareRoom director, comments: “We’ve been running flatshare sites for over 20 years and we’ve never seen the market like this. The spike in demand will ease over time, but the real worry is the continued drop in supply. Landlords are leaving the market in alarming numbers and renters are facing an incredibly tough time. The government has decided growth and jobs are its focus. But jobs are no use if people can’t move to take them.
One silver lining is that homeowners are starting to look at renting out their spare rooms to make a little extra cash and help with the cost-of-living crisis. That could provide much-needed supply far quicker than anything government can do and will bring rents down, whilst helping struggling homeowners too.”
