A shortage of rental homes is pushing rents up
Renters in 2023 suffer from a lack of choice. Lack of supply is forcing rents up and creating competition. The number of available properties to rent is 46% below what it was in 2019, meaning renters are willing to pay more for less than ideal homes. Meanwhile, rents are outstripping wages, increasing 11.1% in the year to April, according to Zoopla data, while earnings increased by approximately half that rate (6.7%) for the same period.
We’re all experiencing a cost-of-living crisis, but many landlords are upping rates to cover higher mortgage costs. Renters must accept this if they want to stay, along with increased energy and food costs; because they are essentials. At the same time, landlords are not under any obligation to invest in maintenance, meaning renters pay thousands per month for rental homes which are often unattractive, poorly maintained and riddled with issues.
Renters have changed and so have their needs
More than half of “Generation Rent” are 25 to 44-years-old, and the number of renters aged 45 to 54 has increased by 70% in the last decade. Renting is no longer a short term solution for young people while they save up for a deposit. Many working people cannot afford to save up to buy a home and, even if they could, banks may turn them away for mortgages even though they pay more per month on rental costs than they would on a home loan.
Today, 40% of people in the UK expect to rent for the rest of their lives. As a result of this longer term view, the needs of those renters have shifted. They want high quality homes in areas with communities, good schools and space for their families. This is evidenced by Rightmove data which reveals the the biggest gap between supply and demand in rentals is for terraced houses, with more than four times as many people enquiring as there are properties of this type available. Add to this the real possibility that a landlord might evict a renter under a ‘Section 21’ or “no-fault” eviction, meaning the upheaval of a short notice move, the stress of finding somewhere new, not to mention potentially having to settle children into new schools, and you can understand why renters have higher anxiety levels.
The sector needs new landlords willing to offer quality rental homes
While there is a huge opportunity for landlords to offer homes to renters to live in for the long term, the system hasn’t evolved from the old fashioned model of offering basic, sometimes substandard, homes for rent, with the view that the people renting them will move on quickly. Standard rental contracts arguably favour landlords, tying renters in for 12-months, sometimes with six-month break clauses, and often stipulating a ban on pets.
Managing a rental property is hard work and many landlords don’t have the knowledge, time or desire to look after their renters and homes properly. This gives landlords a bad name, but this isn’t to say landlords are bad. They are stigmatised in today’s society because of how the system has always worked. In 2023 landlords are also under huge financial and legislative pressure. The government has removed the relief on mortgage payments which made being a landlord financially viable for many smaller buy-to-let investors; and rising mortgage rates, new legal requirements to invest in energy efficiency in rental homes, plus changes to eviction powers, mean many are leaving the market. One in 10 homes for sale on Zoopla at the beginning of this year had been formerly rented.
The government’s tabled Renter Reform Bill sets out that a “healthy” private rental sector is “vital” to the UK economy. The bill, which has had its first reading in parliament but needs to go through three readings and the Lords before it becomes law, proposes “once-in-a-generation” reforms with the aim of imposing specific obligations on landlords to deliver “safer, fairer, and higher quality homes''. It says responsible landlords are facing issues by being “undercut by a minority of criminal landlords”.
In short, it highlights the undeniable need for landlords and buy-to-let homes to meet the rising demand from tenants who are willing to pay good rent for high quality homes. The gap between the service being paid for by renters that’s not being delivered by buy-to-let owners must close. The question is: how?
The Smarter Rent solution
We’re taking an entrepreneurial approach to shake up the rental sector, making sure that homes and homeowners deliver exceptional service to the people who are living in them – making them worth the money being paid for them.
If landlords are leaving the market because they don’t want to provide top quality homes, we’re ok with that. We want new investors who care about renters and are willing to provide decent homes which reflect modern life and meet high standards.
Our homes are beautiful, and our contracts are simple. We give both homeowners and home occupiers their rights on terms that are fair and transparent. We offer tenant-only break clauses and are upfront about everything, so there are no nasty surprises in the small print.
We’re not a lettings agent. We use data to work out how best to optimise a buy-to-let to maximise rental income, taking on all the property management stress so the investor can earn a passive income while we do all the hard work and offer a top service to clients.
The rental crisis inspired us to create better homes for renters and, as a consequence, we’ve found we can deliver better returns for owners. We manage property like any other investment, rather than the tired buy-to-let model that has led to the current crisis. This means offsetting risk by making rental homes a sustainable and attractive long term prospect.
Want to learn more about our Smarter way of renting? Read how our full-management service is taking on the buy-to-let headaches and giving owners their time back.