February 9th, 2017
Note : This article was published by Mortgage Solutions.
Property rents have increased 2.96% or more in 20 UK areas in the last year, the latest Landbay Rental Index has shown.
In 19 of the areas the increase recorded was more than 3% and in Luton it was as much as 6.52%, meaning tenants in the outer London area are now paying an extra £528 per year on rent, bringing their total annual rent to £9,354 on average.
Landbay said the findings highlighted the growing affordability crisis facing about 4.3 million tenants in the UK. It called on the government to prioritise these areas, which include Peterborough (+4.78%), Nottingham (+3.25%), Leicester (+3.19%), and Brighton (+3.09%), in its affordability programme, as recently announced in its Housing White Paper.
Founder and CEO John Goodall said: “There are currently 4.3 million tenants in the private rented sector but affordability is becoming an issue across many parts of the UK.
“While private rented sector schemes are already on the way in many of the areas facing the fastest pace of rental growth, the government’s White Paper missed an opportunity to highlight where in the country this type of investment is needed the most. For those in the top 20, experiencing rental growth above 3% a year, the clock is ticking.”
In its White Paper out on 7 February, the government outlined its commitment to creating a fair and better-served private rented sector.
This was to be achieved through legislative measures to make renting more affordable, such as banning letting agents’ fees. It also named increasing the supply of rental accommodation, bringing in more institutional investment in purpose-built rental housing, and making three-year minimum tenancies standard on new builds.
The paper also highlighted the growing proportion of income tenants are currently spending on rent, which can amount to about half their salary.
Landbay found tenants in nine of the 20 areas highlighted for fastest growing rents were spending more than 60% of their take-home pay on rent.
A tenant in Luton for example, currently spends an average of 68% of their disposable income on rent, with tenants in Brighton & Hove, Bristol and Thurrock spending an average of 69%, 64% and 63% respectively.
However, encouragingly many of these areas were already earmarked for large-scale private rented sector developments, Landbay said.
For instance, it pointed to a deal between housebuilder Carillon and Deutsche Pfandbriefbank in Manchester (+3.06%), which would create 450 apartments in its city-centre, while build-to-rent landlord Grainger was working with Willmott Dixon to deliver a new scheme of 200 flats in Bristol (+3.62%).
Furthermore, new properties were earmarked for Northamptonshire (+5.05%), which already doubled in size in the past 10 years, while large developments in both Nottingham and Edinburgh City (+4.6%) were also under construction, Landbay said.
Goodall said: “Government attention has tended to focus on regulating so called ‘accidental’ landlords, so the step change in this week’s White Paper to focus on supplying more rental properties suggests that the sector may finally be given the investment it needs to keep rents in check. Further institutional investment in large scale developments, specifically designed to rent rather than buy, should go some way to professionalize the sector, improving living standards and helping control further rental growth.
Landbay has recently launched ‘Rent Check’, an online tool that harnesses the UK wide data from its monthly Rental Index that is powered by MIAC, to allow tenants and landlords to compare their own rents against others with the same number of bedrooms in their area. Visit http://rentcheck.landbay.co.uk