Industry senior calls for urgent action as rent rises spiral

Propertymark boss Nathan Emerson has renewed calls for the Government to incentivise investment in the Private Rented Sector (PRS) after the Office for National Statistics (ONS) recorded the highest rent rises since 2016 – putting thousands of renters at risk.

ONS data reveals private rental prices paid by tenants in the UK increased by 5.7% in the 12 months to September 2023 – the largest annual percentage change since January 2016 and up from 5.6% in the 12 months to August 2023.

TENANTS IN ARREARS

Nathan Emerson (main picture), Propertymark Chief Executive, says: “Our agents report that more and more tenants are falling into arrears but without Government intervention to incentivise investment, this is going to worsen.

“The growing disparity in the number of homes available to rent when compared with increased demand from prospective tenants is alarming and continues to widen from already worrying levels.

Governments must now look to incentivise landlords.”

“Governments across the UK need to urgently address the underpinning reason for these issues which is undersupply and must now look to adequately incentivise landlords to provide desperately needed homes in the private rented sector.”

Greg Tsuman, President of ARLA Propertymark and Director of Lettings at Martyn Gerrard Estate Agents, is also worried, arguing that a number of factors are placing strains on landlords, reducing supply and creating an explosion in rental inflation.

And he says that unless urgent action is taken to remedy the burden on landlords, many renters face calamity.

Tsuman says: “This trend [will] continue as a clear consequence of three key factors: rising interest rates, lack of supply and Section 24 of the Finance Act. Together, they are creating an explosion in rent inflation, which unfortunately is set to get worse.

“George Osborne’s policy with the Finance Act was intended to protect tenants and enable to them to save for a deposit for their own home.

“Instead, it has harmed the very people it was meant to protect. No tenant today would say it is easier to save for a deposit now than it was in 2016.

Home ownership is further away than ever for tenants.”

“Home ownership is further away than ever for tenants. Instead, many are finding that their rental prospects are now in jeopardy as well.”

TAXES ON TURNOVER

And he adds: “As a result of the full rollout of Section 24 in 2021, landlords must pay taxes on their turnover rather than just their profits, meaning they’re being taxed on their costs including interest payments, which are spiralling.

“This additional burden couldn’t have come at a worse time, and it has created a perfect storm that is driving landlords out of the private rental sector.

Some landlords are seeing their monthly payments increasing threefold.”

“The view from the ground suggests that millions of borrowers will need to refinance their mortgages over the next 12 months as they exit fixed rate deals, with some landlords seeing their monthly payments increasing threefold.

“Ultimately, this is creating misery for tenants, with many unable to pay the higher rents that will be passed onto them as landlords cover costs.”

LANDLORDS SELLING UP

“Other landlords who are unable or unwilling to pass on these rent increases are simply selling up and exiting the market altogether, reducing an already insufficient supply of rental properties.”

Fred Jones, Chief Operating Officer at instant buying firm UPSTIX, warns: “For mortgaged landlords, higher interest costs have dwarfed any comparable increase in income, leading many to leave the market before property prices fall further – which has the unintended effect of exacerbating the supply crunch, pushing rents ever higher.”

And Sophie Pollard, director of Brighton-based estate and lettings agency, MyHause Brighton, told Newspage: “The rental market is in a hugely challenging place right now. Rents are high and with landlords continuing to sell, supply is dwindling, pushing rents even higher.

“High mortgage rates are forcing landlords to increase rents simply to cover costs.

“In time, although it’s likely happening already, this will have an effect on standards as landlords rely on rental income to make repairs and maintain properties for their tenants.”