Race to Rent by Heather Hilder on June 27, 2024 Race to Rent Race to Rent: Are landlords winning? The race to rent is a fierce one. A shortage of supply coupled with high demand, as well as high interest rates and cost of living impacting the ability to buy, has led to more people than ever looking to rent. As a result, the listing time for rented properties is falling across the UK. At the same time, rent prices have risen by between 8 and 10% throughout England and Wales. This leaves tenants with little choice but to pay. It’s led to accusations from some that landlords are profiteering from the situation. If you are a landlord having to justify increasing rents or a tenant wondering if landlords are benefiting then it’s time to read on. Cashing in? Last November, a poll of more than 1,000 landlords commissioned by Shelter suggested that seven out of ten landlords who own their rental properties outright had increased rents on new or extended tenancies in the past 12 months. This led to criticism that, without mortgage costs to pay, such landlords are simply taking benefit of the high demand for rental properties to cash in with higher prices. Shelter accused landlords of “cashing in on the housing emergency”. However, the National Residential Landlords Association (NRLA) hit back with its own data. It showed that landlords without mortgages are half as likely to increase rents as those with them and are also more likely to keep them static. It said that data from Savills shows that profits for landlords, including those who are mortgage-free, were at their lowest level for 16 years. The pain isn’t over yet, despite inflation now falling. According to the Resolution Foundation, private renters’ housing costs will rise to nearly 35% of their disposable income over the next year. That’s in contrast to only 15% for homeowners with a mortgage. For landlords who need rent to pay the mortgage costs on their rental property the need to raise prices is clear. They are likely to soon be facing, or already have faced, significant hikes in their mortgage costs as they’ve had to re-mortgage properties. But even those who don’t have increased mortgage costs still have businesses to run. Rising costs and interest rates in other areas of their work, such as maintenance and repairs impact them. Ensuring rents are in line with market conditions is necessary for success. Or cashing out Indeed, the rising costs faced by landlords have led to many cashing out of the market. The fact is that if they can’t absorb their higher costs in higher rents then more will follow this path of selling up. This, in turn, further increases the restriction on supply and therefore the imbalance of demand. Landlords face higher interest rates and costs, as well as a tougher tax regime with changes to how buy-to-let incomes are taxed. Landlords were also set to have to achieve an energy performance rating (EPC) of C or better on their properties from 2028. The government scrapped this last September but prompted many landlords to sell up instead of facing expensive upgrades of their properties. Landlords may be accused of winning the race to rent. But the reality is that no-one is profiteering from the situation. Instead, many landlords rely on rent rises to keep them in business and to ensure that the supply/demand imbalance isn’t impacted even further. And that is also good news for tenants. Adapting to tenants’ needs this spring? Rely on Callaways Estate Agents for expert support along the South Coast, including Falmer, Worthing, and Brighton & Hove. Reach out today to discover how we can safeguard your investment. Contact us now for more information!