Comment: the cost of living crisis is particularly acute for tenants living in the capital

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Today’s tenants are not just facing one problem; the cost of living, the scarcity of rentals and rapidly rising rents mean it’s just one thing on top of another.

Most tenants would like to see their time in rentals as a temporary episode in their lives, usually as a stepping stone to owning their own property, once they find a partner, combine resources, and settle down to a house with space, rather than the archetypal cramped city flat.

One crisis after another

But with seemingly one crisis after another for generations X, Y and Z, first Brexit, then Covid and now a European war has thrown another great spanner in the works, the house owning dream looks further away than ever for many renters.

The so called cost of living crisis is have a big impact on tenants already, and we’ve barely reached the start of it; as winter arrives we are likely to see the full extent, which could extend to years rather than months.

With tenants in the capital paying up to 50 per cent of their earning capacity on rent, the rising cost of heating fuel and food – as a result of Putin’s grotesque invasion of the sovereign state of Ukraine – and to some extent successive Governments’ seeming inability to invest in a coherent long-term energy strategy, it’s all having a devastating effect on the many tenants trapped in the rental market.

To make matters worse, there’s a severe shortage of rental accommodation, which means that if tenants need to move – and this is happening more often as landlord decide to sell-up – they are not only having to much pay higher rents, they are lucky to even find any vacancies.

Renting with bills included?

According to Melissa York writing for the Sunday Times, the most searched for rental property item on Rightmove currently is rental accommodation with bills included. Unfortunately for most tenants – apparently only around 1 per cent of landlords would do that – getting such a benefit in today’s inflationary environment is a bit of a forlorn hope.

Offering an all-in rent, for most landlords, is just one risk too far. Would tenants be as careful at keeping their use of electricity, heating, hot water and water usage in check, as if they were paying for these themselves? Human nature says not. Especially so in a multi-occupied groups, where there’s always someone willing to abuse trust, usage is likely to escalate under carte blanche – it’s the “Tragedy of the Commons” story over again!

A lower standard of living for everyone

Everyone’s cost of living and therefore standard of living will be affected by the ongoing crisis and there’s going to be no shelter from that. But with average rents outside of London now in excess of eleven hundred pounds, and 52 per cent fewer rental homes available to let, causing a scramble for every vacancy in the capital, according to property agents Hamptons International – some tenants are just teetering on disaster.

Among the younger population, renting is widespread in the UK with only around 40 per cent of 25 to 35 year olds owning their own homes. And despite a Conservative stated Government policy of encouraging home ownership, with it’s “Help to Buy” schemes, there’s still around 60 per cent of low earners, that is people earning below £300 per week, who are renting, and many likely to be life long renters.

Where do renters live?

In the UK over half of all renters live in “terraced” single-family homes, with around one-third in “flats” and the balancing minority living in detached rental houses. For renters, living conditions are on average worse that those of home owners, with fewer and smaller rooms, and often-times with some form of overcrowding.

If you go back 100 years local authorities were required by law to provide council (social) housing. This type of tenure was introduced to provide decent housing for returning army veterans after World War I, and the tenure received a further boost after World War II, largely replacing bomb damaged housing.

The switch to private renting

But by the 1970s the negative side of social housing began to show: lack of funding, lack of maintenance and large sink estates with decaying property stock. It led, under the Thatcher administration to a major shift in policy, away from Government provided housing to private supply: the private landlord and the growth of the private rented sector (PRS), which has continued to the present time. The private landlord now assumes that mantle that was once the remit of the local council.

Home ownership in decline

At the same time, home ownership had been in steady decline, as renting continued to increase. Ownership reached an all time peak in 2003 at just under 71 per cent, dropping to around 63 per cent today. So more people than every rely on landlords to provide rental housing at a reasonable price.

It’s something that now appears to be slipping further and further away, rents continue to soar as rental supply dwindles. So far there’s no sign the Government intends to do anything positive to encourage small-scale private landlords to invest: far from it, with the latest a A fairer private rented sector white paper is providing enough perceived threats to actually scare many landlords away – it’s literally the last straw for many.

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Landlord ‘ignorance’ about wear and tear vs damage is getting costly

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Educating landlords about what constitutes wear and tear could reduce the number of costly deposit disputes, according to the Association of Independent Inventory Clerks (AIIC).

Those landlords who can’t distinguish between the two are likely to raise disputes over negligible wear – and are more likely to lose them, particularly without a thorough inventory.

The AIIC says relying on knowledgeable inventory clerks can protect both tenants and landlords but also reduce unnecessary disputes.

Mydeposits reports that rental deposit disputes between landlords and tenants amounted to a costly £27 million in 2021 – an average of £1,005 per tenancy.

AIIC chair Daniel Evans (pictured, below) says the money wasted on unnecessary disputes could be reduced with better understanding of fair wear and tear, which describes the deterioration of the condition of the property as a result of reasonable use by the tenant.

Damage caused by negligence does not fall under this criteria, but items, fittings, or fixtures that have been worn through natural use would be classified as fair wear and tear.

When a home’s wear and tear is assessed, average useful lifespan of an item, expected usage, who is renting the home and the length of the tenancy are all considered.

“We recognise that deposit disputes cannot be prevented altogether but if issues arise, the only way to ensure the right amount of money from the deposit is received is by relying on an inventory,” says Evans.

“Landlords can do their bit by making sure all the correct information and documentation is provided throughout the tenancy. This will ensure that adjudicators have sufficient evidence and neither parties are left to bear the brunt of unnecessary costs.”

Read more: A handy end-of-tenancy checklist.

View Full Article: Landlord ‘ignorance’ about wear and tear vs damage is getting costly

Landlord insurance pay-outs remain steady despite increasing claims

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Market analysis from Total Landlord Insurance reveals that the average proportion of a landlord insurance claim being paid out has fallen by -33 per cent since before the pandemic. 

The research shows that: –

• In 2019, landlords submitted insurance claims totalling £2.5 million to Total Landlord Insurance, with fire and water damage leading the way as the most expensive claims. Of this total, £2.1 million or 86 per cent was paid out by Total Landlord Insurance. 

• By 2021, however, the picture had significantly changed. The total sum of annual landlord insurance claims rose from £2.5 million to £4 million, while actual insurance payouts remained steady at £2.1 million. 

• This means that the proportion of total claims paid was 53 per cent in 2021, a drop of -33 per cent compared to 2019.

• It’s interesting to note that the biggest decline in the proportion of claims paid between 2019 and 2021 was for those related to landlord liability insurance – insurance that covers the landlord in the event that a tenant is injured inside the property.  

• In 2019, landlords submitted liability claims of £44,400, 68 per cent of which was paid out by the provider. In 2021, however, total liability claims rose to £125,500, of which just 8.6 per cent was actually paid – this marks a decline of almost -60 per cent compared to 2019. 

• It’s a similar story with storm damage claims. In fact, Total Landlord Insurance doubled the amount it paid out for storm damage claims between 2019 and 2021, but the amount being claimed rose even more, from just under £338,000 to more than £1.5 million.

View Full Article: Landlord insurance pay-outs remain steady despite increasing claims

UK’s annual house price growth slows to 10%

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The UK’s annual house price growth slowed to 10% in August – down from July’s 11%, according to the latest Nationwide house price index.

The data also reveals that prices rose 0.8% month-on-month after seasonal effects were taken into account.

View Full Article: UK’s annual house price growth slows to 10%

Student landlord fears over periodic tenancies dismissed

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It looks like student landlords will have to move to periodic tenancies for their rental properties – according to the Department for Levelling Up, Housing & Communities (DLUHC).

While the Renters Reform Bill has still to make its way through Parliament

View Full Article: Student landlord fears over periodic tenancies dismissed