Sep

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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