Just as landlords predicted – rents are going up

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Just as landlords predicted – rents are going up

You must hand it to Labour, though they went hard on how great the Renters’ Rights Act would be for tenants, at least they didn’t promise that rents wouldn’t go up.

Well, here we are, 100 days into the one-sided debacle of the legislation and guess what? Rent trackers are pointing out the obvious.

Rents are not only going up, but landlords are pitching new and renewed rents at growing market rates.

But the market rates are set by other landlords who also can’t accept higher offers, so they are setting theirs higher too.

Then you must set your rents, and the agent says you must do so at market rates, which are going up and the circle of inevitable rises continues.

London rents go up

Propertymark’s latest tracker shows London rents rising from £2,385 to £2,484 in a single month, a 4.2% jump.

The salary needed to secure the average London home has climbed from £70,050 to £74,520 in a year.

That is down to demand for privately rented homes continuing to significantly outstrip supply.

And until more good quality homes are brought into the sector, tenants are unlikely to see the reductions many are hoping for.

Bidding war ban

Meanwhile, one letting agency has flagged up a trend that anyone who has ever negotiated a price rise could have called from the moment the bidding war ban was drafted.

Barred from letting tenants compete openly for a property, landlords are simply setting the advertised rent higher on the assumption tenants will then offer less but still land somewhere near what the landlord wanted all along.

Rightmove’s rent tracker reflects a wider trend: asking rents rose 2.9% year-on-year in the second quarter, the fastest pace in two years, with London outperforming the rest of Britain for the first time since 2023.

None of this should surprise anyone. What continues to baffle me is that it does.

Why invest in London?

Why does everybody act astonished that London rents sit above the national average, when London property prices and values have always sat miles above the national average?

Nobody clutches their pearls that a flat in Chelsea costs more than a semi in Chesterfield.

Yet the same people who accept that logic for house prices somehow expect rents, the return on that capital, to defy it.

Rent is the price of housing capital.

If the capital is expensive, the rent is expensive. That is not exploitation, it’s simple maths.

London yields count

What should genuinely raise eyebrows is that anybody still bothers letting property in the capital at all.

Gross yields on London buy to lets can be as low as 3% to 4%. That is before mortgage interest, maintenance, management, insurance, tax, licensing, voids and compliance.

On a leveraged property, the rent can struggle to cover the finance and operating costs, while alternative investments offer returns without boilers, licensing schemes or possession proceedings.

Add Section 24’s mortgage interest restriction, licensing fees, EPC upgrade costs running into 2030, and the compliance burden the Renters’ Rights Act has piled on top, and the wonder is not that rents are rising.

The wonder is that London landlords haven’t all sold up and put the money somewhere it might actually work for them.

Benefit tenant issues

Then there is the risk nobody in Westminster wants to discuss honestly: housing benefit tenants.

Take one on, and if it later transpires they were never eligible for that benefit, the council won’t be chasing the tenant for the money. It chases the landlord.

You can carry out every reference check available, and you still cannot eliminate that risk, only reduce it, and reducing it means more due diligence, more admin, more cost, all before you have let a single room.

Small wonder so many landlords now think twice before touching a benefits tenancy at all, whatever the consequences for the people who need housing most.

Balance rent income

This is the trouble with legislation dreamed up by people who have never had to balance a rent income against a mortgage statement.

Ban bidding wars and landlords price in the uncertainty upfront.

Load landlords with risk and cost and some will simply leave the market, tightening supply further and pushing rents higher still.

The Renters’ Rights Act was sold as tenant protection.

What it actually protects is the political fantasy that you can regulate costs out of a scarce, expensive asset without either tenants or landlords paying for it somewhere down the line.

Rent is not the problem. It is the symptom.

Treat it as anything else and the same story will keep surprising ministers, month after month, tracker after tracker.

Unfortunately, it is tenants who must live with the consequences. Every extra cost created by government or councils must eventually be absorbed through higher rents, reduced investment or fewer homes.

One way or another, tenants pay the price. They have little choice but to do so.

Until next time,

The Landlord Crusader

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