Good news on the horizon for landlords - it's about time!
Recent research from the Royal Institute of Chartered Surveyors has revealed that rental rates in the UK are expected to increase by around 20% over the next five years.
Surprisingly, the rise is not expected to be as fast in the capital, with the research expecting to see only a 15% hike in the capital – good news for renters who are already stretched to meet high rental rates in one of the world’s priciest cities.
One of the reasons we could be seeing such a significant jump is the ever-increasing level of demand being placed on the private rental sector. With property prices expected to increase 18% in the same timeframe, the shortage of available properties is increasing, with tenant demand outweighing the number of new properties being brought to market. This trend has been building for three years, and as more and more people turn away from buying, and look towards rental option as a long-term housing solution, it’s not a trend that the experts see changing.
Whilst the rise may be welcomed by landlords who are now facing heftier bills, taxes and more stringent legislation to abide by, it is bad news for tenants, with many experts predicting that the hike in prices will see tenants reliant on housing benefits forced out of the private rented sector. A third of respondents to the RICS research admitted that they believe that people on lower incomes are being pushed out of the market, with 29% blaming caps on housing benefits.
It’s not all bad news for tenants though. Over 50% of landlords said that they would be prepared to rent their property to households in receipt of housing benefit, or homeless people, if help was offered through central government to provide financial guarantees for deposits and rent.
Renters are more likely to be evicted if a Waitrose opens nearby – this is why
If you rent, and a Waitrose opens nearby, enjoy as much of the delicious food as you can before you get kicked out
Waitrose, purveyor of ostrich eggs and an amusingly posh 'essentials' range, is good for homeowners. When one of the supermarkets opens in a town or city, house prices rise by as much as nine per cent.
What happens to renters, though? Who, by the way, are more plentiful than ever, given people are having to wait longer to get on the housing ladder on account of all those avocado brunches.
According to an Oxford University study, renters are up to 50 per cent more likely to be evicted if Waitrose opens in the area. Free(ish) coffee and Heston's tea-infused salmon is a siren to the well-heeled.
Queen Elizabeth II looks at products on the shelves at a Waitrose
Queen Elizabeth II would not be evicted were a Waitrose to open nearby, because she is the Queen, and has a fair bit of dollar (Image: Getty)
Supermarket invents most ridiculous 'risotto' ever – and its name is even worse
Researchers looked at a ten year period. They found that the upmarket supermarket accelerated the rate in which tenants were evicted by landlords.
Waitrose typically opens in affluent parts of the country. When an area is being 'gentrified' – simply, when young professionals move in, and investment follows – house prices and rental costs increase.
And landlords, eager to cash in on their more expensive homes – prices rise by £40,000 on average – kick tenants out in order to sell or re-let their properties at higher amounts.
The report was commissioned by campaign group Generation Rent, which wanted to analyse the downside of the 'Waitrose Effect'. Eviction rates are between 25 and 50 per cent in areas where the supermarket causes property prices to rise.
The Oxford study is the first to link an increase in evictions with investment. When Waitrose comes, similarly upmarket businesses follow. Not only does it lessen the chances of people being able to afford to buy, but it also means they're more likely to be priced out of the rental market too.
The study looked at eviction rates in 92 council areas in England between 2005 and 2015. It matches them against Waitrose openings, which more than doubled from 70 to 162 stores in the ten-year timeframe.
In the Lambeth borough of London, for example, instances of tenants being kicked out rose by 17 per cent between 2009 and 2010 alone. In the next year, evictions trebled. Waitrose opened a store in the area in 2013.
David Adler, of the University of Oxford and who completed the research, said: “The Other Waitrose Effect illustrates the hidden costs of gentrification. On the one hand, local homeowners both enjoy new local amenities like Waitrose and the increase in house prices they bring with them.
"On the other, private renters face increasing insecurity in their homes and the possibility of being priced out of their neighbourhoods.
“When house prices rise, landlords feel more confident about their investment and more willing either to take a risk by replacing their tenants, or to realise the value of their asset through sale. The arrival of a Waitrose is one of the most visible signs of gentrification, which reinforces this confidence and sustains both higher prices and higher evictions.”
Dan Wilson Craw, Director of Generation Rent, said: “Renters already fear they won’t be able to settle down in their local area thanks to rising house prices. The last thing they need is the threat of losing their own home.
"New businesses providing job opportunities and a greater choice for shoppers in a local area should be welcomed, but because evicting tenants is so easy, too many people are losing out.
“Waitrose would agree that a strong community relies on local people investing their time in it, but they can only do that if they have the confidence they’ll still be around in a year’s time. Proper protection from eviction will do that.”
Under UK law, landlords are allowed to evict tenants without reason and with only a two-month notice period.
Private renters at the end of their tenancy are now the most likely group to be declared homeless, as many struggle to keep up with rents that have risen by 22 per cent since 2010.
Time Running Out for Rogue Letting Agents in Scotland
We don’t normally do articles affecting Scotland only but, landlords can soon start to take action against poor performing letting agents who fail to keep to standards set by a new statutory code of practice.
From January 31, 2018, every letting agent in Scotland must comply with the code – which means meeting strict rules about handling deposits, client money and taking out professional indemnity insurance.
Landlords can trigger a legal challenge before a tribunal to claim compensation for rule breaches.
Besides adhering to the code, letting agents in Scotland must also sign up to a mandatory register and undertake regular training.
The Scottish Government Housing Minister Kevin Stewart said: “We are committed to ensuring the highest quality private rented sector, which empowers tenants. Our framework for regulation, and the need for the sector to meet key standards and expectations through the code, is an important step in achieving our ambitions.
“Many letting agents already do a great deal to continuously improve standards and inspire confidence amongst landlords and tenants. The introduction of the code means a level playing field for all and ensures clarity on rights, responsibilities and expectations.
“For many, private renting provides a place to call home, and they deserve the necessary standards and protections to find and keep that home. With six months until the code comes into force letting agents must take steps now to be ready for these new ways of working.”
The government has published a guide outlining how letting agents should register and the steps they need to take to comply with the new code.
Scotland also has a mandatory landlord register which requires them to display their registration number on advertising.
Letting a property as an unregistered landlord is a criminal offence with a fine of up to £50,000.
Letting Fee Ban on the Way in Wales
Welsh lawmakers are collecting views on proposals to change how letting agents and landlords charge buy to let tenant fees.
They have launched a consultation to find out how much tenants are charged and if the fees are fair as part of the cost of letting a private home.
The Welsh Government also wants to know about fees landlords pay agents and the implications of scrapping letting fees.
“Tenants often have little or no choice in which letting agent they use. Regardless of quality of service, or fee transparency, they will naturally be constrained by location, accommodation type and rental costs when choosing a home to rent. This restricts their options in the private rented market. Landlords, on the other hand, can exercise choice when placing their property with an agent,” says the consultation paper.
The document goes on to highlight a list of fees to landlords and tenants are commonly charged to let a private home and complains charges are hard to compare and are not itemised.
The list of charges includes:
- Fees for accompanied viewings
- The cost of pre-tenancy negotiation and drafting tenancy agreements
- Generating guarantor forms
- Checking references
- Verifying all safety certificates
- Dealing with deposit protection
- Handling move in payments and signing documentation
- Taking an inventory
- Renewing tenancy agreements
- Managing early tenancy terminations
- Supervising moving out
“The Welsh Government believes many of the fees charged to tenants to be unjustified and arbitrary. Fees can act as a barrier to privately-rented housing. In the long run, a failure to address this issue risks making the Private Rented Sector unaffordable for some people. Together with a ban on letting agents’ fees, we propose to include a ban on fees charged to tenants by landlords and third parties”, says the consultation.
The consultation ends on September 27.