As the FT notes today:
The affordability of private rented homes in England worsened last year as tenants' incomes fell while paying sharply higher rents, according to official data.
They added:
The average household renting privately spent 36.3 per cent of its gross income on housing in the year ending in March 2024, the Office for National Statistics said on Monday, compared with 33.1 per cent a year earlier and well above the threshold of 30 per cent that the agency defines as affordable.
This is the Office for National Statistics based data:
Note three things.
Firstly, these ratios are to gross income, i.e. this is not even a comparison with after-tax income.
Secondly, note that this burden falls most heavily on poor and younger households, often simultaneously, of course. The lifeblood is literally being sucked out of their lives by these rental payments. How can anyone have hope when all they do is work for a landlord?
Thirdly, this situation is getting worse, and Labour is doing nothing about it. The case for rent caps is overwhelming. The case for bringing more property into state ownership to increase supply and to control prices is overwhelming. And there is no action. No wonder people are looking to Reform.
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LINO knows it is finished. Thus the top people are far too busy feathering their exit routes to worry about minor details such as rent reform.
Deform & Fart-rage don’t care either – but voters will find that out far too late – probably after the enabling laws have been enacted & fart-rage is dictator for life.
Arguably, apart from Corbyn/Sultana party, no party has any coherent policy in this area (on the principle of “I’m alright jack why would I care about renters”).
My policy? whatever the rent is now – halve it. All contracts last 5 years – any rent rise after 5 years is reviewed by local council & can be no more than 2%. All rental accomodation that is placed on the market – council has the right to buy @ the original price paid by the owner (all funded by central gov). Confiscatory policies have much to recommend themselves.
1976-7- a one bedroom flat, in a sizeable country house, Wiltshire, I had to be within 5 miles of Salisbury as a condition of my work, occasional use of owner’s swimming pool.
(Amuse-bouche, the house used to belong to John Stonehouse)
I paid rent of 15% of my pre-tax graduate salary (£60/£400/month).
Today’s situation is not just criminal, it’s unsustainably terminal.
Another one of Thatcher’s chickens coming home to rest.
And remember that the (ha ha) ‘affordable rent’ in social housing is 80% of market rent and even if it is the lower target rent, the increased service charges will also be kicking in as the government lets markets feed on us.
Note to Reeves: please spend some money and make sure it is the governments.
“No wonder people are looking to Reform.”
As someone who is at the sharp end of this, I agree with everything you say.
However, for tenants to be looking to Reform to help them, that would be a big and costly mistake. I know you don’t believe they should be looking to Reform! But yes, people are getting desperate, that they could make bad choices.
A renter voting for Reform is a little like cutting off your nose to spite your face.
At the last election, when it came to housing, Reform were the only party who believed that current tenant/landlord law was fine, including no fault evictions. They are for it.
Reform would make housing, to buy and rent, less affordable.
And of course, Reform use the race and anti-foreigner card, by saying that social housing should only go to local people “who have paid into the system”, whatever that means. What if you are unemployed, a single mother, can’t work, disabled, etc. Have they “paid in” enough? Sounds like a system to discriminate against anyone Reform doesn’t like. Dangerous.
But Labour are a shambles when it comes to doing the right thing on housing.
I read today that no-fault evictions have gone up under Labour.
https://www.bigissue.com/news/housing/no-fault-evictions-renters-labour-first-year/
And Homelessness Minister, Rushanara Ali resigned recently after evicting tenants, and then putting the house back on the market at a higher rent. She said that she intended to sell it, but then changed her mind. I suppose the higher rent was just a nice bonus for her.
https://www.bbc.co.uk/news/articles/clyd3l2x2n8o
There is clearly a need for rent control.
And clearly a need for more social/council housing – to rent, at affordable/secure/living rents. Labour should not be building houses to sell, even if it is to help first time buyers on the ladder. That ladder to housing security begins with renting, and that is where tenants are being screwed.
The fact is, affordability is the issue – it affects millions of voters – around 11 million people rent in the UK.
I hope Jeremy Corbyn is listening.
Much to agree with.
How can anyone who claims to be an ‘economist’ believe that the solution to a shortage of rental properties is to restrict supply by reducing the return to landlords from lower rents?
It’s nonsensical.
No it isn’t.
It’s about making properties available for sale to the state sector at lower price.
And how can anyone claiming to have a serious opinion support the alternative of Black Rock etc building private rental housing en masse and ask us to believe that this will be anything other than a carefully calibrated ‘vacuuming up’ of any income that Generation Rent have in their pockets? You really expect anyone with eyes and ears to believe that private equity are innocent hardworking plain speaking folks operating to simple rules of supply-demand? Do you actually know anyone under thirty…?
Lack of affordable housing is a drain on our economy. Those on low income can become trapped in an area without work, unable to move because they will then be at the bottom of the ladder for social housing in another region. Conversely, areas with lots of work can either put off workers moving there due to high rental costs or force people out of areas where they grew up. Temporary affordable accommodation is vital for a mobile workforce. And before the argument of immigrants taking all the houses comes up, it is this lack of mobility in the workforce that contributes to the need for immigration in some areas, as employers seek a workforce who are more open to the terrible accommodation available, and exploitation by rogue landlords. Furthermore, councils are still obliged to house those in need, and often have to turn to private landlords and private rates for rent. Having a good supply of state-owned housing stock seems like common sense to me, and allowing private individuals to gather up housing stock and basically tithe workers and local government does not seem sustainable.
Thanks
A question for Oliver…
If you decide to leave the rental market, what will happen to your property portfolio?
Sold to another landlord?
Sold to owner occupier?
Sold to a social housing provider?
What will be the economic implications of each?
Which would most benefit society as a whole?
Can you still make a profit at a lower rent level?
What is your current situation in your rental business regarding profit and tax?
How “leveraged” is your portfolio?
The one thing that will not happen is that the property will be demolished.
Exactly, and how many MP’s are landlords? They are a national disgrace.
£750 for a room in a shared house in Reading, not dissimilar elsewhere.
That’s 9,000 a year, well over half of take-home pay of most renters.
Should we stop calling it the ‘Housing Crisis’ and rename the ‘Housing Disgrace’?
Ask the LINO party what they are going to do about the national Housing Disgrace?
“No wonder people are looking to Reform”.
But why not the Greens? I’d have thought they’re closer to what people want.
Look at the data.
As you alluded to with the lifeblood being sucked out of the poor and the young, this system makes being able to own far harder as saving becomes much harder. This is further compounded by property prices going up and up as they’re bought to rent out and the people who can do this tend to be richer or owners (yes this makes you rich) in their own right. I don’t believe the 2008 recession really cleared the rot at it’s core and that was that property prices were already rising far faster than people’s wages so only those in an already fortunate position or with large amounts of assets or cash. I’ve even heard of landlords using other property as collateral for buying more and so the dominoes get stacked.
Really it comes down to the same problem as everything else that doesn’t work, greed, profit making from basic needs and general neoliberalism. I had a CMO say straight faced that the government can’t run anything efficiently, I pointed out that the same is true of the private sector but he dismissed this as government is worse. This is the entrenched mindset.
@AlexWH…”the government can’t run anything efficiently”… the obvious retort is that government is not there to be efficient, it’s there to be effective and to provide according to need, not profit.
What does efficiency even mean? I rarely encounter it. Anywhere.
I almost said to the CMO that some things aren’t always meant to be what he would consider efficient because there needs to be accountability, back up systems or simply because other aspects are ahead of efficiency. A good example is end of life care, it won’t be efficient because we need compassion, dignity, the predictability is all over the place and to be blunt it’s a lot nicer to pass with someone holding your hand than alone.
That’s not an excuse to be wasteful, just that other aspects come first.
I don’t try to argue with people who don’t understand that many government departments fail as a deliberate attempt to deprive resources so they fail and are then outsourced for less initially then the cost spirals or the service fails to deliver. So I moved on.
The trade off is very often service v efficiency.
Cut cost and service efficiency will be sacrificed.
What is never true is that people in the private sector are more or less efficient than people in the state sector. They are all just people.
I get annoyed at the ‘Govt can’t do anything mantra’. So, let’s look at any task that is not complex organisationally (for sake of argument, let’s say if a man with two vans can do it, it is not a complex organisational task) — and examine how well it is done in the different sectors.
Shall we take privatised hospitals – low risk, planned procedures – or the NHS who are the fall-back for everything and unable to reliably schedule the random emergency demand (including private hospital failures). Private sector food is better when things don’t go wrong!
The privatised low risk prisons – or the difficult ones with more complex needs?
Schools – our private schools are full of teachers who wouldn’t cope in overcrowded, underfunded comprehensives. What a great boost to productivity we’d get if we gave all our children a better chance (aye, there’s the rub — the already rich don’t want a level playing field!).
Olympic experience — Q4S fell out at the 11th hour because they couldn’t cope — public service and the army stepped in.
Privatised utilities…. Trains, Post Office ?
Let’s take software delivery companies (Should we mention Fujitsu, software for DWP, NHS ?). The private companies seemed unable to handle required process?
Let’s take HS2 ……
Do you know, we have recently started to use retiring air force pilots to set up training schools for RAF pilots? Madness — some things are core competency – and required for sustainability. Look how getting private recruiters for the army worked (didn’t meet agreed targets, year on year).
Let’s benchmark the private service delivery systems we have with neoliberalism and compare to those that did something similar in the past (we’ll hear that British Rail sandwiches were worse!) — or benchmark with other countries. Then we can have a discussion about what exactly is so good about the private sector in the UK. The mantra of ‘govt can’t do’ is driving so many organisations into the ground with hopeless outsourcing, fragmentation and pointless bureaucracy (managing the contract between arguing train companies isn’t the same as managing the trains to run on time).
But we have the mantra ‘outsource’ / ‘privatise’ is good! Public deliver is bad. Meanwhile, the civil service has been gutted.
So very much to agree with. Thank you.
I am beginning to think that Starmer will be finished after next year’s local elections.
I wonder if Andy Burnham might be tempted back into Parliament.
Perhaps he could save us from the misery of Farage in 2029.
Let’s not forget: 50% of young renters in E&W will be paying the additional 9% tax (above ~26K) for their student education …
Add on to the list of dumping on the young…….
Our daughter lives and works outside of Inverness. She pays nearly 800 pounds rent (without any bills) for a one bedroom with no double glazing. This is nearly half of her monthly earnings. She works hard as an artist and full time as a Chef. Both jobs she loves which I’m sure is unusual now but when our young ones want to spread their wings, take up new opportunities and move away it is impossible without family support. When in this country did it become impossible with one wage to make a living and for it to be affordable. Rent prices are shocking and in the Highlands and Islands there is little rentable stock and very little that is affordable.
Her story is one I know with my sons, and others. This is not sustainable.
I live in a flat in Nottingham and the firm I rent my flat from put my rent up by ~£140 a few months ago and the letter literally said something along the lines of “we’re doing this because all of the other properties nearby have increased their rents”
Usually you get some fluff about rising costs etc. but they didn’t even bother with that this time, eeesh
Exploitation then
Ironically, their landlords are probably Reform voters too, despite the status quo serving them rather well.
Here’s an opportunity for you (pl) to do something (albeit in a very small way) about the ‘ripoff’ rental sector – an chance for those of you who care, to do something positive. Actions, as they say, are stronger than words.
I am a private landlord (therefore, a piece of scum to most of you).
I have decided to exit the rental sector – I’ve had enough. I have no intention of making any of my tenants homeless, but will sell the properties when they become vacant.
The first one will come onto the sales market next week @ £140k (agent’s valuation £160k. I don’t need the extra £20k; it’ll just sit in the bank earning interest that I will never spend).
The property (a 1 bed ‘cottage’) cost me – in total including purchase price; SDLT (with the extra 3% landlord’s penalty); legal & Land Registry fees; and a tiny amount of capital expenditure) £134,197 in September 2020. Add on expected spellings fees of £2940 (Agents and Legal feess); and my total costs come to £137137.
Why don’t you (pl) club together and purchase the property, and let it at what you consider a reasonable rent?
Purchase 137137
Legals 1300
SDLT 7100
Remedial 3500 tiny bit of damp; new flooring where needed; redecorating.
Initial investment £149037
Monthly Interest @ 4% (on initial investment – including any opportunity cost. 497
Insurance 25
Rep Boiler 15 (cost of replacing boiler every 10 years)
Boiler Break 18 (monthly cost of boiler breakdown and Landlord’s Cert)
Mort Fee 33 (monthly to cover £1999 mortgage fee every 5 years)
Maintenance 30
Roof Fund 67 (the roof will need replacing in about 10 years – £8k)
Let Fee 99 (10% of monthly rent + VAT – the cheaper you rent it for, the lower this amount).
Voids 31 (to cover void periods – 1 month every 2 years. Does not include your liabilities – Council Tax, etc. during voids)
EICR 7
Total rent needed to cover the above: £822
I have until recently received £725. No doubt, many of you think that this was extortionate.
Well, now you (pl) have the opportunity to put your money where your mouth is. Buy this property and let it at a ‘fair’ price (It is only really suited for one person. Single wages, around here, circa £30k. So, let’s say a rent set at 25% of earnings….£625 per month – you’d only lose £198 per month).
Interesting – but you miss the point that, as I have long argued, interest should be very much lower – and tyat is the cause of the problem and you fail to notice that.
Totally agree, Richard. Interest rates should be lower. Unfortunately, I, and other Landlords, have to operate in the market as it is now – all of my mortgages are 4.5%+.
Why don’t you and other like minded people, club your resources, and buy this (or another) property. You can then forgo any profit or opportunity cost, and let it for cost?
Be the change you’d like to see.
Peter
Perhaps because I have no desire to be a landlord? I think the state should be. You are not proposing the change I desire.
You may wish for the government to provide all rentals, and, thereby, wiping out the private rental sector (although your original post only mentioned your desire for rent caps); but even you are not so much an ideologue as to believe that this would ever happen – the provision of all rentals, that is, not rent controls.
“ The only thing necessary for the triumph of evil (extortionate rents) is for good men (you and like minded people) to do nothing”. I think that it is incumbent on you (pl) to make the changes that you (pl), fervently, believe should happen. The time has come to ‘walk the walk’ as no one else is going to do it. Pool your (pl) resources (there must be tens of thousands of like mind people), buy out the private rental sector (house by house) and set the rents as low as you (pl) see fit – should be very low as you’d (pl) have no interest to pay.
Peter
Very politely, you are now trolling.
Don’t waste my time again.
@Peter Reid
Multiple properties?
Are you a limited company offsetting lower corporation tax and possibly 100% of your mortgage costs, or are you not using tax benefits available to you?
On what basis is the accounting you have presented in the long post?
Without both calculations, I can’t adjudge the viability of the purchase.
Hold on folks. Apologies for multiple postings on this … But This is in response to subsequent postings.
I think the point being advanced by some speculative landlords is that when conditions are not in their favour, others should bail them out — but don’t recognise the fundamental concern that the rent is not sustainable?
So no empathy?
Only a desire to enrich themselves when possible and to be bailed out in bad times (but not in the interests of the renters).
Perhaps we have identified part of the cancer?
I’m already involved in lending/donating to schemes to provide affordable housing on a non-profit basis. I’m trying to get involved in another but the planning delays and costs may prevent the build happening as the costs are exceeding the trust capital available.
Your letting business seems to be leveraged – ie: you borrowed, to buy to let. That was a conscious voluntary choice on your part. Now the sums don’t seem to be working for you. Presumably if they were working, you would be happy with the status quo. At least you can sell the property snd exit. In many other businesses, you might exit with nothing when the sums stopped working, or even with the loss of a home used to secure business capital.
I wonder how the sums work for your tenants? How does their rent compare with local HA rates for the local authority area for that type of property?
It isn’t left-wing or progressive politics or MMT that has hit your profits. It is the cost of borrowed money, allied to a failed housing market, itself a product of decades of neoliberal economics (which have also inflated rents, reduced housing supply, reduced ability to pay affordable rent. If you read the posts here and Richard’s published work, you will know he advocates for central bank interest rates to be much closer to real inflation, not well above it as they are now. Which would reduce your mortgage costs.
Have you explored offering your properties to a social housing provider? It varies according to area. You would be selling at a discount on market value.
I suppose my main point would be is that housing is not there to provide business opportunities for landlords and property developers, but to provide affordable and comfortable homes for people to live in. That has to be the priority of any housing policy.
Although you might not be making a profit just now you are paying off a part of the mortgage each month and when you sell you have money in the bank. If it wasnt profitable no one would be a landlord. But maybe it shouldnt be profitable and there should be more state owned property where any profit would go back into the homes and also for building new affordable housing,.
I don’t think any of us wish to be landlords. One home is more than enough! We are looking at the problems and some solutions for affordable housing. There is a charity and some private land owners on Mull offering affordable rent but not enough…… affordable rent should be available for all.
Agteed
Is your predicament not simply ‘the market’ working?
Peter
Offer your property to your local authority instead if you’re that hot to sell – they might need it for social rent. It would need to be surveyed before agreeing a price of course?
And thank you for proving our point – private renting is not the answer really is it? Nor is a laissez-faire economy for that matter because it is an economy based on having to extract rather than invest. I mean you could have sorted out the damp, put in new flooring and decorated really.
Interest rates are not the cause of the problem it’s primarily the cost of upkeep of a property. Besides if interest rates are cut significantly as you suggest this will cause house prices to rise even more.
Look aty the data just provided
Of course interest rates are the problem – and are another form of rent extraction
@Demos Kratos – MP for High Peak ‘declares’ amongst his ‘registered interests’ that he receives rent from his previous home (joint ownership presumably with wife) – I presume that all MPs do declare such but I doubt that there is any central register showing how many MPs receive relevant rental income. Jon Pearce MP (High Peak – and the lead of Labour Friends of Israel) was previously a lawyer in a large London firm and so I doubt that this property will have an affordable rent for most people, especially affordable for the young.
There is very little available rental property around here (Buxton in High Peak constituency) as those with surplus funds, whether from inheritance, cash sum from Pension or whatever, are ‘cash buyers’ for the properties that would be suitable for young people – these young people do not stand a chance when they must arrange mortgage etc against cash buyers – then these cash buyers immediately turn these properties into holiday lets/Airbnb style lets as they can charge higher rents than for long term residential lets – homes that could otherwise house local families, local workers or be a starter home for a young person. Some tax advantages have been taken away re short term holiday lets – but —. I live in a block of 14 flats at least 3 of which are now holiday lets and 1 which takes in Airbnb – I and others have complained but there is nothing in the 199 year lease to prevent this. Apart from denying an affordable home to a local worker or local family, there are times when it feels like a holiday camp with some very poor behaviour. The 2 youngsters who have managed to buy here are a rarity, and one of them told me that he is the only one of his friends who has managed to buy. There is 1 long term let here and the owner does want to sell, but has not as she does not want to evict her tenant – but how many landlords consider the tenant first?
Thanks
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