Spending four figures a month on rent was a rare luxury for tenants in the capital, but now it is almost the norm. The capital’s private rental market has exploded recently, with prices rocketing to their highest level against earnings in seven years. In May, average rents across Greater London were 2,234 pounds, a 13% increase from last year, according to an analysis by estate agents Hamptons International for Bloomberg News.
The price rises have been driven by a combination of factors, including rising demand, a shortage of available properties, and higher mortgage rates, which keep potential buyers locked into the rental market for longer and push up costs. London rents have increased by an average of 7% in the past three months alone, according to online property site Rightmove.
Those living in the city center have faced the most significant increases, with central London rental prices now higher than during the pandemic lockdown. But it is the capital’s outskirts where demand is growing fastest, with Coulsdon, Purley, and Romford all seeing rents grow by more than 20% over the past year.
A shortage of homes to buy is also exacerbating the rental crisis, keeping many prospective first-time buyers in the rental market and pushing up costs. The number of new-build houses in England fell by 40% during the first quarter of this year to just 50,000. That’s far short of the 250,000 needed each year to keep pace with the country’s growing population and meet the needs of people moving out of London.
Amid the supply crisis, there are concerns that the quality of rental accommodation is starting to deteriorate. Landlords are increasingly taking on properties in poor condition, with some reversing previous plans to invest in their properties and instead opting to raise the rent. In some cases, landlords are also using eviction notices more frequently. But the government says it is taking steps to help tackle the problem, including unfreezing tenant housing benefits and boosting housebuilding.
But the National Residential Landlords Association is urging ministers to do more. Its policy director, Chris Norris, criticized the current climate for causing a “reckless shrinking of the rental sector” and called on ministers to unfreeze housing benefits, accelerate housebuilding and scrap the planned cuts to tax relief for landlords. The government said it was committed to helping households in financial difficulty. It introduced the energy price guarantee and a renters’ reform bill, which includes measures to end no-fault evictions. The legislation is expected to be implemented by late 2024.
