Renting in London is fucked: Part two
Why is it such a mess and what can we do?
A week ago we published a personal essay about the current renting crisis. Since then that issue has become the most viewed and ‘liked’ we’ve ever published. Which is gratifying and depressing in equal measure.
It’s depressing because we heard from so many people who were going through the same kind of problems, if not worse. People having to ‘couch surf’ for months on end while trying to find somewhere affordable to live, or resigning from their jobs because they were being forced to throw in the towel and move out of London.
Some readers pointed out that renting in London has always been difficult. After all, didn’t those people who had to traipse the streets armed with a copy of Loot and a battered A-Z face the same kind of stresses?
Well, not really. And here’s why.
London: “Not a sexy place for landlords”
As Kate said in her article, the Finance Act of 2015 changed the way landlords pay taxes, and that’s led to many of them selling up. Recently a spokesperson from National Residential Landlords Association told ITV “We see a punitive tax regime, we see greater regulation. This is not a sexy place for landlords to invest” (seriously, only someone from the National Residential Landlords Association would put the words ‘sexy’ and ‘landlords’ in the same sentence).
But that’s been happening for six years, so why have things got so much worse recently?
House prices have gone up and that means fewer landlords are buying properties. As the Times reported this weekend, the number of approvals for buy-to-let mortgages went down by 11% over the past year.
It also means that the ‘yield’ (the amount of rent a landlord can expect to make from a property) is becoming harder to extract. To get a 5% yield from an average property in 1996 a landlord would need to earn £245 a month. Today that figure is £1,217 (and that’s working on average UK house prices, not London ones).
Plus, if you have an interest-only mortgage on your rental property, then the fact that the Bank of England has raised interest rates seven times since December means your repayments have likely almost doubled.
What has this ‘exodus’ of landlords meant for London’s rental market? Between July 2021 and July this year, the number of rental properties on the market dropped by 38% (a stat published over the weekend actually has that number closer to 44%).
But demand for rental properties is going up
At the same time as two out of five rental properties were vanishing from estate agent windows, the number of ‘tenant enquiries’ was going up by 60%.
After we published Monday’s issue, the founder of OpenRent emailed us to let us know that they were getting six times as many enquiries per property, per day, than they were eighteen months ago.
Some of that demand is coming from people moving back to London ‘post-pandemic’ and it’s exacerbated by the fact that a lot of those people are now working from home, so they’re looking for bigger properties (if they can afford it). There’s also a theory that says many people have decided that, “after the claustrophobia of lockdowns” they don’t want to “live crammed together anymore,” so fewer people are willing to live with roommates.
There’s yet another factor: students. As the FT reported this weekend, there is a student accommodation crunch happening, caused by “exceptionally tight” rental markets and a repeat of last year’s problem “when some universities accepted more students than they had planned for”. If they can’t find places in halls, then those students are turning to the private market (and if they’re students from, say, the US then the recent slump in the value of the pound means they have a much healthier budget than someone from the UK might have).
It’s true: trying to find an affordable, liveable rental property in London a few years ago wasn’t easy. But now you’re competing with many more people for a slice of an ever-decreasing pie.
You don’t have to be an economist to know what happens next.
The basic laws of supply and demand means that rents are now ‘soaring’ (up 16% in London in the past year) and, as Kate outlined in her piece, many places are being snapped up within minutes of being listed (often without even being seen) and tenants are offering landlords more rent than they’re asking for.
So what can we do about it?
In Friday’s Guardian Jazmyn Sadri wrote about how she had “lost [her] home twice in two years because of unfair rent increases”. As far she’s concerned, “the solution is clear”: we need to follow Scotland’s lead and freeze private rents.
Sadiq Khan would agree with her. Earlier this month he praised the Scottish government’s “bold action” and called for the UK Government to give him the power to do the same. But there was nothing to that effect in last week’s ‘mini budget’ something which didn’t go unnoticed by Khan:
There is an argument against rent freezes though. That argument goes that capping rents doesn’t address the supply/demand issue and might even make the situation worse by reducing supply of properties even more. Landlords in Scotland are already blaming the student accommodation crunch on the rent freeze (and the ban on evicting tenants), and the Scottish Herald is publishing editorials saying it’s “unlikely these measures will make a meaningful difference to the people it is intended to help.”
In the end, the only real solution to this crisis is to build more affordable housing in London, and that’s a crisis all of its own (which will have to wait for its own newsletter).
Coming up on Wednesday 🤒
We’re taking a looking at London’s vital signs to see how things are going; from footfall and hotel rooms, to the ‘Pret index’ and air traffic. Plus we’re taking stock of the various plans to get London back to full health.
5 little bits
Labour’s shadow justice secretary, Steve Reed, has told the Telegraph that Sadiq Khan “must not be allowed to turn London into a ‘drug supermarket’”. To be more precise, what he said was that Brixton “became like London’s drug supermarket” when he was leader of Lambeth Borough Council, and that Labour wouldn’t be decriminalising cannabis (or giving the mayor powers to do it) if it wins the next election.
Some of the people who live on Wimpole Street in Marylebone have written to Westminster council to complain that the office block at number 91 has been granted a license to sell alcohol on its roof terrace, which means people getting drunk, playing music and looking right into their bedroom windows.
Fun transport news: Some classic old London buses (“complete with conductors”) will be driving around route 37 (between Peckham and Putney) on Saturday 1st October 2022. Depressing transport news: The Tottenham Conservatives are comparing LTN’s to apartheid now.
There were two London Underground-themed photo essays in the papers this last week. First, The Guardian took a tour of TfL’s In Bloom competition entrants; and then The Telegraph (paywall alert) collected some images of London Underground's most beautiful stations, which included Gants Hill’s “stirring pastiche of Soviet-era architecture” and Chesham station with its “endearing whiff of rural isolation and a beguiling historic water tower.”
Keep an eye on the sky over Battersea Power Station this week. The rumour is that Pink Floyd might be recreating that Animals cover.
