Greg Tsuman, the current president of ARLA Propertymark and director of lettings at the Martyn Gerrard agency, expressed concern over the latest government report. It revealed an average 5.7% annual rent increase across Britain, with London experiencing the highest surge since 2006, reaching 6.2% annually. Tsuman’s comments come in response to these figures.
Tsuman highlights three key factors contributing to the ongoing trend: rising interest rates, a limited supply of housing, and Section 24 of the Finance Act. These factors are fueling rent inflation, and the situation is expected to worsen.
George Osborne’s policy in the Finance Act aimed to support tenants in saving for their own homes but has inadvertently harmed them. Saving for a deposit has become more challenging since 2016. Homeownership seems increasingly distant for tenants, and their rental prospects are also at risk.
The full implementation of Section 24 in 2021 requires landlords to pay taxes on their turnover, including costs like interest payments, rather than just their profits. This additional tax burden has hit landlords hard, exacerbating the challenges in the private rental sector, which is pushing them to exit the market.
Tsuman highlights the harsh reality that some landlords are witnessing a threefold increase in their monthly expenses. This situation is causing distress for tenants who may struggle to afford the higher rents passed on by landlords to cover these mounting costs.
In response, other landlords, whether unable or unwilling to raise rents, are choosing to sell their properties and exit the market altogether. This is further depleting an already insufficient supply of rental homes, exacerbating the challenges for renters.
This scarcity of available rental properties is taking a toll on the market, with affordable two-bedroom properties now attracting up to 80 inquiries from desperate tenants. Consequently, renters are increasingly relocating to more affordable areas, triggering a ripple effect on prices as urban residents seek refuge in the suburbs. This migration trend from cities is influencing neighboring areas as well.
“As tenants are forced to move and sign new leases, this contributes to the rise in rental costs. These statistics also include lease renewals, which typically come at lower rates than new rentals, masking the true extent of the increase in market rents. As more tenancies end due to landlords selling their properties, tenants are facing significantly higher rent increases than these figures indicate.”
“The impact of this situation is two-fold: tenants are struggling with increased rental expenses, while the statistics fail to accurately reflect the actual rental rate surge happening in the market.”