Will spiralling household bills impact rental growth and elicit a cost of living response from tenants?
The prices of day-to-day essentials are rising in what some are calling a cost-of-living crisis. The energy price cap for household utilities will go up by almost £700 per year next month, with further increases expected in October. Petrol and diesel costs have likewise rocketed, with experts predicting that petrol could reach £2.50 a litre. Food prices, which were already rising earlier this year, are expected to go higher still because of the war in Ukraine.
With tenants’ incomes squeezed, the scope for rental increases this year is limited. National letting agency Hamptons now forecasts that average rents will rise by just 2.5% in 2022 – significantly down on last year’s 7% average, and well below inflation.
Industry suppliers also warn that rising living costs could cause some tenants to stop paying rent altogether. Similar predictions were made during the COVID-19 pandemic in 2020, with PayProp’s platform data showing that the proportion of tenants in arrears rose from 8.7% to a peak of 13.4% – a big proportional increase, but against the context of a sharper fall in household income than the one seen during the 2007-8 financial crisis.
At that time, rental housing providers showed a lot of flexibility in working with cash-strapped tenants. Almost half of UK landlords offered to temporarily reduce rent, with many of them proactively offering payment holidays. Similar generosity this time around could help to sustain tenancies once again. The government’s £150 Council Tax rebate and £200 energy bill loan may also help to soften the impact in 2022.
Some politicians are renewing calls for rent freezes to limit the burden on tenants. Mayor of London Sadiq Khan has asked the government for the power to prevent rent increases in the private rented sector for two years – a move projected by the Mayor's office to save the average tenant around £3,000, and backed by rental platform Canopy. Westminster has rebuffed previous requests for rent control powers and is unlikely to grant Khan’s wish this time either, but the clamour is rising as local politicians elsewhere weigh in as well.
A rent freeze is unlikely to be as impactful as its advocates say. The aforesaid expected savings for renters in the capital are based on an average 6.5% rent increase in London in 2022, taken from a Savills report written before the latest cost-of-living squeeze. If agents and landlords opt for lower rent increases this year as predicted, they will already be helping to reduce the burden on tenants – and the small additional impact of a legally-enforced rent freeze would be outweighed by the rising cost of other essentials.
Other tenant headlines
85% of tenants happy with landlord so let’s drop “slum narrative” – LandlordZONE
How tenants pay rent is no business of landlords, claims Shelter – Landlord Today
Horrified landlord finds boa constrictor as “nightmare” tenant leaves – The Mirror
