Until March 2023, Nicola Sturgeon has frozen rent rates. As part of her ‘programme for government’ speech in September, the Scottish Prime Minister spoke of her decision to halt any rent increases in private and public sector properties.
English renters are feeling the pinch and many are looking across the border in envy. According to research published by housing charity Shelter:
30% of renters are behind or struggling to keep up with their rent
32% are spending 50% of their household income on rent each month
42% had experienced a rent increase in the past year
10% had seen their rent increase by more than £100 per month
And it’s not surprising
As of 2022, the average rent charged per month now stands at £1,060. For many people already struggling to keep up with the increase of costs and lack of wage growth, this figure is too much.
However, Chris Norris, policy director for the National Residential Landlords Association (NRLA), argues that, “There will be cases where landlords are simply unable to shoulder all the increased costs and need to increase rents accordingly.”
Average rent versus average income in England
In England, the average salary is £29,588 but after tax and National Insurance, that equates to £23,573. Per month, that’s £1,964.
If an individual living alone had to pay the average rent of £1,060, that would leave them with £904 to cover their electricity and gas (£65), water (£34), council tax (£90), broadband (£30), phone contract (£46), food (£175) and car costs including fuel, insurance and maintenance (£160).
For this example, the individual would need to be careful of their electricity, gas and water usage and then they could be left with £304 a month.
However, these sums exclude any additional costs that a person might pay throughout the month, like debt repayments, childcare, a private pension or personal care i.e. haircuts, and pet expenses. There also isn’t much room left to save to buy their own property one day.
Furthermore, if this person were to live in the South of England or London, their rent on average for a one bedroom flat would be as much as £1,237 per month, pushing their budget even more so.
How can first-time buyers save for a deposit when their rent is so high?
In January 2022, the average price for a house in the UK was almost £274,000. While there are 5% mortgages available to first-time buyers with a good credit history, low debt and a steady income, the majority of mortgage lenders will require a 10-15% deposit.
This is also where the deals with lower interest rates can be found as typically 5% mortgages can charge higher rates of interest, costing the borrower more for their mortgage over the years.
Average property price of £274,000
Based on a disposable income of £304 per month for an individual renting a one bedroom flat on a salary of £29,588:
It would take 45 months (3 and ¾ years) of saving every spare penny they had to accumulate enough to have a 5% deposit
90 months (7 and ½ years) to save a 10% deposit
135 months (11 and ¼ years) to save a 15% deposit
Are landlords supposed to stop making a profit?
It’s a tricky question because there are lots of landlords that provide a brilliant service to their tenants and a safe, warm, mould free home to live in. These hardworking individuals have created an income for themselves by responsibly letting out property and they too are faced with an increase to their outgoings.
Interest rates have rocketed recently and for buy-to-let landlords with a variable rate mortgage, that means higher mortgage repayments. They’re also faced with the cost of living crisis, forking out for higher bills and outgoings like property maintenance.
So who should go without? The individual renting a home or the landlord?
For some, like The Guardian writer and charity worker Jazmyn Sadri, the solution is clear. Freeze rent rates like they have in Scotland to provide some security for millions of renters who simply can’t afford another rent increase. However, understandably, landlords disagree.
How will freezing rent rates address the housing supply crisis?
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA) questions how freezing rent rates will encourage additional landlords to buy property in order to let it out to tenants during a period of housing shortage.
In an open letter to the Renters Reform Coalition, Beadle states: “One of the central arguments is a call for a two-year rent freeze in the private rented sector. I should be grateful if you could outline how this would help address the supply crisis that tenants now face.
Research for the NRLA has found that in Q2 2022, 23% of private landlords in England and Wales said they planned to cut the number of properties they let over the next 12 months.
This was up from 20% the year before. In contrast, just 14% said they planned to increase the number of properties they let, unchanged since the same point last year and down 4 points since Q1 2022.”
What do you think?
Are you a renter saving for a deposit to buy your own home or are you a landlord repaying a buy-to-let mortgage, considering either to continue with the property you have or try to buy another property to let out?
First-time buyers with savings advice and guidance on how to improve a credit report
First-time buyers looking for an affordable mortgage in light of the interest rate rises
Buy-to-let investors needing advice on how to increase their property portfolio
Buy-to-let investors looking to remortgage to a cheaper deal or for more finance