Concerning new research has revealed that the Private Rental Sector could well be on a sliding timescale to demise.
Earlier this month, the Residential Landlords Association published a report that showed 56% of landlords planned to raise rents in the next 12 months. This has largely been attributed to tax legislation changes and alterations to mortgage interest tax relief.
Now, new findings from a report from property classifieds site TheHouseShop.com, has discovered that 42% of renters would be unable to afford any increase in rents, of up to 5% of their current monthly rental costs.
The YouGov supported survey of more than 1000 renters and mortgage holders questioned people on the minimum percentage that their rental payments would have to rise by before they came unaffordable.
Even more shockingly, an increase of just 1% would see 16% unable to keep up with rental payments. This underlines the importance of buy-to-let landlords taking out rent guarantee insurance in order to protect their investment.
On the other hand, mortgage holders were found to be much more likely to withstand any increases in monthly payments. 24% said that payments would have to rise more than 20% before they became unaffordable.
For both mortgage holders and renters, 22% said that they would be unable to afford rental increases of up to 3% in their housing costs. Interestingly, more men than women said that housing costs would have to rise by more than 20% before they couldn’t afford to pay.
Unsurprisingly, 18-24 said that they would be least likely to absorb a rental rise of 20%, with only 6% saying this was the case.
Nick Marr, Co-Founder of TheHouseShop.com, commented: ‘We all know that the rental market is highly competitive right now, and tenants’ budgets are already stretched to breaking point. Therefore the prospect of any further rent rise is a real concern, and as our research shows, even a relatively minor increase in monthly rent payments could push tenants over the edge. The fact that 16% of renters said that they would struggle to afford even a 1% increase in monthly rent is especially worrying – this could equate to as little as £7.79 extra per month based on average UK rents.’
‘The results also show that more than 1 in 4 (27%) renters would struggle to afford an increase of up to 3%, or a potential monthly increase of £23.37. These figures are totally at odds with the various surveys and research papers showing that the majority of landlords are planning to raise rents on their tenants within the next 12 months.’
According to Mr Marr, this shows that there is a, ‘ticking time-bomb’ in the Private Rental Sector. He continued by saying: ‘With the number of people renting from private landlords already at a 30 year high – we could quickly find ourselves in a very precarious position with wide-ranging consequences for both tenants and landlords up and down the country.’
Mr Dan Wilson Craw, Policy Manager at Generation Rent, issued a warning that landlords looking to raise rents will be met with steadfast resistance from tenants. Wilson said: ‘Rents are already taking a huge bite out of tenants’ incomes, so any attempts to raise them further will be met with resistance. With only a third of privately rented properties mortgaged, tenants should be prepared to negotiate hard on any attempts to raise rent, and remember that there are many landlords out there who won’t be affected by the tax changes.’