/ Money

Doom and gloom for a generation of renters

I’ve just moved into a new flat on my own – and boy does it cost a lot. Unfortunately, I’m far from alone in feeling ripped off by the rental market and excluded from the property ladder. So what’s to be done?

According to the latest research by LSL Property Services, rent prices have increased by 4.3% in the past year, hitting an average £718 per month in England and Wales. That’s £29 a month more than last year. Rents in London, the South West and West Midlands have increased by even more.

At the same time, competitive mortgage deals are only available to those with a hefty deposit. On a one-bedroom flat in London, that means saving up as much as £40,000 for a 20% deposit. How is the average renter expected to reach this figure if they’re paying half their take-home pay in rent?

And with fuel, food and transport costs going through the roof, savings rates still very low and the stock market uncertain at best, spare cash is both rare and, if there is any, unlikely to grow very much over time.

How can we solve out renting woes?

So what’s the answer? There have been a lot of reports in the news over the past week stating that older people should move into smaller properties once their children have flown the nest. But why should they move out of the home they’ve put years of time and effort into?

Another option is an increased private home-building programme which would not only lower rents in the longer term, but could also help the country build its way out of economic difficulty. But who is going to pay for them and where should all these homes be built? Certainly not on valuable greenbelt land.

My own view is twofold: I’d introduce a huge tax bill on any second homes that are not let out full-time, and also instigate a massive expansion of public-owned housing. This would increase the housing stock, reduce rents and aid the redevelopment of urban areas.

It would also ensure that the rent paid goes back into local councils’ coffers and help many more of us avoid the ridiculous fees imposed by private letting agencies (check-in fees, inventory fees, admin fees, check-out fees). Some estate agents are even adding excessive surcharges to credit and debit card payments.

Until that happens, hundreds of thousands of renters will be left paying through the nose, while existing homeowners and banks pull the ladder up behind them.

Comments
Guest
Phillip Bray says:
26 October 2011

Interesting article Martyn, a few points I’d add:

1. I couldn’t agree more that additional (affordable) homes need to be built; this could have the twin effect of helping first time buyers and also creating employment. I’d also agree that building on brown field sites is preferable for the community than concreting over green belt land. Although from the developer perspective green belt is far more interesting, it is cheaper with less contamination issues to consider and the houses are probably easier to sell. The government need to do the right thing and move out from the influence of the developers

2. I’d like to see the government offer more funding to housing associations to help first time buyers, this could be in the form of building affordable housing which could be let out at reasonable rents or used to help fund shared equity schemes, which again could be targeted at first time buyers in the hardest hit areas. Clearly this would need the agreement of some lenders, but don’t the government own some of these? They should be easy enough to persuade to come up with some excellent FTB deals

3. I’m not sure what the benefit would be (apart from increasing the tax take, which is not to be sniffed at) by imposing an additional tax on 2nd homes. Many people see their second home as an investment, to impose a large new tax would not be popular, and would in many ways be similar to Gordon Brown’s raid on pension funds. You could however increase stamp duty significantly for new second home purchases which are not to be let out

4. Speaking as a renter, who has recent experience of the lettings market (we move next week!) I found the vast majority of agents lazy and clearly reliant on a very bullish rental sector. I’ve lost count of the agents who said would call us back about something or other but never did. However, I have not experienced over inflated fees, I think our application fee, which covered all checks, was just £125, which seems reasonable

5. There are of course advantages to letting, for example, if you thought house prices were going to fall in the short term why on earth would you buy now? Not only would your investment fall in value because of the reduction in house prices, but inflation would be eating away at your ‘investment too’. We’ve looked on renting as an opportunity to live in places we could never afford and live flexibly, moving easily when we want to. I do recognise of course that there are plenty of people who would like to get on the housing ladder but can’t due to the large deposit needed and the tight lending criteria of the banks and building societies.

The housing crisis will only get worse unless we come up with a solution to provide more affordable housing, whether owner occupied or rented, which would seem to be an opportunity for the economy as a whole, if it is approached in the right way.

Phil

Guest

I agree totally that something needs to be done to ease the housing crisis. I’m in the process of looking for a flat to rent at the moment & it’s proving to be a very stressful situation. My experience of letting agents is much the same as yours Phil, they rarely call back when they say they will and worse than that, they don’t keep their appointments. I’ve seen a few flats in London now and have been stood up by the letting agent twice, leaving me standing in the cold outside the property I’m meant to be viewing with no more than a brief text message to explain they won’t be able to make the appointment today. I wouldn’t mind if they gave more notice but I received these messages a few minutes before the allotted appointment time.

Once you’ve gone through the process of trailing round to find the dream flat (or just something passable) you’re then hit with the fees. It seems to me that they charge a large amount for doing very little. For instance, even for renewing a contract (signing a piece of paper) it typically costs £100 per person plus VAT. To me this seems far too high – they haven’t had to find more tenants and all they’ve changed on the contract is the date. I think I can be forgiven for thinking that this seems like money for nothing.

Currently letting agents are not regulated. There are numerous schemes that they can opt into but often tenants don’t know to ask the agent whether they are a member of a regulated body. I feel that this needs to change – as a bare minimum letting agents should be obliged to sign up to an official redress scheme, so that tenants and landlords know that should something go wrong, they will be properly looked after.

There seems to be growing media coverage of the housing crisis – hopefully this will lead to improvements soon!

Jess

Guest

For me, affordable housing means cheap rubbish that is subsidised, creating more profits for developers. And once people are in, and the grace period has expired, they move out and sell at a profit anyway. The people that then move in have to deal with the fact that all the cheap materials are falling apart around them.

I work in London, but I am moving to a new house in Bedfordshire next month. On that estate/new village, there is a mixture of private and social housing. The social housing is extremely high quality yet available at an affordable/subsidised price. St Pancras is a 40 minute commute away also.

Coupled with this, we needed a 25k deposit, with 11k gifted from the developer + 10% discount on the selling price. I know commuting prices are quite high, but outside of London there is just so much more scope within the middle distance commuter-belt ie Milton Keynes, Bedford, Luton etc.

If you HAVE to live in London then unless you are a city worker, you will always have to rent. I lived in Amsterdam and Duesseldorf, both these places have higher rents than are available in London.

The other option is to share, either with a friend or a partner.

I own my own house in Leeds and I have rented it out for about 4 years. I have not once increased the rent because I have a reliable tenant who has been in there right from the start. If only all landlords were like me 🙂

Guest

I’m also in much the same situation with looking for a flat in London – the rental market is a complete headache! I have chosen to bypass letting agents and look for rooms online, but the competition is terrible – the house I am currently talking to in regard to moving in had 150 people apply for their spare room in 2 days. Is the problem with letting agents and unaffordable deposits particularly London-centric? I’d be interested to know how people find it with renting in different cities or areas.

Costly transport is another issue I find drives up living costs coming into the city too (but that’s a whole other topic…) I used to commute in from my parents’ house in Kent before moving in to my first flat – and the commuting costs really weren’t that hugely different from renting. Feels a bit of a lose-lose situation to me…

Guest

So long as there is no brake on the uncontrolled increase in employment levels in London and other metropolitan areas there is going to be a problem. Every now and then somebody pipes up with a “solution” – like, “let’s help all the old people to move into something smaller, more manageable and more economical”, or “let’s penalise all the second home owners so they release their country cottages and seaside bungalows” [big help!], or “let’s get all the people who can’t or won’t get a job and move them to where there isn’t any work so the workers can rent their flats more cheaply”.
There is no natural law that says that people’s first rung on the housing ladder must be a brand new property, so why are developers forced to provide a ratio [upto 45% in some areas] of “affordable” homes on new developments? This is only retarding the relief of the housing shortfall. When developers can supply desirable houses in pleasant locations with spacious layouts demand will soar, decent second-hand property will be released, and the increased supply will suppress prices. Not only are people paying ridiculous prices for their homes nowadays but they are having to put up with sub-standard dwellings that a few years ago were at the bottom of the market and with journeys to work that are harmful to their long-term well-being. More jobs have got to move out of London and the major cities, more houses have to be built in the provinces, the expansion of commuting must be curtailed [apart from anything else the roads and railways are already too overloaded for safety], and other towns have to become as attractive for work, entertainment, education and welfare, access, and general quality of life as the conurbations.

Guest

Interestingly, I just read today that Poole in Dorset has outstripped London as Britain’s least affordable place to rent a room – who would’ve thought it!

Guest

I’m from that area originally – Poole includes the very affluent area of Sandbanks, which has long been quoted as the most expensive part of the UK per sq mile (or something like that!), so that probably contributes to it. Some areas of Poole are a real dive!

Guest

Homes are too important to be used for profiteering This may seem an obvious statement but homes are for living in, not for cashing in.
House prices are nowhere close to the real value of the materials and the land. There needs to be some serious intervention now, which does not have the unbridled economic motive behind it that we all know only too well, ends in disaster.

Guest

Ah well – Blame the Thatcher Era –

She of the de-regulation of rents – the forced selling off of council housing at subsidised prices coupled to the refusal to allow councils to use the receipts of the subsidised house sales to build more housing to allow the poor to live at an affordable rate. Now my council has to pay premium rates to the “buy to rent” exploiters – instead of using rent receipts to pay to build more housing. .

Yes – Brilliant – The rich “buy to rent” buying up all empty property driving up the price of houses AND making vast profits by increasing the rents that used to be regulated.to increase income even further.

I live in London – Before Thatcher my modest house was worth 2.5 times my annual income – Now it is “worth” 10 times my annual income – I couldn’t afford the mortgage even at 5% interest at the moment – I dread to think how many home owners will default and lose their home when the Interest rates increase – Remember Under Thatcher mortgage rate went up to 15% (many lost their homes then too).

Rents used to be affordable which was why so many poor people lived locally. Now local rents for tiny flats are around £1000 a month or higher – so the poor can’t afford them. Think about it – you need to earn £6-25 an HOUR to pay just for the rent – minimum wage around £7.00 – so live on 75 pence a week – Ridiculous – But what do you expect of a Tory government?.

Guest
brat673 says:
8 December 2011

I am a charity worker and recently we were help a person to obtain assistance for housing costs. they were first asked £100 for credit reference checks. Now to be given the keys they had to pay upfront £1715. It consisted of a £595 rent £895 deposit and £125 sign up fee.
Now when we rented our house out a year or two ago we had to pay the agent £250 to find and vet a tenant. I believe it is time these agent were properly regulated. Getting paid by both sides seems a good deal for the agent. For the tenant not very good. Then there I hear tales of sign up fees every year. Rip off springs to mind.

Guest
Sally says:
30 October 2011

I wonder if we are tinkering around the symptoms of the problem, rather than the cause? Simply, there are too many people requiring accommodation.

If government intervention is required, then a reduction in immigration (a net figure of some 3.5m during the Blair and Brown years, with no appetite to change from the Tory government), combined with a reduction in the welfare largess to coax the indigenous lumpenproleteriat into work, would reduce the number of homes required.

Couple this with a relaxation of the HMO regulation, so that the letting of rooms, tax free is enhanced, and accommodation levels increased. Moreover the mobility of our workforce is eased allowing people to chase the jobs.

I worry when new tax regimes are suggested as the collection of the tax adds to burgeoning state costs

Guest
Dave says:
30 October 2011

It’s all well and good to blame the past, but that doesn’t help us for the present and the future. Think proactive not reactive…

Guest
Sammshine says:
2 November 2011

I’ve recently been looking to rent in London as well & decided to avoid letting agents due to the astronomical fees they charged me last time. I used a well known online website to find a spare room in the area that I presently live in. I didnt realise how competitive it was for rooms up til this point. Meeting the landlord & tenant was an interview on my lifestyle & suitability. Fortunately I passed (phew!). In all the time I’ve rented (all over the country) I’ve never experienced the rental issues that I have here in London. I have owned property previously, but I don’t want to again. I love renting but I would like to see less domination in this market by letting agents & their exorbitant fees.

Guest

Apparently prospective tenants are being forced to hand over their CVs in desperation to score a property and impress potential landlords.

http://www.independent.co.uk/life-style/house-and-home/property/prospective-tenants-hand-over-cvs-6259373.html

I don’t think I’d hand over my CV to a landlord. Proving you have a secure job is enough, surely? Strange times we’re in…