Rents Rise Faster Than Official Reports
Local rents are rising much faster than official figures would suggest. Read on to find out how much they are rising and for whom exactly.
The Official Figures
Looking first at the national figures, the Office of National Statistics (ONS), say rents are going up 1.8% but London rents have fallen and if they are excluded the increase is 2.7%. However, they acknowledge they are not measuring the same thing as the indexes that landlords tend to look at. The HomeLet Rental Index, produced by an insurance firm, more closely reflects new rental prices, and shows the average monthly rent is up 8.3%. Rightmove think the figure is just over 10% and Zoopla about 7.5%.
We asked a range of local agents and all four thought new tenancies were achieving rents at least 10 % above what the rents were for the previous tenant.
None of these figures are a true measure of rent inflation nor do they help us decide how much we should increase our rents.
The ONS figures come from data gathered by the Valuation Office Agency (VOA). The VOA collect actual rent figures from landlords and agents over a year, this is broken down by the number of rooms the property has and by town or area. They also gather data for room rentals and "studios".
Dated Data
When you look at the detailed figures they can jump around erratically as the sample changes but they do give an indication of direction. When averaged out nationally they are probably a useful indicator of rent inflation. They are what the Government will feed into the overall Consumer Price Index.
However, the figure is always out of date. They gather the data over a year so on average the figure is 6 months out of date and it takes 3 months for the reports to get out there. So their current numbers tell uswhat tenants were paying 9 months ago is 1.8% up on what tenants were paying 21 months ago. Some of the rent figures we give them will be well below the market value of the property today. Some of us are reluctant to put rents up a little each year and tend to wait till the tenant leaves. Then there will be a big jump but it covers a number of years. As the ONS put it "these supply and demand pressures can take time to feed through to its index".
The fact that the Government cannot officially see a step up in rents for 9 months should be a worry for those reliant on CPI linked benefits.
It is also rather alarming to note that the ONS figure is going up 0.1% every month. If that rate of increase continues we could see even their figure of 2.7% reach 3.9%by the year end.
So How Much Should You Charge?
How useful are the figures from Homelelet, Rightmove or Zoopla? Well they tend to be based of the increase in the rent for an average property. A fairly crude measure.
As many of us were reluctant to put up rents when Covid had such an impact on incomes, are the percentage increases we see now an exaggeration? Their sample size will be much smaller than that of the VOA. If we put up our rent last year and have relet a year later perhaps we could add 8.1 % but far more sensible would be to assess the local situation and use Rightmove or Zoopla to ascertain what similar properties are going for.
Much harder is deciding how much we should put up the rent for an existing tenant. Somewhere between 2.7 and 8.3% is probably appropriate assuming we increased the rent last year. BUT will that be affordable? How much do we want to retain the goodwill of a good tenant? If they leave what will be the cost reletting? How much have our costs gone up by? (Regulation, tax, our own living costs etc.)
However we chose to look at it, the outlook for those renting is grim.
If Labour get their way, we will have rent controls, for those of us who are slow to put rents up each year that is good news but it won't help tenants and will further reduce incentives for us to invest, supply will decrease.
An Interesting Observation on HMO Rents.
Over two years to 31 March 2021 HMO shared rooms in the lower quartile (More affordable) went up 17%, £325 to £380 PCM. (From ONS data). All while the benefits rate was frozen at £342. The national average increase over the same 2 years was 5%. This is not a like for like comparison. This indicates a shift away from affordable rooms. This is what we are seeing locally as PCC push to raise standards. The rents in the upper quartile are now £500 but you get lots of space. The result is increased homelessness for those on benefits
You can find the ONS stats here-
Index of Private Housing Rental Prices
The detailed rent data broken down-
For more general ONS comments-
Poll suggests many private landlords less likely to rent to tenants on benefits
And an interesting perspective on this topic-