Landlords are vacating the market in record numbers — and it’s bad news for renters.
In a small town in east London, nearly an hour’s commute into the City, dozens spent a March afternoon queued outside a beige roughcast two-bedroom property. Over the course of a few days, more than 150 people viewed the average-looking rental in Chadwell Heath. At £1,500 per month, it wasn’t even cheap — it shouldn’t have been in such high demand. That it was, exposes a foundational crack in our rental market.
A landlord exodus — driven by interest rate rises that turned their ‘safe as houses’ investments into liabilities — precipitated an almost 40% fall in London’s rental housing stock. Consequently, the rental market has seen a 17% increase throughout 2022 and a severe uptick in lease competition. With so little supply, renters are at landlords’ mercy, subject to arbitrary rent review clauses, poor housing quality, rent hikes, and no-cause evictions. The proposed Renters Reform Bill — a piece of legislation which the Conservatives have been promising since Boris Johnson first gained office — would eliminate these issues from a regulatory standpoint, but it fails to resolve the main issue afflicting renters. We need policies to bring landlords back to the market.
The deterioration of the rental market has exposed the real need for reforms to protect renters from landlord negligence and abuse. But regulating landlord practices won’t help renters find a place to live. Instead, the combination of higher interest rates and more onerous rental terms will incentivize landlords to cash in their assets and abandon the market, driving up rental housing scarcity and costs.
To truly solve the housing crisis, we need to balance rental reforms with an equal supply of policies to incentivize new building projects and to draw landlords back to the market.
The answer almost certainly doesn’t lie in tax relief — that would be politically toxic — but it may well lie in interest rate reliefs to attract professionalised landlords, usually offering higher quality housing and a better rental experience. In addition, financial support for build-to-rent schemes, liberalised planning reforms, and checks on local authorities’ power to arbitrarily block important housing projects are all reforms that could help bring more landlords into the market.
As a London renter, I see first-hand how the rapid haemorrhage of landlords from the market makes my situation worse. My rent is going up, primarily because of rising interest rates, but also because with so few housing alternatives out there, the landlord knows he can charge whatever he wants and easily replace me if I leave. It took nearly three months of searching to find my current flat — now that I’m here, I have to cling to it like gold dust despite the rising cost.
One great benefit of the Renters Reform Act would be that it would ensure renters like me security against landlords who try to use arbitrary rent review clauses to put up rents beyond the market price; it will prevent them from kicking tenants out simply to bring higher paying ones in. But while it will help keep rental prices at a market rate, that rate may still be excessively high if we don’t also increase our rental housing stock.
During their disastrous tenure, Liz Truss and Kwasi Kwarteng promised a liberalisation of the planning market to open up supply and tackle the structural causes at the heart of the housing crisis. This plan dropped out when they did, but Rishi Sunak must bring it back to the top of the agenda.
To remedy the rental crisis, we must address the root cause of what ails it. With more properties to manage, more landlords will join the market, and with more landlords, renters will have more opportunities to vote with their feet. If the property quality is poor, tenants will relocate; if the rent is too high, a landlord down the street could be offering a similar property for less.
The Renters Reform Act is badly needed, but so are more landlords.