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Rents are rising across London – and unfortunately, we are usually the messenger who has to deliver this news to residents as their tenancy renewal approaches. This is a sharp change of tact for us, only a few short years ago we were negotiating lower rents on behalf of residents based on the market dropping during covid.
We have seen a surge in requests to explain why higher rents are being proposed, how figures have been reached, and why the Landlord has decided to do this now in a cost-of-living crisis. We wanted to take some time to explain the process here and have laid out some points to be aware of.
1. Suggested rental prices are market-driven
There are no factors that a resident can influence which will impact what a property is worth in any market. It does not affect your ability to look after a property well or your conduct within a tenancy.
The rental market is, simply put, driven like any other market by supply and demand. This will link to housing supplies in general, as well as what the sales market is doing.
From a really reductive point of view, we’ve seen huge changes in the mortgage market in the last year. A lot of people have been unable to move or buy, and who previously would have been in a position to do so. Higher monthly payments due to increased mortgage rates have altered plans for millions of would-be movers.
This means there's a big group of people staying in rented property who otherwise would have moved on to buy; either because they can no longer afford to, or because they're deciding to wait and see what happens.
In addition, there are increased numbers of overseas employees and students returning to the capital, as well as a small shift to ‘return to the office.' London has started to come alive again post-pandemic. This increases demand for rental properties and reduces supply, so rental prices go up.
2. The suggested renewal rent is often not market value
When it comes to a tenancy renewal, our advice to owners (what we call our landlords) is always to keep rents under market value.
To retain good residents, minimize void periods and reduce any interim works required – this is often worthwhile for owners, and gives residents a rental that they wouldn’t be able to find elsewhere on the open market.
If you are faced with an increase in rent, it is often good to do some local research to see what something similar in your area might be renting for. Depending on how long you've been in your tenancy, it might have been some time since you looked around - and you might be surprised.
3. What role do we, as the letting agent, play?
We are often seen as the evil middleman here, trying to push rents to the extreme, but I can assure you this isn’t the case.
We do have to balance our duty of care here. While, of course, we empathise with everyone's current climate, it’s our job to ensure that owners are given accurate information, including what they would achieve for the property if it returned to the open market.
Our process involves informing the owner of the current market value and then advising of a rent under this that would both balance an under-market rent for the resident and close the gap for the owner.
The owner ultimately decides where to pitch the rent between ‘current rent’ and ‘market rent,’ and each owner has different drivers.
Some are facing the cost-of-living crisis themselves and increased mortgage payments and, therefore, lean towards market rent. Some have always prioritized having good, long-term residents and make their decisions based on this. All we can do is lay out the facts and help owners with their individual needs.
What is our financial gain? I heard this from a resident this week: ‘You want to increase our rent because you earn a higher fee.’
This is true—we are paid a percentage of the rent received. But I think most residents would be surprised to know that once you renew a tenancy, this percentage and the difference in rent are negligible.
For example, an increase of £150pm earns us an additional £90+vat per year
4. What do I do if I can’t afford the proposed increase?
Communication is key - we want to work with everyone to ensure the best outcome.
We can also discuss offers or counteroffers with owners if you’d like us to and, of course, help you find alternative accommodation if that’s the right decision.
Our overarching advice to owners is always that having residents in a property who cannot afford it or who will be financially stretched is a worst-case scenario for everyone. We highly recommend against this.
5. Are there any factors that can affect what rent I pay?
Of course, the condition of a property should always be considered. We would expect market rent to rent a property in the open market. If it’s not to a standard befitting our portfolio - the owner is unlikely to achieve that.
Whatever your rent, you should expect a property to be maintained to a good level. If you are unsure what this is or feel that there might be some improvements that could or should be made, we are always happy to advise and speak to the owner to resolve these for you.
We have also been discussing with owners improvements that should, in turn, reduce other costs, for example, energy efficiency. If we can improve windows, insulation, or anything like this, it can positively impact your energy bills and offset some of the rental costs. We are promoting and sending out lots of information about this to our portfolio at present as a priority to assist residents. You can read more about this here.
