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 impact what a property is worth in any market. It has no bearing on your ability to look after a property well or on 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, in the last year, we’ve seen huge changes in the mortgage market. A lot of people have been unable to move, or unable to buy, 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.
On top of this, 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 middle man here, trying to push rents to their excess, but I can assure you this just isn’t the case.
We do have to balance our duty of care here. Whilst of course we empathise with the current climate for everyone – it’s our job to ensure that owners are given accurate information, and this includes 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.
Where to pitch the rent between ‘current rent’ to ‘market rent’ is a decision ultimately the owner makes, and they all have 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 decision based on this. All we can do is lay out the facts, and help owners with their individual needs.
In terms of the financial gain for us? I faced that 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 rent received. But I think most residents would be surprised to know that once you are renewing a tenancy, this percentage and difference in rent is 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 counter offers with owners if you’d like us to, and can of course help to find alternative accommodation if that’s the right decision.
Our over arching advice to owners is always that having residents in a property who cannot afford it, or who will be financially stretched, is a worse 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. Market rent is what we would expect 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 is 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 which should in turn reduce other costs, for example energy efficiency. If we can improve windows, or insulation or anything like this – it can impact positively on your energy bills and offset some of the rental cost. 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.