Average rents up 2.3% in January
- Published: Thursday 13 February, 2020
- Updated: Tuesday 05 May, 2020
- By: Nicola Eaton
The start of the year has begun with a 2.3% year on year increase in average UK rents, according to the HomeLet Rental Index. The figure now sits at £953, up from £932 in January 2019.
The greatest annual increase is in the North West, where average rents have gone up year on year by 8.7%. Wales has also seen a significant jump up, at 7.3%, Scotland by 6.2% and the East Midlands by 5.1%.
In total, of the 12 UK regions reported on by HomeLet, 9 have experienced annual average rent increases of around 1% and up to 8.7%.
By contrast, there have been three regions where average rents have declined. These are, the South West, with an annual decline of 0.9%, the East of England with 0.20% and the South East 0.1%.
Month on month, there has been no change to the overall average however, regionally, the picture is different.
The South West, which experienced a poorer annual picture, actually experienced month on month growth between December 2019 and January 2020. Average rents in the South West were up 1.3%.
The greatest increases, month on month were in Scotland, up 1.8%, the South West at 1.3% (as previously mentioned) and the North West at 1.1%.
Greater London rents
The good news for London landlords is that rents in the capital have also jumped up significantly from January 2019, with an increase of 4.4%.
Taking the capital city out of the equation, the national average rent for January 2020 was £793. This figure is up 2.3%, year on year, from £775 in January 2019.
Average rents in London remain considerably higher than the average for the rest of the UK. In January this year, this figure was £1,627, making it 105% higher than the UK average.
Month on month variation
Yorkshire & Humberside
East Of England
UK excluding Greater London
Are deposit-free rent schemes back-firing?
A recent report published by the BBC, has highlighted that some renters are being miss-sold deposit-free products.
The products have only relatively recently emerged within the private rental sector. Their aim is to help tenants avoid the upfront cost of renting.
The products replace the traditional rental deposit.
A traditional deposit must be held in a government approved scheme. It is refunded to the tenant in full at the end of a tenancy (unless there are any deductions for damage or unpaid rent).
The new options available to tenants are instead non-refundable insurance solutions.
Whilst upfront costs associated with the products can be far cheaper than a traditional deposit, some may not be cheaper over the long run.
The BBC report cites data on deposits for the UK, provided by the TDS (Tenancy Deposit Scheme) for England and Wales, TDS Northern Ireland and Safe Deposits Scotland.
In England and Wales, the average deposit in 2019 was £1,108. In Northern Ireland it was £600 and in Scotland it was £686.
For those already paying rent and other bills, finding this lump sum is naturally a challenge. This is compounded by rents rising ahead of wage growth.
As a result, there was arguably a strong need for a different solution.
Depending on the provider, deposit-free insurances can amount to a one-off sum of a week’s rent, or a monthly fee.
Some products come with other costs though. The BBC report highlighted that sums of up to £100 were charged by some providers, for pursuing disputes regarding damage claims. Another was charged an administration fee for switching from a deposit-free product to a traditional deposit, for example.
Miss-selling of insurance solutions
It has come to light that some letting agents may be miss-selling the deposit-free insurance solutions to tenants.
What the BBC have highlighted in their report, are examples where tenants feel they have not been given clear information on the costs associated with a product being recommended to them.
On the surface of it, avoiding the significant upfront cost of a deposit has appeal for new and existing tenants.
However, one of the tenants the BBC spoke to, reported that it had not been made clear to him that the sum he had paid was non-refundable.
In an environment where the Tenant Fees Ban has put financial pressure on letting agents, who may receive commission for selling such products, the question hanging in the air is whether this is driving agents towards these insurance products.
In the example reported on, where the tenant said they were unaware the costs were non-refundable, the agent defended their position saying it had been made clear via email and in a document of terms that he signed.
With new products coming into the industry, all parties need to do their due diligence to ensure the full implications are clear. This is especially true for letting agents, as the professional party proposing the options available to tenants.
Scottish Bill seeking rent controls is launched
Housing spokesperson for Scottish Labour, Pauline McNeill, has launched a Member’s Bill, seeking to limit rent increases in the private rental sector (PRS) in Scotland.
The proposed “Fair Rents (Scotland) Bill” proposes the following measures, aimed firstly and fundamentally at capping rent increases and secondly at recording rents in order to create a database of rental information:
- A cap on rent increases
- Property improvements
- Rent appeals
- Landlord register
McNeill proposes that annual PRS rents would be capped at 1 percentage point above inflation, for both new and existing tenants.
What’s more, when a new tenant moves into a previously rented property, the landlord would only be able to increase the rent by 1 percentage point above inflation.
The proposal illustrates this as follows:
“For example, if a property had previously been rented for £400 a month and was being re-let two years later, and if CPI had been 3.5% over that two-year period, the maximum rent now chargeable would be £418 a month.”
For landlords bringing new properties into the PRS, the proposal stipulates that there would be no cap, but that market forces would serve to control the amount that could be charged.
Where a landlord has made improvements to a property, the proposal suggests an increase in rent may be sought, but would have to be signed off by a rent officer.
It is suggested that the current structure for appeal, involving rent officers and a First Tier Tribunal, would be maintained. But, it should only be possible to maintain or lower the rent, not increase it.
At present, Scottish landlords are required to register their property every three years. The proposal Bill seeks to require that landlords also publish the rents charged and any increases in rent.
The objective behind this part of McNeill’s proposal is to monitor rent increases and produce a dataset of market rates.
A penalty system is put forward as a way to stop landlords exceeding the 1 percentage point above inflation rent increase.
The proposed Bill, also referred to as the ‘Mary Barbour Bill’, references a political activist responsible for a 20,000 strong protest against rent rises in Glasgow in 1915.
Responses gathered during the consultation period, which ran from 14th May 2019 – 8th August 2019, were gathered from organisations (39%) and individuals (61%).
The organisations who responded included councils, commercial organisations, trade bodies and charities.
Individuals comprised one politician, twelve industry professionals, and forty-seven members of the public.
54% of respondents were either wholly or partially opposed to a cap on rent increases, versus 40% who were fully or partially supportive of the move.
Where some degree of support existed for a rent cap, there was debate over what the appropriate measure should be.
It was flagged though, that rent caps had in a number of scenarios only added to housing problems, by rendering property investment an unattractive avenue to pursue and thus reducing supply.
In the coming weeks, Govan Law Centre will be helping Pauline McNeill to draft the proposed Bill.
Welsh Bill will impede landlords claiming property possession
Julie James, the Housing Minister for Welsh Labour, has introduced a Bill which seeks to make it harder for landlords to reclaim possession.
Amongst other measures, the party is seeking an extension of the repossession notice period, from 2 to 6 months.
It also seeks to prevent landlords from issuing a repossession notice, by 6 months, beyond the date of occupation on the tenancy agreement.
Amendment to Renting Homes (Wales) Act 2016
The new proposals constitute an amendment to the Renting Homes (Wales) Act 2016, which is not yet in force.
The objective of the 2016 Act is:
“…to improve security of tenure for those who rent their home in Wales. Whilst its provisions will apply to all landlords who issue standard contracts, its greatest impact will be felt in the PRS.”
There are eight key measures specified within the Act:
- Require landlords to issue a simpler, written contract of occupation than is currently used;
- Make it easier to add or remove contract holders from joint contracts. Require joint contract holders to act together in order to end a contract;
- Enhanced succession rights which make it possible for two successions of an occupation contract;
- Rental properties must adhere to ‘fit for human habitation’ (FFHH) legislation (the definition is to be set out separately). Landlords will also be required to provide smoke and carbon monoxide alarms and electrical testing at least 5-yearly;
- Prevent retaliatory eviction where possession is sought after a contract holder’s repair request or FFHH claim;
- Give landlords faster access to abandoned property without a court order, so the property can be re-let;
- A new ‘supported standard contract’ which provides a legal basis for occupation for those in supported accommodation;
- Only making possession notices valid when issued two months after the expiry of the notice period.
By bringing in amendments to the Act before it is in force, the intention is to bring in all the changes in one go, rather than making two sets of changes in short succession.
By making the repossession notice period six-months, the 2016 Bill also seeks to direct landlords to a court process, in instances where they are seeking to evict for anti-social behaviour or rent arrears.
Responses from landlords, during the consultation period, made clear that the no-fault eviction route was being used in these two scenarios.
The objective of adding the six-month notice period, is to give the tenant a chance “to present his or her case at court”.
This may result in possession being denied, if there is a good reason why the rent is unpaid. The example given being, a delay in benefits being paid to the individual.
The Bill highlights that serious rent arrears, of 8 weeks or two months, is subject to a notice period of just two weeks. But, landlords could be forgiven for wondering, why it is expected that they can afford rent losses of up to 10 weeks, or two and a half months.
Other measures the 2016 Act will bring in, include:
- Adding a four-month delay before any notice can be issued by a landlord. This is to stop landlords issuing possession notices at the start of a tenancy, whether or not they intend to pursue it.
- Stop landlords issuing a notice during fixed-term contracts, instead they will revert to a periodic standard contract. Require a landlord who wants to take back possession to issue the new style of notice. As a result, a contract holder will have a minimum of 12-months’ security regardless of the fixed term period.
- Stopping landlords issuing ‘just in case’ notices, by requiring six months to pass before a subsequent notice can be issued.
- Stop break clauses being used in tenancies of less than 24-months. Where present, only allow activation until month 18.
Within the consultation, there was strong feeling for (from contract holders) and against (from letting agents and landlords) the proposals.
David Cox, chief executive of ARLA Propertymark, voiced strong concerns:
“We are concerned that landlords will have no viable option of evicting problem tenants quickly and efficiently due to current court procedures. If landlords sell up due to the perceived risk, this will shrink the sector and contribute to landlords being more selective about who they let their property to.
“The Welsh Assembly must reconsider extending the minimum notice period and take a long-term, holistic view that supports those who are providing professional and well managed tenancies.”
The Bill is subject to approval by the Welsh Assembly, which has not, as yet, been given.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.