The government are preparing to control tenant’s deposits, limiting them to five weeks rent. This will mean that landlords will soon only be protected in the event of a single month of unpaid rental arrears, at a time when Universal Credit introduction issues has seen some rent arrears quadrupling (and that’s before landlords consider damage to property and solicitor costs).
It’s important to consider both sides of the story: it can’t be disputed that the deposits tenants have to save for raises the cost of renting. It puts another nail in the coffin of the dream of home ownership for many Rotherham renters. At the same time, those same deposits are unable to provide landlords with a decent level of protection against unpaid rent or damage to the property.
What’s going on in Rotherham?
Let’s look at the facts in our area: in Rotherham there is a combined total of over £4,660,000 in deposited or protected tenant deposits.
However, when you consider the value of all the privately rented properties in our area totals £819,600,000, you can see the need for decent landlord insurance to ensure adequate cover for the Rotherham landlord.
Again, let’s consider the point of view of the Rotherham tenant. Several housing charities believe spending more than a third of someone’s salary on rent as exorbitant, yet for the tenants they find themselves in that very position. We feel especially sorry for the Rotherham youngsters in their 20s who want to rent a place for themselves – they face having to pay out the rent and try and save for a deposit for a home.
Here’s the reality for Rotherham young people…
The average 22 to 29-year-old in Rotherham spends 28% of their typical salary on a one bed rental property
….and 32% of their salary for a 2-bed home in Rotherham.
How does this compared to history?
40 years ago, British people who rented spent an average of 10% of their salary on rent, and only 14% in London. Looking in even greater detail, according to the ONS, over the past 60 years the proportion of total spending on all housing (renting and mortgages) has doubled from 9% in the late 1950’s to 18% today. Whilst, on the other hand, the proportion of total expenditure on food has halved (33% to 16%), as has the proportion of total spending on clothing (10% to 5%).
Landlords have important costs that need to be considered
Landlords also face costs that need to be covered from rents including mortgages, landlord insurance (especially the need for the often inadequate deposits to cover the loss of rent and damage), maintenance and licensing. In fact, rents in the last 10 years have failed to keep up with UK inflation, so in real terms, landlords are worse off when it comes to their rental returns (although they have gained on the increase in Rotherham property values – but that is only realised when a property sells).
There are a small handful of Rotherham landlords selling some/or all of their rental portfolio as their portfolios become less economically viable with the recent tax changes for buy-to-let landlords. We predict that this will result in fewer properties available to rent, reducing the supply and availability of rental properties in our area and inevitably causing rents to rise. For those landlords that keep their properties, they could actually end up seeing return and yields rising.
Yet, because tenants still can’t afford to save the deposit for a home and we are all living longer, the demand for rental properties across Rotherham will continue to grow in the next twenty to thirty years as we turn to more European ways where the norm is to rent rather than buy in the 20s and 30s age range. Things often go in full circle: this could mean new buy-to-let landlords will be attracted into the market.
It’s a complicated time and many landlords are getting in touch with us for our advice and support. We are always happy to help so please do get in touch. Our details are on the contact page. For those looking to invest in the property market, we post several property recommendations to our investment property deals page.