Stories about soaring rents and the search for a new place to live taking months are all too common in London right now. The city’s rental market is in crisis, and renters are facing the consequences.
One of them is Daniel Lloyd, who lives with his flatmate in southwest London. After living in their two-bedroom apartment for almost a year, their landlord asked them to pay 27% more rent.
“We were shocked at how high the rent increase was,” he told CNBC’s Make It. While they were expecting their rent to go up, they had not anticipated it being by that much.
“We were willing to accept an acceptable level of increase. However, going close to 30% would have been an increase of just over £4,000 [$4,854], and we were not going to be earning an extra £4,000 by the end of the tenancy,” Lloyd explained.
They would therefore not be able to afford the higher rent, and would be forced to move. But as rent prices have gone up across the city, they would likely have to move further from the center — somewhere with worse transport links and away from their local community.
“None of the areas that we’ve found potential properties for would really suit our living situation,” Lloyd said.
Him and his flatmate also realized that most other renters in their building were facing the same issue. They got together and tried to push back against the rent increases after realizing that their landlord was breaching their tenancy agreements, which limit how much rents can go up.
Some of Lloyd’s neighbors have heard back from their landlord through the property manager and new, lower rent increases have been suggested, but most are still worriedly waiting.
Buying instead of renting?
Dave Chawner was in a similar situation and moved out when his landlord proposed a 26% rent increase.
“When we said, ‘look, I think it’s reasonable that there is going to be inflation, I think it is reasonable that prices do go up. We will negotiate at, say, 15%. Does that sound good to you?’ And they said absolutely not. It’s a 26% increase or nothing,” he told CNBC’s Make It.
The rent increase was unaffordable for them and would have slashed their budget for food and bills, Chawner said.
Chawner and his partner were already saving and were able to buy an apartment together when they did move. Their mortgage is now lower than their increased rent would have been.
“We were incredibly fortunate in order to be able to buy somewhere,” Chanwer said, adding that he is very aware that most of London’s renters are not in the same position.
He is not, however, the only person opting to buy, explained Richard Donnell, executive director of research at real estate company Zoopla.
“We’re seeing people sort of leaving rented accommodation to buy property and just looking further afield. So that’s one approach. And actually the fact that rents are going up so fast themselves will push some renters into buying,” he told CNBC’s Make It.
A recent survey by housing charity Dolphin Living, published in the U.K.’s The Times newspaper, said that eight-in-10 renters in London were struggling to keep up with the cost of accommodation.
The root of the crisis
The key issue that has led to this crisis, that saw rents rise by 17% throughout 2022, according to Zoopla, is demand and supply, Donnell explained.
“Supply and demand are really out of kilter at the moment. On the supply side, the average London estate agent would typically have had 17 to 20 properties for rent on their books. That’s down to 10 or less than 10 at the moment,” he said.
The rent shifts also link back to the coronavirus pandemic, and the sudden drop in demand for rental flats that occurred when London went into lockdown and people could not travel or move there. This caused rents to fall by as much as 10-15%, Donnell recalled.
Laws and regulations also play a role: There are no rent controls in London, and landlords have the option of so-called “no fault” evictions. These allow them to force people to move out even if they have not breached their tenancy agreement, so for example if they do not agree to pay higher rent.
This has led to intense competition for rental properties, Katinka Hill, the regional director for central London lettings at the estate agent Chestertons, said.
“Viewing levels have increased dramatically year on year. Properties aren’t staying on the market long, if at all,” she told CNBC’s Make It.
“We often don’t have to to ask tenants to offer over asking price. They just offer over asking price because they’ve lost out on the last two or three properties that they’ve bid for,” Hill added.
As well as making higher offers, people are also providing bios and pictures of themselves, and are creating resumes for their pets to help secure them a home, she explained.
Looking ahead, Donnell believes rent prices are likely to keep increasing, but probably at a slower pace. Long term solutions are needed, he said. “We really need to see more supply in London. A lot of that’s going to come off new build development,” he said.
For now however, the situation is likely to remain difficult for London’s renters.