private rented accommodation – The NEN

Shocking new research shows the Scottish private rental market is unaffordable

92 per cent of the private rented sector in Scotland is unaffordable for people claiming benefits

New research commissioned by the Chartered Institute of Housing (CIH) Scotland in partnership with Fife Council highlights the shortfall between Local Housing Allowance (LHA) and the actual cost of renting a home in the private rented sector (PRS).

The research, conducted by the UK Collaborative Centre for Housing Evidence (CaCHE) and based on analysis of Zoopla data on advertised rents, found that:

Across Scotland, just one in 12 advertised properties in the PRS (eight per cent) are covered by LHA
Aberdeen and Shire had the largest percentage of “affordable” properties at 19.7 per cent, still significantly below the 30^th percentile West Dunbartonshire had no properties available at or below the LHA rate
The average shortfall in rent for a two-bedroom home was £108.10 per month
The smallest difference was found in Aberdeen and Shire at £6.64 per month, in Greater Glasgow the shortfall was £201.78 per month.

The report concludes that, “the PRS is now largely unaffordable to new entrants or those seeking to move within the sector who are in receipt of LHA.” It recommends:

Reinstating LHA at the 30^th percentile in the short-term. This is likely to cost around £98 million per year in Scotland. This cost could be covered by the UK Government or a ‘top up’ by the Scottish Government similar to ‘bedroom tax’ mitigation in the social rented sector.
Reviewing the process for setting LHA in the longer-term, including consideration of how rental data is gathered and the geographical boundaries of BRMAs.
The Shared Accommodation Rate (SAR) which limits single people under the age of 35 to a room in a shared home, rather than a one bedroom home, is unfair and impractical, and consideration should be given to scrapping it.

Gavin Smith, Chair of CIH Scotland said: “The PRS is a vital part of our housing system and can play a greater role in preventing and responding to homelessness in Scotland.

“We cannot ignore the link between affordable housing supply, the rising number of people in temporary accommodation and the emergence of Scottish councils having to declare housing emergencies.

“The PRS plays a vital role but must be affordable and as this research shows freezing LHA rates has had a devastating impact on its affordability for those that need it the most. All UK governments must urgently unfreeze LHA rates”

Andrew Watson, lead author of the research by the UK Collaborative Centre for Housing Evidence (CaCHE) added: “Due to changes in housing choices and a lack of social housing, the PRS plays a critical role in the provision of homes for households in receipt of LHA.

“A combination of rising rents and frozen LHA rates have rendered the sector unfordable for those seeking entry, whilst also limiting the ability of existing tenants to move within the sector.

“The lack of affordability has many drivers, but the actions of UK and Scottish Governments (and in particular the freeze in LHA rates and the introduction of rent caps) have played a significant role. It is therefore reasonable to expect that government action will play a key role in addressing the problem.”

You can read the research report in full here, which includes a breakdown of the findings by region and property size.

Rent in Scotland is increasing at £41 per month

Rental growth to highs not seen since the Global Financial Crisis

6% strong annual rental growth in Scotland.
The proportion of gross earnings used for rent falls to 17.3% for dual renters in Edinburgh.
Rental demand is strongest in London, Scotland and Wales with demand levels more than 65% above the five-year average. London’s market is also one of the most constrained when it comes to stock levels, with homes available to rent at just over half the 5-year average, creating the conditions for the sharp rises in rents.
Average UK annual rental growth has reached a 14 year high (+11%), with rents increasing to £995 in Q1 2021, an extra £88 a month compared to the start of the pandemic
On average, UK tenants are staying in their rental properties for an extra five months compared to five years ago, with the average tenancy length up to 75 weeks, from 51 weeks at the start of 2017.

The highest rental growth since the Global Financial Crisis, coupled with the cost of living crisis, is putting increased pressure on renters – according to Zoopla, the UK’s leading property destination, in its quarterly Rental Market Report.

Higher rents and cost of living magnify pressures faced by renters

Average UK annual rental growth has reached a 14 year high (+11%), with rents increasing to £995 in Q1 2021. This represents an increase of £88 a month compared to the start of the pandemic and follows a strong bounce back from

last year, when average UK rents were down by more than 1%, despite wage growth peaking at 8.8% last summer.

For renters, this has led to a significant increase in the proportion of gross income spent on rent, particularly in London where it has risen to a significant 52% for a single earner (a level not seen since March 2020).

This falls to 26% for sharers and means that a new let agreed for an average rental property in London will cost more than £20,000 in rent over the next 12 months – putting significant pressure on renters already dealing with the backdrop of the cost of living crisis.

In the UK as a whole, the average rent now accounts for over a third of gross income (37%) for a single earner. Around a third of renters live alone, according to the English Housing Survey.

There’s also been a strong bounce back in rental growth in London from falls of 10% seen last year. Average annual rental growth in the capital rose to 15% at the end of Q1 – driven by demand for flats from students, office workers and international demand.

Demand for rental property continues to outpace supply across the country, pushing up rents, although the rate of rental growth will slow through the second half of the year

Stock constraints leading to longer tenancies

With renters facing increased pressure on their disposable income – there’s been a marked increase in tenants deciding to stay in their rental property for longer.

On average, UK tenants are staying in their rental properties for an extra 5 months compared to five years ago, with the average tenancy length up to 75 weeks, from 51 weeks at the start of 2017.

Interestingly, this trend has extended beyond lockdowns when the ability to move was hampered and indicates that landlords with tenants in situ may not be raising rents at the same rate as rental growth.

Rental demand is strongest in Scotland, Wales and London, with demand levels more than 65% above the five-year average. London’s market is also one of the most constrained when it comes to stock levels, with homes available to rent at just over half the 5-year average, creating the conditions for the sharp rises in rents.

Rental markets remain highly localised

The rental market remains highly localised, with the most affordable rental markets for dual earners located in more rural areas including Great Yarmouth in the East of England, South Somerset in the South West and North East Lincolnshire in Yorkshire & the Humber. In these markets, average rents account for up to 15% of joint gross income.

In London, Bromley is the most affordable rental market, where average rents account for 19% of joint gross income. In the North West, Copeland, a local authority on the edge of the Lake District, encompassing the towns of Whitehaven and Cleator Moor is the most affordable rental market.

Gráinne Gilmore, Head of Research at Zoopla comments: ““UK rental growth is being driven by high rental demand and limited supply, trends that are more pronounced in city centres. The surge of post-pandemic pent-up rental demand will normalise through Q2 and Q3 however, which means rental growth levels will start to ease.

“Affordability considerations will also start to put a limit on further rental growth although this may occur at different times depending on location. Rents are likely to continue rising for longer in areas which have the most constrained stock levels – currently London, Scotland and the South West.”

Gareth Atkins, Managing Director, Lettings at Foxtons comments: “ “The tenancy renewal numbers we have seen so far in 2022 are unprecedented. Steadily increasing demand, severely limited stock and a swift rise in rental prices are all compelling reasons to renew – and renters are responding.

“Through Foxtons renewals department, we have seen a 29% rise in renewals year-on-year vs 2021. Renters are also choosing longer tenancies to avoid a market in flux; our deal length for renewals has gone up 9% in 2022, reaching an average tenancy of 15.7 months.”

https://www.foxtons.co.uk/

Lothian landlord event to “reduce perils” of new tenancy agreements

Scotland’s largest landlord membership organisation, in partnership with the Scottish Government, will be holding an information event for Edinburgh and Lothians landlords to understand their new responsibilities when a new tenancy agreement for the Private Rented Sector (PRS) comes in to force in December.

The event, which is free and open to anyone who lets out property, takes place at Queen Margaret University on Tuesday 24 October from 6pm – 8.30pm. Continue reading Lothian landlord event to “reduce perils” of new tenancy agreements