Goodlord and Vouch have today released the results from their fifth State of the Lettings Industry survey. This year’s report is the largest of its kind and gathered the opinions of over 2,600 agents, landlords and tenants.
The poll is the most comprehensive analysis of market sentiment since the government unveiled its White Paper on rental reform and comes at a time when the Private Rental Sector is facing a litany of changes and challenges.
The below provides a summary of findings across the following areas:
Legislation and the Renters’ Reform Bill
Cost of living and the economy
Lack of stock
Industry sentiment about the future
Tom Mundy, COO at Goodlord, commented: “This report comes at a seismic time for the industry. After two and half years of almost unimaginable upheaval, the private rental sector is now facing another series of intense challenges. A raft of new legislation and a major economic crisis mean that the year ahead will be choppy.
“It’s clear from the data that tenants are concerned about their finances and landlords are also feeling uneasy. Despite this, the majority of agents remain optimistic about the future and confident in their ability to weather the forthcoming challenges. As ever, I’m full of admiration for our industry stakeholders and their ability to adapt and thrive even in unsettled times.”
Legislation and the Renters’ Reform Bill
White Paper causing concern amongst agents and landlords
The Government’s long awaited publication of their rental reform White Paper in June gave the industry a much clearer picture on what legislation to expect over the coming months and years. And the immediate feedback from the sector was far from positive.
81% of agents expressed concern about the impact the Renters’ Reform Bill could have on the private rented sector. One third (33%) of agents said they were “very concerned” and 48% of agents said they were “somewhat concerned”.
Landlords felt even more strongly. With over half (56%) “very concerned” about the impact of the Bill on the private rented sector.
However, two-thirds of tenants (70%) agree that they would like to see more legislation introduced around renting in the UK.
Section 21 remains contentious
Abolishing section 21 remains contentious, with 28% of agents and 53% of landlords expecting it to have a “major and negative impact” on the PRS. In contrast, 23% of tenants said they thought it would have a “major and positive impact”.
Periodic tenancies and pets spark opposition
40% of agents expect the introduction of a single system of periodic tenancies to have a negative impact on the PRS. The same number, 40%, expect the new rules on allowing ‘pets in lets’ to have a negative impact on the sector.
Agents confident about legislation but landlords pessimistic
The vast majority of agents, however, remain bullish about their ability to handle the upcoming changes. 75% of agents said they were “very” or “somewhat” confident that their businesses were set up to cope with future legislation changes.
In comparison, only 22% of landlords said they were “very confident” that they were set up to cope with future legislation changes – a worrying statistic at a time when stocks are low and more landlords than ever are leaving the sector.
Cost of living crisis and the economy
Rental arrears drop year on year, but predicted to rise
In brighter news, fewer agents have seen increases in rent arrears over the past year — only a quarter (24%) said they’ve seen increases in arrears across their portfolios. This compares to 32% of all agents this time last year.
However, of those agents who had seen arrears increase, almost half (47%) said that arrears in their portfolio had increased by more than 20%, indicating the intense financial pressures faced by certain households.
Landlords and agents concerned for tenant finances
This reflects a broader concern from agents around the impact the cost of living crisis is set to have on the market during the year ahead. 80% of agents say they are “very” (31%) or “somewhat” (50%) concerned about the impact of an economic recession on the private rented sector.
46% of landlords believe the cost of living crisis will have a major negative impact on tenants. And the same number of tenants agree; 46% are concerned the crisis could impact their ability to pay rent.
15% of tenants said they had already had to make other arrangements (such as a payment plan or borrowing from friends or family) so that they would not miss rent payments. And a fifth of tenants (22%) said they had already moved as a result of the cost of living crisis. A further 10% said they were considering moving for the same reason.
Low stock
Lack of stock intensifies as landlord losses mount
In 2021, low stock was the leading cause of concern for agents. And it appears that the last twelve months have done little to ease the pressure.
Almost two-thirds (65%) of agents said they had struggled with a lack of stock in the past year. Shockingly, more than a quarter (28%) of agents had seen more than 10% of their landlords leave the sector in the past year. And 67% said they expected even more of their landlords to leave in the coming year.
Legislation pushing landlords away
63% of landlords said they had considered leaving the private rented sector. Almost three-quarters (72%) of landlords said that legislation and regulation changes would be one of the top three reasons that would cause them to leave.
Industry optimism
Optimism declines, but pessimism still in the minority
There’s been a big drop in optimism amongst agents. Less than half of agents (42%) say they’re either “very optimistic” or “somewhat optimistic” about the future of the lettings industry. This compares to 67% of respondents in 2021 and 80% in September 2020 (at which point the UK was emerging from all initial lockdown restrictions).
However, only a quarter of agents (26%) say they’re pessimistic about the future of the lettings industry.
Letting agents are also feeling stressed out in the current climate, with 87% of respondents agreeing to some extent that “most days, I feel stressed in my job”. 90% said that their workload had increased in 2022.
Here are the initial findings from the State of the Industry report
So to sum it up half of PRS be it landlord, tenants or agent agree that tenants won’t be able to pay rent and yet rents continue to rise.
I’ve been calling for this for many years, tenants affordability should be a legal stipulation for agents and landlords just as the requirement is in the Financial Services sector. The reckless approach has been going on for years and one wonders why annually pre Covid-19 there were 40,000 repossessions and that wasn’t 50% of the sector!
You are not just playing about with a risk investment, it is peoples lives.
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Agents do reference tenants and part of that check is an affordability calculation. If the tenant doesn’t earn enough they fail the referencing process.
It’s for tenants and landlords to decide what the tenant can afford. It’s not for you or the central government to decide what they think tenants and landlords hundreds of miles away can afford to pay or afford to take in rent.
If the rent is set too high the property will remain empty, the landlord will suffer from void periods, or attract only the most desperate and uncreditworthy tenants. Landlords have every incentive to set rents at a reasonable level, but tenants bid each other up to secure the properties they need.
This is wonderful news. It means tenants are wealthier than they were before. Repossessions are not rising, there are affordability checks in place, and tenants are electing to pay more to secure the property they want.
If you don’t allow tenants to bid higher, then you fall back on “first come, first served” which is far less efficient than using the price system. Higher prices signal to builders that they should build more houses, higher prices cause tenants to only take the accommodation they need and not be greedily living in houses that are too big for them.
You and your socialist ideas would destroy the lives of tenants in this country if you even came to power. (note, you do have power and a voice, please use them more responsibly in future).
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I’m certainly not a socialist. Very much an imperialist without my head in a bucket of sand.
I respect your views (exclude your last paragraph) but there will be more than a few people, agents, landlords and tenants who will agree with my philosophy that affordability should be a duty of care and many following that idea. However just about everyone, including the courts agree that reckless behaviour abounds in many quarters.
Affordability doesn’t mean that growth will be stumped. If they can afford the hikes, fine. If not are you saying the hikes are a problem for the tenants? Reference checks, LOL. If that was done properly there wouldn’t be the annual 40,000 possession orders plus all those that leave without one! I can write a book on landlords and agents so called references! Just like the ones they do on a tenant that has been evicted by the courts!!!
The jury is out on what will happen this winter but no-one I have found is confident that rent arrears will not be on the increase and that isn’t with the unscrupulous kikes we are seeing in some places. SHS tenants are certainly being priced out, but then they shouldn’t have been in PRS in the first place.
Far too many tenants are bidding out of desperation over the shortage of housing and frankly many of them know they can’t afford the rent but better than on a park bench to get a roof over their head and be awkward till they are repossessed months along the way. We see it every day with applications. One has to question the motif of some agents passing tenants non-affordability, risking the backlash from the landlords who were banking on them doing the right job for them. The Property Ombudsman has more than a few investigations on that subject. While some landlords don’t know how to go about it, don’t bother or turn a blind eye and wonder why they get stung.
Repossessions are now on the increase again, after Covid19 possession restrictions have been lifted. Who will be right about the numbers in 2023? Bigger increase in rent arrears possessions, which shouldn’t happen with new rents!
And what is wrong by having affordability as a duty of care, got something to hide?
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