Stories of soaring rents and months of searching for a new place have become all too common in London these days. The city’s rental market is in crisis and tenants are facing the consequences.
One of them is Daniel Lloyd, who lives with his roommate in south-west London. After living in a two-bedroom apartment for almost a year, the landlord asked them to pay 27% more in rent.
“We were shocked to see how high the rent was,” he told CNBC’s Make It. While they were expecting their rent to go up, they didn’t expect it to go up that much.
“We are willing to accept an acceptable increase. However, an increase of almost 30% would only be an increase of more than £4,000. [$4,854]and we won’t make another £4,000 at the end of the lease term,” explains Lloyd.
As a result, they will not be able to afford the higher rent and are forced to move out. But as rents rise across the city, they may have to move further away from the center — somewhere with poorer transportation and further away from their local community.
“None of the areas where we found potential real estate really fit our living situation,” says Lloyd.
He and his roommate also realized that most of the other tenants in their building had the same problem. Together they tried to fight the rent increase after realizing that their landlord had breached their lease, which limited the rent increase.
Some of Lloyd’s neighbors have received feedback from their landlords through the property manager and proposed a new, lower rent increase, but most are still anxiously waiting.
Buy instead of rent?
Dave Chawner was in a similar situation and moved out when the landlord proposed a 26% rent increase.
“When we said, ‘look, I think it’s reasonable for inflation to be imminent, I think it’s reasonable for prices to go up. We’re going to negotiate at, say, 15 percent.’ Does that make sense to you?’ And they said absolutely no. It’s a 26% increase or nothing,” he told CNBC’s Make It.
Chawner says the rent increase is unsustainable for them and will cut their budget for food and bills.
Chawner and his partner saved up and were able to buy an apartment together when they moved. Their mortgage is now lower than their increased rent.
“We are incredibly lucky to be able to afford it somewhere,” says Chanwer, adding that he is well aware that most London tenants are not in the same location.
However, he’s not the only one choosing to buy, explains Richard Donnell, research executive at real estate firm Zoopla.
“We’re seeing people leaving rented accommodation to buy property and just looking beyond. So that’s one approach. And the fact that rents are rising so quickly will spur some renters on. buy,” he told CNBC’s Make It. .
A recent survey by housing charity Dolphin Living, published in the journal British newspaper The Timessays eight in 10 renters in London are struggling to keep up with housing costs.
Roots of the crisis
The main problem driving this crisis, which has caused rents to rise 17% throughout 2022, according to Zoopla, is supply and demand, Donnell explains.
“Supply and demand are really divergent right now. On the supply side, the average London property agent typically has 17 to 20 rental properties on their books. That number drops to 10 or so. less than 10 at the moment,” he said.
The change in rents is also related to the coronavirus pandemic and the sudden drop in demand for apartments that occurred when London was on lockdown and people were unable to travel or move there. This caused rents to drop by as much as 10-15%, Donnell recalls.
Laws and regulations also play an important 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 aren’t in breach of their lease, such as if they don’t agree to pay a higher rent.
This has led to fierce competition for rental properties, said Katinka Hill, central London rental area manager at estate agent Chestertons.
“View levels have increased dramatically year over year. Real estate doesn’t last long in the market, if at all,” she tells CNBC’s Make It.
Hill added: “We usually don’t have to ask tenants to pay more than the asking price. They only bid above the asking price because they lost the last two or three properties they auctioned.”
She explains that in addition to making higher offers, people provide their bios and photos, and create resumes for their pets to help them get a home.
Looking ahead, Donnell believes rents will likely continue to rise, but perhaps at a slower pace. Long-term solutions are needed, he said. “We really need to see more supply in London. A lot of that will come from new building development,” he said.
For now, however, the situation may remain difficult for London renters.
