A surge in rents and evictions in London has left many residents struggling to find affordable housing. Landlords in the city are passing on the pressure from higher interest rates by increasing rents or evicting tenants. The private rented sector, which the UK capital heavily relies on, is particularly susceptible to rising rates due to the prevalence of interest-only buy-to-let mortgages.
Rents in London have reached their highest level on record, surpassing those in other parts of the UK and many European capitals. Between March 2020 and May 2023, rents in London rose by 20%. The demand for rentals is driven by record immigration to the UK, a shortage of student accommodation pushing students into private rentals, and the unaffordability of home ownership in London.
Tenants are facing intense competition for homes, with bidding wars becoming common and some offering to pay multiple months’ worth of rent upfront. The stock of available rental homes in London, which has already struggled to meet demand, is at risk of shrinking further. The private rented sector experienced a boom in the 2000s with the introduction of buy-to-let mortgages, but the reliance on interest-only loans has made landlords vulnerable to increasing borrowing costs.
Landlords are also grappling with regulatory changes, including the scrapping of tax relief on buy-to-let mortgage interest and the possibility of new energy efficiency requirements. Increased mortgage costs have led some landlords to increase rents to avoid losses.
As a result, many landlords are selling their properties or paying off their debt, leading to a decrease in outstanding buy-to-let mortgages. However, this sell-off poses a risk of further squeezing the housing supply, particularly in the private rented market.
London’s most vulnerable tenants, who rely on private rentals because of limited access to social housing, will be most affected by the shrinking supply. Around a quarter of tenants in the private rental sector in the UK receive government housing benefit, with the figure rising to 29% in London. The lack of social housing development in the past two decades has contributed to the growth of the private sector and exacerbates the housing affordability crisis.
Overall, the surging rents and evictions in London highlight the challenges faced by tenants in finding affordable housing, and the structural issues within the housing market that need to be addressed.
Sources:
– Financial Times
– Property agents Savills
– Zoopla
– UK Finance