London’s rental crisis is a ‘disastrous’ situation

The Covid-19 pandemic has taken a heavy toll on London’s private rental sector (PRS), with new research revealing a 41% drop in the number of properties available for rent since March 2020.

The study, conducted by the LSE and Savills and commissioned by a group of organisations led by London Councils, warns that this trend is exacerbating the already severe problem of homelessness in the capital.

Research reveals that many landlords are leaving the buy to let sector due to lower returns and higher costs, reducing the supply of affordable housing for low-income households.

At the same time, rents have soared to unaffordable levels, especially for those who rely on the Local Housing Allowance (LHA), which has been frozen since 2016.

‘Unsustainable and increasingly unmanageable pressures we face in London’

London Councils’ executive member for regeneration, housing and planning, Cllr Darren Rodwell, said: “This research is the latest evidence of how the capital’s broken housing market is worsening the unsustainable and increasingly unmanageable pressures we face in London.

“A bad situation is now becoming disastrous. We’re seeing fast-rising private rents and reduced availability of rental properties against a backdrop of continuing cost-of-living pressures and London’s longstanding shortage of affordable housing.”

He added: “Homelessness is a national emergency but with London accounting for two-thirds of England’s temporary accommodation placements we are at the epicentre of this crisis.

“Urgent action is needed from the government to help households avoid homelessness and to reduce the number in temporary accommodation.”

166,000 homeless people living in temporary accommodation

The report estimates that there are currently 166,000 homeless people living in temporary accommodation arranged by their local councils in London.

This is equivalent to the entire population of some boroughs, or of cities like Blackburn or Oxford – and leaves councils with a £52million bill to pay every month.

The report predicts that this number will reach an all-time high by the end of the summer, putting enormous strain on the councils’ budgets and resources.

The report’s co-funders – London Councils, Trust for London, Capital Letters, and the London Housing Directors’ Group – call for urgent government action to address London’s broken housing market and rising homelessness.

London Councils say the situation is now ‘unmanageable’.

Also, the big drop in rental numbers was acute for larger properties, with four-bedroom homes almost halving in number.

The report also highlights that the average rent asked by landlords in London has risen by 20% since March 2020.

‘London’s PRS is heavily reliant on private landlords’

Abigail Davies, a director of Savills, said: “London’s private rented sector, which provides homes for over one million households, is heavily reliant on private landlords.

“Many have high levels of borrowing who find themselves at the sharp end of the turmoil in the mortgage market.

“The triple whammy of rising costs of borrowing, greater exposure to tax, and regulatory changes means many are exiting the sector, putting downwards pressure on supply against ever-rising tenant demand.”

She adds: “Further upwards pressure on rents seems an inevitable consequence.

“Without doubt, this will compound the problems faced by lower-income households and points to the need for policy that favours the delivery of affordable homes across the capital.”