Should Landlords Capitalise On Sky-Rocketing Rental Demand?

Should Landlords Capitalise On Sky-Rocketing Rental Demand?

10:40 AM, 22nd August 2022, About 2 months ago 41

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Whether or not landlords should capitalise on sky-rocketing rental demand is a political hot potato. There are polarised opinions even among the Private Rented Sector’s leading centre’s of influence.  For example …

Eddie Hooker, CEO of Hamilton Frazer (the owners of MyDeposits, Landlord Action and several other well known brands in our sector) is advising landlords -..

“Don’t be tempted to put the rent up”

“We are starting to see landlords putting the rent up; they want the same yield,” he says. “If they are coming out of a fix on a mortgage they are probably likely to see a threefold increase in the interest rate, and therefore their yield will drop, and so they will be tempted to put the rent up – and obviously there is a lot of demand out there, because a lot of landlords have been tempted to exit the market.

“I think landlords would be better to look at the long term and not be tempted to suddenly whack the rent up, which would exacerbate the problem for the tenant, causing arrears.”

However, Mark Alexander, Founder of Property118.com disagrees. He said …

“Landlords have an obligation to themselves and their own families to maintain their own household incomes. They are feeling the financial squeeze on even more levels than their tenants. The mass exodus of so many landlords is caused by Government policy but it is creating demand for the landlords with properties still available to let. If they are able to sustain their own finances by letting to people who are ready, willing and able to pay higher rent that’s exactly what they should do. It is not their moral obligation to swallow the burden of Government failings and the anti-landlord policies that are driving so many landlords to sell up.”

He went on to say …

“The plight of tenants is not the fault of landlords. We are all in the same rat race and those who run the World are responsible for that. What do they expect is all to do? Maybe they expect tenants to get a second job and for their landlords to build, rent and manage more properties to solve the housing crisis and to pay the extra taxes and increasing costs of living, but we all need to live a little too don’t we? There has to come a time when we all say enough is enough!”

What are your thoughts?



Comments

Ian Narbeth View Profile

11:50 AM, 22nd August 2022, About 2 months ago

In a free market, landlords charge what the market will bear and as Mark Alexander says they should let to people who are ready, willing and able to pay higher rent.
Furthermore, as the Government keeps interfering in the free market, it will be a good idea to have a high base rent so that if rent controls are brought in by the socialists who call themselves Tories, at least landlords will start from a better position.

The Forever Tenant

13:06 PM, 22nd August 2022, About 2 months ago

I am all for people making a profit on their investment. You go for it. There will always be a need for the PRS.

However the rental sector feels like one area where the rampant increase in prices due to the free market will eventually cause the focus of the publics ire to move to the PRS.

Housing and shelter is one of those basic necessities in life. We all need it to survive and because of this need, its why there is the concern about rising prices. In other sectors where there is a need for something, there has been other recent public concern. Right now it is the energy companies, a couple of months ago it was the Supermarkets. I don't think it will take much more for the PRS to end up as the target if things continue.

One of the other things that does bother me a little is the increase in rents to those that are willing to pay that amount. You may indeed find those willing to pay but that then in turn causes an increase in the "Market Rates" to which a lot of landlords will wish to increase their rents for existing tenants, even those that cannot pay that increased amount.

I understand about the increase in costs incurred by landlords and the need to keep yourselves solvent, but I worry that the rampant cash grab that appears to be going on may come back to hurt you in the future.

Ian Narbeth View Profile

13:59 PM, 22nd August 2022, About 2 months ago

Reply to the comment left by The Forever Tenant at 22/08/2022 - 13:06
Price also sends a signal that supply is limited and that may lead to properties being put onto or brought back onto the market. It might even cause some of the politicians to question whether doubling down on failed policies actually works and to re-think.

Keeping rents artificially low distorts market signals. If also makes it worthwhile for tenants to sublet unlawfully at a profit.

Old Mrs Landlord

14:27 PM, 22nd August 2022, About 2 months ago

Reply to the comment left by The Forever Tenant at 22/08/2022 - 13:06The Government's Office for National Statistics puts the increase in private rents at 2.7% for the year to April 2022. In London particularly there has been an increase on this figure since April because the city is only now catching up on the losses and voids of the period when Covid saw many London renters leave. Many landlords have had to bear losses because of tenants not paying when eviction was prohibited and now they are facing up to 300% increases in mortgage payments. The rate of inflation is over 10% and rising!. Do you think llandlords get special low prices at the supermarket or for energy? Of course landlords are subject to the same rates of inflation as tenants and in addition have seen huge increases in maintenance and repair costs. You profess to understand landlords' increased costs yet accuse them of a "rampant cash grab". For many it is indeed, as you say, a matter of remaining solvent. If lenders repossess rented properties tenants are made homeless. Not all rents are being increased but at 2.7% those landlords that do put rents up are being extremely restrained in the circumstances. Some of the landlords leaving the sector have cited anti-landlord sentiment such as you exhibit as a contributory factor.

The Forever Tenant

15:08 PM, 22nd August 2022, About 2 months ago

Ian - I doubt that high rents would make the government think that they have acted incorrectly. I am of the belief that they will do whatever the public is crying out for and that would be to put even more pressure on landlords. There would be the argument from landlords that this would in turn create even higher rents for Tenants, to which point the Government would restrict even further. If it was needed to, they can put a policy into place a lot more quickly that the notice period for tenants.

I would also be concerned about high rents and subletting, as you may find that people sublet because they need the extra money to cover the initial rent.

Old Mrs Landlord - I am tended to believe the figures from the ONS as I have used them a lot in the past. But the numbers they have given do not seem to be what is actually happening in the real world.

I live in Bristol and rents have jumped massively. The Market Rate for the type of house I am in presently has gone up 70% in 3 years. I am thankful that I have a landlord that is choosing not to increase the rents to what he could, as I could not afford to live here, or anywhere for that matter, at the amount it should be.

Now this is me looking at the scenario from my own local bubble so I cannot say what prices have done across the country, but comments I have seen across the internet suggest a much higher increase.

As for my wording, you are right, I should not have used Rampant Cash Grab. I think I chose those words because I suspect they will be the kind used by the media and other interested organisations when the time comes.

If as I suspect will happen and the spotlight is turned towards landlords and the cost of living, how the public perceive this will depend on the comments of landlords, but I also suspect that a lot of the usual points made would be easily countered.

Mark Alexander - Founder of Property118 View Profile

22:32 PM, 22nd August 2022, About 2 months ago

Reply to the comment left by The Forever Tenant at 22/08/2022 - 15:08
In response to your comment …

“ There would be the argument from landlords that this would in turn create even higher rents for Tenants, to which point the Government would restrict even further. If it was needed to, they can put a policy into place a lot more quickly that the notice period for tenants.”

The Rent Reform Bill clearly proves that isn’t the case. How long has that been in the making?

If the Government has any sense they will scrap the Rent Reform Bill and several if not all of the other policies that have created the mess the PRS is in now. Sadly though, I don’t think they do have much sense, because their focus is on winning votes as opposed to doing what they were elected to do.

JamesB

8:19 AM, 23rd August 2022, About a month ago

How ridiculous for anybody to suggest that landlords shouldn't put up rents. That boils my blood.

I have hmos and am worried sick about the 200/300/400/500% increase in already high energy costs. I mean literally it wakes me up at 5am everyday worried. After 25 years I am now on the verge of getting rid of these places.

My cost of capital has now increased by more than 100%. Forward guidance just a couple of years ago was that this wouldn't happen.

The cost of getting anything done, if you can even find people seems to have increased by 100% and this is clearly demonstrable on numerous diy products too.

Inflation is laughably predicted to be 18% soon (I say laughably because I dream of only 18%), but I should worry about adding a couple of percent to somebody's rent?

David Judd

12:01 PM, 23rd August 2022, About a month ago

Im sure any landlord with a good tenant would have a conversation with them about any increase. That being said, tenants are less loyal to landlords. However section 24 and covid have put alot of landlords back against the wall. With more to come, its not going to get any easier. I reduced my rents during covid to help tenants out. Some of those tenants are now moving out, wanting a change of scenery. This is my opportunity to raise my rents to market rates, and when tenants are interested in renewing still increasing rents with a small discount

batkinson_fermec@yahoo.co.uk

12:59 PM, 23rd August 2022, About a month ago

LL’s are suffering from inflation, increased taxation and the legislative burden placed on them by the politicians poorly considered action, which have driven up cost.

LL’s should and have no alternative but to pass on the increased costs to tenants in the form of rent increases. However in doing so spend a little time to explain the root cause of the increased costs to your tenant. With the suggestion that the tenant write to their MP if they want to complain about the increase tax and legislation burdening causing costs to rise.

northern landlord View Profile

13:21 PM, 23rd August 2022, About a month ago

As Ian Narbeth says in a free market the price for something is the price that the market will bear. This applies for house prices and rental prices. No active checks are being applied to house prices even though prices are so high many would be buyers are stuck in the PRS. However, it seems to me that active checks will be applied to rental prices in England at some point and potentially another eviction ban. All done of course in the best interests of tenants to help see them through the cost of living crisis. Suddenly the media are expressing concern over rising rents and the possibility of increased arrears. This is an orchestrated prelude to some sort of populist action over rents/evictions.

Forever Tenant has said that public ire will turn on the PRS. Sorry to say the ship has long since sailed on this one. Landlords have been vilified for years. The Government have failed to house people and the PRS has saved their bacon. Our reward? To be scapegoated for their failures.

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