Sitting tenants see rents rise as gap with open market narrows

Tenants renewing their tenancies are seeing rents rise at a faster pace than those moving to new homes, research reveals.

According to Hamptons, the average rent paid by a tenant renewing their contract rose by 8.3% over the last 12 months, compared to 6.4% for newly let properties.

It says the trend is due to the significant increase in rental costs on the open market over the past two years.

Historically, landlords have tended to keep rents below market value for existing tenants – but rising costs are putting pressure on them to raise rents.

And, so far this year, 88% of tenants who renew a tenancy have seen rents go up.

‘Years of no or below-inflation rent increases’

The firm’s head of research, Aneisha Beveridge, said: “Many tenants had enjoyed years of no or below-inflation rent increases, particularly when rents weren’t rising much on the open market and mortgage costs were falling.

“Landlords were often content with a small gap between the market rate for their home and what their tenant was paying.

“However, over the last two years, strong rental growth on the open market has meant that the gap between market rates and what some tenants were paying rose significantly.”

She added: “Tenants fortunate enough to be protected from higher rents by their landlord or longer contracts are increasingly seeing their rents rise.

“These increases for renewing tenants tend to be lower and stretched over a longer period than for newly let homes, often meaning tenants still pay below market rate.

“But even so, these hikes can still add up to hundreds of pounds a month.”

Tenants are still paying £178 per month less

Despite the increase, tenants renewing their contracts are still paying £178 per month less on average than those moving into new homes.

Hamptons says the gap is a major disincentive for tenants to move because they often end up living somewhere with less space for more money.

The report also found that the pace of rent price growth on newly let homes is starting to slow down.

After peaking at 12% in August 2023, annual growth has fallen to 6.4%.

However, the monthly increase in rents edged up to 0.8% in April, the largest increase this year.

This suggests that the pace of rent growth may settle at around 6%, which is still much higher than the pre-pandemic average of 2.5%.