With tenants fighting for every vacancy, soaring demand has pushed rent costs higher than the typical monthly mortgage
Huge demand for rental properties means homes are being let in record time. Photograph: Christopher Furlong/Getty Images
Is Britain's rental market out of control? We all know that millions of would-be first-time buyers have been priced out of home ownership, but a wealth of recent data shows that with rental costs hitting all-time highs, many are now finding that this supposedly cheaper alternative is becoming increasingly unaffordable.
Lettings agent Countrywide says soaring demand for rental property means homes are being let in record time. It has five prospective tenants for every available home, despite a marginal increase in the number of properties available. And this is not just an issue in London and the south-east, or a problem confined to urban areas.
Figures produced for Guardian Money by Halifax show the average monthly rent across the UK has risen to £722. Meanwhile, what it describes as the average monthly buying cost (mortgage payments plus insurance and other costs) has fallen to £600.
The high-street lender found that in East Anglia rents have increased by 5% since March 2011, rising by £33 a month to £613, while in Greater London they have risen 2% to £1,194 a month.
In terms of monthly costs, owning a home is now typically 17% cheaper than renting, claims the Halifax. This echoes research published last month by property company LSL Property Services, which owns lettings chains Your Move and Reeds Rains. It reported that average rents have hit a record high of £718 a month, and have for the first time risen in all regions of England and Wales.
Rising costs are putting pressure on household budgets as never before, with the homeless charity Shelter recently reporting that families are being priced out of rental properties in more than half of local authorities in England.
Nicholas Barnes, head of research at property agents Chesterton Humberts, says: "We used to see affordability issues for people wanting to buy – now we're seeing affordability issues for renters."
The key driver seems to be the stagnation of the housing market. In 2006, before house prices started to fall and lenders pulled mortgages for borrowers with small deposits, around 36,000 first-time buyers a month stepped on to the property ladder, according to the Council of Mortgage Lenders. In 2011, the figure has been about half that. Many would-be first-time buyers who are unable, or unwilling, to take on a mortgage are instead staying in rental properties.
Competition has become so fierce that one London lettings agent, ludlowthompson, says it is even receiving CVs from would-be tenants desperate to impress landlords (one tenant baked a cake in an attempt to get a flat – it worked, apparently). While this is still an unusual course of action, the company's director, Stephen Ludlow, says tenants are being asked to jump through more hoops to secure a property, "and they have to start looking for properties earlier. It used to be that tenants could come in, maybe on pay day, and look for something for next week. Now you just can't do that".
Readers are telling us how tough it is to be a tenant and some report being asked to put down holding deposits of up to £200 to secure a property the moment they have seen it, being drawn into bidding wars and being gazumped multiple times.
They also suggest that some lettings agents are charging a processing fee of more than £200 each time they move house.
With this in mind, we thought it was a good time to ask property experts, politicians, commentators and others associated with the industry if the rental market is working.
Some said this was all evidence of a crisis in the rental market. "Competition is fierce to rent even poor-quality properties and there is little incentive for bad landlords to ensure their property is of a decent standard," says London mayoral candidate Ken Livingstone.
He believes the London rental market needs a major overhaul to make it fairer, and has launched a website to collect stories of rogue landlords.
But others suggest that rising rents may be good news for tenants. They may convince more landlords "that buy-to-let is still a good investment despite the easing down of house prices", says David Newnes, director of LSL Property Services. "It might be painful for tenants now, but if buy-to-let investment continues to perform as it has done in the last 12 months, more accommodation will come on the market and prices will stabilise."
What do you think? Is the rental market working, or does it need fixing? Join the debate and vote in our poll or email money@guardian.co.uk
Natalie Cheshire, 27, says she and her family are already stretched to the limit with the rising cost of living – and now they are facing a rent increase. The mother of two and her husband Tim fear they may be evicted if they can't afford the rent hike planned for April, and have been looking for somewhere else to live. "Everywhere else just seems so expensive, too," she says.
The house they rent is a privately-owned former council house in Stevenage, Herts, for which they pay £700 per month. This looks set to rise by at least £50 a month. However, the council house next door costs just £440 per month. "I struggle to understand how this is fair," says Natalie, who has a girl aged four and a seven-month-old son. "Why are wealthy landlords allowed to substantially benefit from the less fortunate generation?"
Both she and her husband work but, she says, "We have no hope of ever getting an affordable home … £8,400 a year of our household income is spent on rent, and with rising fuel bills and cost of living increases, we are constantly fighting a losing battle, incurring ever increasing bank charges for living from an overdraft just to make ends meet."
She adds: "The whole housing system is so unfair and it seems to be very much against working families. I am currently at a loss as to where I go from here, and feel that due to such high rent costs I and many others are effectively forced to not work in order to get assistance … All I am asking for, is a fair deal for my family and those in similar situations. Both the housing crisis and private renting seriously needs urgent government attention and more stringent regulations. Landlords are taking advantage and it is not affordable.I work hard to pay my rent and support my family – I should not be a business opportunity for somebody else."
Natalie's story features in Shelter's Christmas advertising campaign, which focuses on people who were either homeless last Christmas or are living under the threat of homelessness.
Lettings agent Countrywide says soaring demand for rental property means homes are being let in record time. It has five prospective tenants for every available home, despite a marginal increase in the number of properties available. And this is not just an issue in London and the south-east, or a problem confined to urban areas.
Figures produced for Guardian Money by Halifax show the average monthly rent across the UK has risen to £722. Meanwhile, what it describes as the average monthly buying cost (mortgage payments plus insurance and other costs) has fallen to £600.
The high-street lender found that in East Anglia rents have increased by 5% since March 2011, rising by £33 a month to £613, while in Greater London they have risen 2% to £1,194 a month.
In terms of monthly costs, owning a home is now typically 17% cheaper than renting, claims the Halifax. This echoes research published last month by property company LSL Property Services, which owns lettings chains Your Move and Reeds Rains. It reported that average rents have hit a record high of £718 a month, and have for the first time risen in all regions of England and Wales.
Rising costs are putting pressure on household budgets as never before, with the homeless charity Shelter recently reporting that families are being priced out of rental properties in more than half of local authorities in England.
Nicholas Barnes, head of research at property agents Chesterton Humberts, says: "We used to see affordability issues for people wanting to buy – now we're seeing affordability issues for renters."
The key driver seems to be the stagnation of the housing market. In 2006, before house prices started to fall and lenders pulled mortgages for borrowers with small deposits, around 36,000 first-time buyers a month stepped on to the property ladder, according to the Council of Mortgage Lenders. In 2011, the figure has been about half that. Many would-be first-time buyers who are unable, or unwilling, to take on a mortgage are instead staying in rental properties.
Competition has become so fierce that one London lettings agent, ludlowthompson, says it is even receiving CVs from would-be tenants desperate to impress landlords (one tenant baked a cake in an attempt to get a flat – it worked, apparently). While this is still an unusual course of action, the company's director, Stephen Ludlow, says tenants are being asked to jump through more hoops to secure a property, "and they have to start looking for properties earlier. It used to be that tenants could come in, maybe on pay day, and look for something for next week. Now you just can't do that".
Readers are telling us how tough it is to be a tenant and some report being asked to put down holding deposits of up to £200 to secure a property the moment they have seen it, being drawn into bidding wars and being gazumped multiple times.
They also suggest that some lettings agents are charging a processing fee of more than £200 each time they move house.
With this in mind, we thought it was a good time to ask property experts, politicians, commentators and others associated with the industry if the rental market is working.
Some said this was all evidence of a crisis in the rental market. "Competition is fierce to rent even poor-quality properties and there is little incentive for bad landlords to ensure their property is of a decent standard," says London mayoral candidate Ken Livingstone.
He believes the London rental market needs a major overhaul to make it fairer, and has launched a website to collect stories of rogue landlords.
But others suggest that rising rents may be good news for tenants. They may convince more landlords "that buy-to-let is still a good investment despite the easing down of house prices", says David Newnes, director of LSL Property Services. "It might be painful for tenants now, but if buy-to-let investment continues to perform as it has done in the last 12 months, more accommodation will come on the market and prices will stabilise."
What do you think? Is the rental market working, or does it need fixing? Join the debate and vote in our poll or email money@guardian.co.uk
Natalie Cheshire, 27, says she and her family are already stretched to the limit with the rising cost of living – and now they are facing a rent increase. The mother of two and her husband Tim fear they may be evicted if they can't afford the rent hike planned for April, and have been looking for somewhere else to live. "Everywhere else just seems so expensive, too," she says.
The house they rent is a privately-owned former council house in Stevenage, Herts, for which they pay £700 per month. This looks set to rise by at least £50 a month. However, the council house next door costs just £440 per month. "I struggle to understand how this is fair," says Natalie, who has a girl aged four and a seven-month-old son. "Why are wealthy landlords allowed to substantially benefit from the less fortunate generation?"
Both she and her husband work but, she says, "We have no hope of ever getting an affordable home … £8,400 a year of our household income is spent on rent, and with rising fuel bills and cost of living increases, we are constantly fighting a losing battle, incurring ever increasing bank charges for living from an overdraft just to make ends meet."
She adds: "The whole housing system is so unfair and it seems to be very much against working families. I am currently at a loss as to where I go from here, and feel that due to such high rent costs I and many others are effectively forced to not work in order to get assistance … All I am asking for, is a fair deal for my family and those in similar situations. Both the housing crisis and private renting seriously needs urgent government attention and more stringent regulations. Landlords are taking advantage and it is not affordable.I work hard to pay my rent and support my family – I should not be a business opportunity for somebody else."
Natalie's story features in Shelter's Christmas advertising campaign, which focuses on people who were either homeless last Christmas or are living under the threat of homelessness.
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