Rent as a share of pay increases only by 1% in 10 years – But here is how the BBC reported this.
The BBC reported last week that rents now account for 28% of income for an average renter, compared with 27% on average for the past ten years. That is a 1% increase in a decade, with interest rates at their highest levels in over 15 years and inflation running in double digits for over a year. Homeowners are facing the biggest squeeze on their mortgage payments where Hamptons, the estate agency, estimates that by December 2023, average mortgage repayment as a percentage of take-home pay will reach 56%.
Yet, a headline from the BBC last week reported that "Rent takes up the biggest share of pay in 10 years". And the same headline was shared on social media by the BBC Cost of Living correspondent Kevin Peachey. Now the issue with tweeting such headlines is that it starts to create an unhelpful and inaccurate narrative, and we are already beginning to see the impact of this in the rental sector and an anti-landlord sentiment as more and more landlords sell up.
According to a study conducted by Columbia University and the French National Institute, 59% of links shared on social media have never actually been clicked; in other words, most people appear to share the news without even reading it. So, the conclusion that almost 60% of those who view this headline will reach is that landlords are profiteering from their tenants during the cost-of-living crisis, which is not the case as rents as a percentage of take-home pay have only increased by 1% in a decade. And this has constantly been an issue where headlines such as these have built a narrative in the UK that landlords do not care and are only trying to profiteer.
Source: Twitter
Landlord's profits as a percentage of Rent have fallen below 4%
Section 24, introduced by George Osborne, has devastated the Buy-to-let (BTL) sector. This changed the landscape. Before the introduction of Section 24, when interest rates were higher, you could claim mortgage interest as an expense and pay tax on profits. Today you get taxed on your turnover. This means more landlords are dragged into 40%, taxpayers, and you only get 20% relief on mortgage interest.
According to Savills, landlord profits from an average rental property have dropped below 4%, yet landlords are accused of profiteering. I have yet to see any mention of the BBC reporting on the record-low profits of landlords. Instead, they prioritize sensationalizing a 1% increase over the past decade and highlighting the headline "Rent takes up the biggestshare of pay in 10 years".
Another reality is that almost half of all landlords don't regularly increase Rent.
New research by the NRLA found that almost 45% of all tenants who let from independent landlords stated they never experienced a rent increase. As the chart below highlights, independent landlords were likelier never to issue a rent increase.
The same survey also asked tenants whether they had recently had (or tried to raise a complaint about their landlord). The majority, 71% of tenants, had never had to raise such a complaint. Just 13% of tenants had complained with their current landlord, 9% with a previous landlord and 3% with both existing and previous.
Tenants renting from independent landlords are again more satisfied, with 77% of those presently renting from independent landlords having never had to raise a complaint. Just 10% of this group (the largest group in the survey) have had to raise a complaint with their current independent landlord.
This is never reported in the media. But the spectator writes, "Landlords are among the most maligned groups in modern-day Britain". Novara Media now sells caps with 'hate landlords' stitched on the front. A recent article on their site argues that a lack of rent caps or regulations means landlords are 'getting away with' passing on costs to tenants, freeing themselves from the sort of belt-tightening most are experiencing due to soaring inflation.
According to the ONS, this is again factually incorrect, as rent increases have been well below inflation for the last seven years and landlord margins drop below 4%.
Rent increases are still well below inflation:
The ONS reported that private rental prices paid by tenants in the UK rose by 5% in the 12 months to April 2023, significantly lower than the current level of inflation at 8.7%. The rental growth, as the graph below highlights, has been well below inflation for the last seven years, indicating that rental growth has been fair and challenging the narrative of landlords trying to profiteer.
I am a landlord and have capped rent increases for all my tenants at 2% for the next two years:
I own rental properties across the south-east. I have not increased rents for any of my tenants in the last two years and wrote to all my tenants back in May this year to assure them that I will cap any rent increases at 2% for the next two years to help eliminate any concerns about the future cost of living pressures.
The harsh reality is that cost of everything is going up from labour to repairs to insurance, and as I highlighted earlier landlords are taxed very differently to a regular business as we cannot fully account for mortgage interest rates. This is why more landlords are exiting the market than investing; as the graph below highlights, the supply of rental homes across the UK is down by 28%, and demand is up by 57%.
Painting landlords as nasty profiteers may sound appealing, but it's as unfair as it is pointless and not true in most cases. Sure, there will be individuals in every industry that profiteer, and there will be landlords who do that too. However, they are very much in the minority.
With the proportion of households that own their accommodation dropping from 64.3% in 2011 to 62.5% today, the private rental sector is a fixture of how we currently live. We shouldn't let politicians wriggle out of difficult conversations over the housing shortage by pinning the blame on private landlords. In doing so, we risk worsening the current situation, which isn't good already.