The following’s a transcript of our monthly podcast, The Pension Confident Podcast. Listen to episode 22, watch on YouTube, or scroll on to read the conversation.
PHILIPPA: Hello and welcome to what’s now the award-winning Pension Confident Podcast. We’re so proud to tell you the series has just won two silver awards at the 13th Europe-wide Lovie Awards including the ‘best podcast’ category. A big thank you to the judges and of course to everyone who voted for us.
My name’s Philippa Lamb. This time we’re looking at renting. Why has it become so expensive to rent a home in the UK?
Since November 2021, rents have gone up every single month and in the last year they shot up to their highest level on record, with average private rentals costing nearly 12% more than just a year ago. Now, some tenants are having to spend more than half their take-home pay on rent and evictions are climbing. So how did we get here? What can you do if you’re struggling to pay and what needs to change to make our housing market fit for purpose?
Here to share their expertise on those crucial questions, we have three guests. Jenny Lamb is Policy Officer for UK housing charity; Shelter. Welcome Jenny.
JENNY: Hi, thanks for having me.
PHILIPPA: From The Times, Deputy Property Editor; David Byers. Hi David.
DAVID: Hello.
PHILIPPA: And back with us, broadcast queen; Becky O’Connor - PensionBee’s own Director (VP) Public Affairs. Welcome, Becky.
BECKY: Thanks. Hi.
PHILIPPA: As usual before we start, please do remember that anything discussed on this podcast should not be regarded as financial or legal advice, and when investing your capital is at risk.
PHILIPPA: Now, just to give us an idea of how much rents have ramped up I thought I’d start by asking all of you when you were first renting, can you remember what proportion of your monthly income you were spending on the rent? Becky?
BECKY: Yes, I can. And if we’re talking take-home pay, then it was nearly a quarter of my take-home pay that I spent on my one room, in a house share, with five people.
PHILIPPA: I think mine was about a third, Jenny?
JENNY: Mine was also about a third. I was 19 and had a telesales job which paid £6.55 per hour. I’m one of those people who keeps everything. I have all my payslips from all that time ago. I don’t know why, but luckily it managed to make itself useful. So yeah, the rent cost £500 per month. I was splitting it with one other person. So I was taking home around £900 per month.
PHILIPPA: So it was a lot, even then?
JENNY: Yeah, that was in 2010.
PHILIPPA: David?
DAVID: Mine’s slightly skewed by the fact that I started out working for a local newspaper in Gloucester, where I was earning £10,500 per year in 2001. I think my rent was probably about 50%, I’d have thought.
PHILIPPA: That high?
DAVID: So, I lived in Cheltenham. It’s my own fault. I chose to live in Imperial Gardens, Cheltenham. So it was an expensive flat on a crap wage. It wasn’t pretty.
WHAT’S HAPPENING IN THE RENTAL MARKET AND HOW’S IT AFFECTING US?
PHILIPPA: OK. Let’s look closer at what’s actually happening in the rental market right now and, of course, how it’s affecting all of us. David, tell us what’s happened to rents nationally and regionally recently.
DAVID: According to the latest Hampton figures, the rental growth in the year to September in Great Britain is 11.7% and there are great regional nuances in that. So in Britain, the average monthly rent for all properties is £1,300. That’s nationally. In Greater London, where there’s a great shortage of properties, that figure’s risen by about 15.7%. And in outer London, it’s risen by 16.2% in one year. So those rental rises are incredibly large at the moment, year-on-year.
PHILIPPA: Yeah and, as you say, there are huge disparities. Average figures aren’t actually that helpful are they? But we’ll get into why we’re seeing these rises in a moment. Becky, before we do that, how much of their pay are people spending now on rent? Do we have a sense of that?
BECKY: It’s pretty normal now for people to be spending half of their take-home pay on rent. We just gave examples of how much we spent initially and a third is challenging to live on, particularly if you’re going through different life phases and you’re still renting. So if you have children and you’re still renting, if you’re spending half your money on rent, that becomes less tolerable because your costs will be going up. So it’s not just the scale, the proportion of someone’s take home pay that’s going on rent - it’s also the other things that are happening in their lives, the other demands on their income and the cost of living crisis, of course. So there’s pressure from everywhere.
PHILIPPA:Yeah, absolutely. Obviously, this is about tight supply and I know we’ve got figures that say an average of 25 people look at each rental property, and that number was just eight in 2019. So supply is tight, but why is supply tight David?
DAVID: Well, there’s a combination of things. The origins of the crunch go back, perhaps 20 years, when first time buyers increasingly struggled to afford to buy a home as prices accelerated away from them. So, the number of private renters has gone up from two million in 2000, up to 4.6 million in 2021 to 2022 according to the English Housing Survey. So that’s the first big pressure. A huge increase in the number of renters and the ratio of renters to properties has ballooned.
And about 10 years ago, there was a big influx of buy-to-let investors who were meeting some of that rental demand. But that’s now fallen away for a couple of reasons, which I’m sure we’ll get into later. But one of them is increased tax charges from 2016 onwards, when George Osborne introduced a growing number of tax restrictions on landlords, in the hope that some of them would sell up, to free up stock for first-time buyers.
PHILIPPA: And did they?
DAVID: Some of them sold up. Quite a lot of them absorbed the charges. A lot of them put up rent. And many of a landlord’s properties, I think it’s fair to say, don’t necessarily correlate with the sort of properties that first-time buyers are looking for. So George Osborne’s maths didn’t exactly work out. But more recently, and this is the cause for this massive recent increase, landlords have had these huge mortgage rises and they’re passing those rents on to tenants. This shortage of stock added to that means you’ve got this big increase in rents, particularly in urban areas.
PHILIPPA: OK. So, there are way more people renting and all sorts of difficulties for landlords in affording their mortgages, if they have mortgages on the property. A whole array of problems. Jenny, we should talk about evictions. How are these evictions, and of course, the high rents we’ve been talking about, affecting homelessness figures?
JENNY: Homelessness is on the rise and it has been for a while now. At any one time, on the streets of England, there are about 3,000 people sleeping rough, but that’s the absolute tip of the iceberg. Most homeless people are either ‘hidden homeless’ - so they may not want to be on the street, so they may spend their nights on public transport, in abandoned and disused buildings, somewhere out of sight, so they still have nowhere to go. Or they could be sofa surfing with friends and family, knowing full well that they’re outstaying their welcome. Or they could be in temporary accommodation provided by the local authority. There are now record numbers of people in temporary accommodation. There’s 271,000 people living in temporary accommodation and 130,000 of those are children.
PHILIPPA: But presumably, as you say, with the ‘hidden homeless’, we don’t really have any sense how many people are sofa surfing do we? Or how many people are actually homeless?
JENNY: Not a clue. There may even be people who are homeless who don’t really consider themselves to be. Some people staying with friends who are thinking, ‘this is a temporary arrangement while I get on my feet. I’ll sort something out’. But those people are technically homeless, they have no security in their homes, they can be asked to leave at a moment’s notice and they may end up on the street.
DAVID: I was gonna say, there’s also one other quite interesting side issue which is Ukrainian refugees. And many of them are coming to the end of their host family periods which lasted six months to a year. And I spoke to someone recently who said, ‘now the host family, according to the government guidelines for the scheme, say they don’t have to look after us anymore - we’ve got to go into the rental sector’. And the figures, for how much it costs to rent a property, are now so far beyond what Ukrainian newcomers can afford. I know this affects a small number of people, but for people entering the rental sector for the first time in the UK, it’s a massive shock.
JENNY: It’s, as you say, a small number of people, but it’s indicative of how the system works.
PHILIPPA: And of course, what a lot of people have done, not just refugees, but all sorts of people, have moved away from where they were living to lower rent areas, haven’t they? Do we have any sort of picture on that?
DAVID: There are quite a lot of pressures on the rental sector outside of the prime areas. London’s a really good example of this. Figures from SpareRoom; the flatshare site, show that the price of renting a room in some London postcodes has risen by 50% in a year. And those areas are absolutely all over the place. So W8, which is a posh postcode, roughly speaking, has had this 45% increase, but less affluent postcodes, like SE28, have seen a 36% increase. And that’s because a lot of people from affluent postcodes are going to more affordable postcodes and driving up the costs of rent there. And of course, if you go into tourist towns, a colleague of mine went to Frome in Somerset recently, then you have this whole other issue of second homeowners who’ve moved out into the countryside, eaten up properties, and driven up rent and housing prices in those areas.
PHILIPPA: Yeah, I wanted to ask you Becky about this, because, obviously, we’ve had changes in working patterns too. People don’t have to go to the office or their workplace every day in the way that they used to. So that has freed up people, not just in the pandemic, but after, to live very remotely from where they’re working. Is this another push for that as well? Because you can move somewhere cheaper, can’t you?
BECKY: You can, but not everyone can. And I think, although we saw people taking the opportunity to move further away from the office because they didn’t need to be in it, we’ve also since seen some people having to move back. Because they’ve actually been asked to come back into the office and they weren’t expecting it, and it’s caused huge upheaval. So that’s creating demand for those areas that are commutable.
PHILIPPA: And Becky, I’m interested to get into what this really means for all of our finances, because obviously, it’s not just about paying rent. What if you don’t have any spare money because you’re paying so much rent and you’re not saving any?
BECKY: Yeah. I think it’s fair to say that because of rising rents and because of the rising cost of living more generally, people have been thrown into survival mode with their finances. Which is exactly where you don’t want to be if you’re trying to build long-term financial resilience, and do all the right things such as prioritising your pension, and saving for children’s university costs. All those things that us in the financial services industry tell people to do all the time. They can’t be on your radar if all you’re doing is week-to-week budgeting. So it’s having an impact. We, at PensionBee, have seen that’s counterintuitively caused an increase in pension contributions for some people because they’re a lot more focused on where the opportunities are. But that, you know…
PHILIPPA: Is the lucky few?
BECKY: Exactly.
PHILIPPA: Jenny, I think, mentioned older renters and I’m interested in that because we’re seeing a lot more older people renting now than we have done before, aren’t we? And if you’re already retired and renting, you’re coping with this rising rent and you might be on a fixed income. That’s a big problem, I’m guessing?
BECKY: First of all, the idea of a renter has completely changed. We used to see people leaving university, going into flatshares with their friends, building up their deposits, having a bit of fun along the way, then buying a house and doing everything in the ‘right order’. You have kids, you’ve got your mortgage and it’s a 25-year mortgage, so you can manage it. So lovely. And of course, that doesn’t happen in the same way anymore. What we see is that people miss that opportunity to buy a home for themselves because they just can’t afford it. And that moment where they could buy disappears into the past. And then it’s, ‘OK, I’m renting now’.
It then makes it very difficult for somebody to build their pension while they’re paying the rent, which is rising. And then they reach retirement or the retirement years, and they don’t have a big enough pension, but they still have the housing costs from the rent. What this is doing is - they’re having to work for longer, so that retirement becomes something that just isn’t going to happen because the only way you can afford your rent and you can afford to stay in that home is to keep working.
PHILIPPA: Yes, indeed.
DAVID: There’s some good figures on this from back in July actually, from the English Housing Survey analysis by Hamptons. They think that 11.5% of all retirement age couples will be in the private rental sector by 2033. And that’s compared to 5.7% last year. That’s a rise from 400,000, roughly, to about one million. One of the things that’s interesting about this is if somebody dies and has a property, they pass on the value of that property to somebody. If more and more older people are being swept into the rental sector in retirement, inheritance will not be passed down, and so there’s all sorts of interesting, fairly profound intergenerational ramifications with that.
PHILIPPA: I think what we’re understanding from this conversation is that this is a structural problem, isn’t it, on many levels? It affects landlords, doesn’t it? Because a lot of them have looked at their properties as alternatives to, or side by side with, their pension funds.
BECKY: Yeah. That’s a key reason why people have invested in buy-to-let properties over the years. They’ve felt that property has been more tangible and more secure than pensions which have, as an industry, had its fair share of scandals over the years, which has put people off. People have looked at property and thought, ‘oh well, we can touch this, we can feel this, we’re more in control of this than a pension fund, so we’ll go there’. That equation now doesn’t necessarily stack up for all the reasons David was mentioning earlier. What that does mean is that there are an awful lot of people who are landlords, who own a rental property and they’ll need to realise that investment, and that means selling it. So, that means potentially evicting tenants.
JENNY: What I’d want landlords to understand is - this is a serious job. It’s a very, very serious job because this might be your property, but it’s somebody else’s home. So many children now are living in the private rental sector and we know how important a secure home is. So you’re, kind of, indirectly taking on the burden of responsibility for someone’s entire future. For their prospects, for their mental health, for their physical health. To be a good landlord is a hard job and it should be because these are people’s lives.
WHAT ARE YOUR RIGHTS AS A TENANT OR LANDLORD?
PHILIPPA: That’s a really interesting take on it. And actually, it brings me really neatly to the next thing I wanted to ask you - what are your rights as a tenant, and as a landlord? The first question in my mind is, can you challenge a rent increase if your landlord says, ‘I want to put your rent up’?
JENNY: You can. The first message that I’d like to get out there is that everyone is shocked to find that there’s no limit on the amount a landlord can put the rent up by. There’s no limit.
PHILIPPA: No cap?
JENNY: No cap. The increase should be guided by market prices. If you think that your rent increase is disproportionate, then you can go to a First-tier Tribunal to challenge it.
PHILIPPA: Does that cost you?
JENNY: It doesn’t, but there’s a risk involved. First of all, your rent could go up instead of down. If you’ve miscalculated and the tribunal decides, ‘oh, actually, the landlord could be asking for more’, then your rent will go up instead of down. The second barrier, I think, is that it’s just a massively stressful thing to do. People work, people have kids, they aren’t really expecting to have to challenge their landlord in a tribunal to be able to stay in their home. The third barrier is Section 21 notices because you can challenge your rent increase, but you’re probably going to get evicted for it.
PHILIPPA: And there won’t be anything you can do?
JENNY: Nothing you can do about that.
PHILIPPA: Thinking about tenants. As you say, some perfectly well-intentioned landlords are struggling with their finances, particularly if they’re retired, they may be on fixed incomes. You know that these are not all profiteering, bad people. But, if the property that you’re paying a lot of rent for isn’t being repaired, can you withhold rent?
JENNY: Never withhold rent! This is one of my biggest messages. I wish everybody knew this. It seems completely counterintuitive because you think, essentially, ‘I’m a customer paying for a service that I’m not receiving. I wouldn’t be paying for a bad service in any other walk of life’. In any other kind of business arrangement, you wouldn’t be paying for a poor service, but it’s not the same in the rental market. It’s not a bargaining chip! If you withhold your rent, the landlord may take steps to evict you.
JENNY: With a Section 21 notice, you can also add on a money judgement so they can pursue you for the lack of income. And then you’re essentially left with nowhere to go. So, although it seems fair and proportionate to withhold your rent, it always makes things worse.
There are other ways to tackle this. The first thing I’d recommend is to just approach them civilly, don’t assume they’re not going to do anything. Speak to them on a one-to-one basis and just explain the situation, and ask for them to do the repairs. If they don’t, you can make a complaint to your local council. They should send an Environmental Health Officer out, who should inspect the property. This, in itself, is risky as well.
PHILIPPA: Ok. So yeah, as you say, this isn’t great news. I’m just going to ask you before we move on - if you’re struggling to pay your rent, where can you go? Is there any assistance for you?
JENNY: So, if you’re struggling to pay your rent, there are a number of things that I’d recommend you do, first of all. So the first thing, I’d say, is talk to your landlord. It’s scary, none of us want to do it, but explain your circumstances. Explain, if they’re wanting to put the rent up, for example, explain what’s affordable for you. See if you can negotiate with them. See if they might drop the rent if you’re between jobs or if you’re expecting your circumstances to change. Explain that to them, see if you can negotiate a lower rate and then, get it put back up at some point.
The second thing I’d say is make paying your rent your priority. We talk a lot about people having to make completely inhumane decisions between heating and eating. But it’s heating, eating and paying the rent. And there are certain debts that are a priority, that can result in you losing your home, and rent is the most obvious one. So, prioritise paying your rent and then, you might want to look into other ways that you can subsidise your income. If you’re on benefits, check your benefit entitlement because it could be that you’re entitled to something that’s not loudly advertised.
PHILIPPA: Yes, because a lot of benefits still go unclaimed, don’t they?
JENNY: Absolutely. So check that, make sure that’s all squared away. You can also speak to your energy providers. Citizens Advice can be really helpful in telling you where you can save on other bills. You might be eligible for Council Tax relief or, at least, a bit of help there, or with your gas and electric, TV and broadband, that kind of thing. There are also charitable grants that might be available to you.
PHILIPPA: How would you find out?
JENNY: There’s a brilliant charity website called Turn2us which has a grant search. It asks you a few questions about your circumstances and it tells you what you might be eligible for. They also have a benefits checker calculator as well. So put your circumstances in there, they might be able to tell you if you’re owed more. If you’re working, there may be an industry-affiliated charity, like for catering, or bar work, or something like that.
PHILIPPA: Hardship funds, that sort of thing?
JENNY: And then you can always ask your local council. Discretionary housing payments are available, although they’re decreasing, they’re shrinking, they’re disappearing.
PHILIPPA: And these are one off payments to tide you over?
JENNY: A discretionary housing payment is a one-off payment to, basically, avoid homelessness. In a nutshell - speak to your landlord, make yourself a household budget. I’m not advocating that people cut their costs elsewhere because people are cut to the bone, but just be mindful that there could be something cheaper and there could be some help.
PHILIPPA: That’s really helpful, Jenny. Thank you.
HOW CAN THE RENTAL MARKET WORK BETTER?
PHILIPPA: I think we all understand, if we didn’t understand at the beginning of this podcast, that we need to see some change to make the rental market work better for everyone. So, should we move on to that? We’ve got the Renters (Reform) Bill, haven’t we? Tell us about that.
JENNY: So the Renters (Reform) Bill was a manifesto promise of the Conservative Party, a promise upon which they were elected.
PHILIPPA: We still don’t have it, do we?
JENNY: We’ve been talking about this since, well, since before I’ve been working at Shelter, but very recently we’ve just had its second reading. The Renters (Reform) Bill is a raft of different policy measures, but the main one is the abolition of Section 21 notices.
PHILIPPA: Which I’m assuming Shelter would welcome?
JENNY: We’d welcome that, yes. We’d be very pleased to see that happen. It doesn’t mean that landlords won’t be able to evict tenants. There’s another type of notice that can be used. It’s called a Section 8 notice and, really, the main difference between the two notices is with Section eight, you have to give a reason. And there’s a list of preset reasons that you can give.
PHILIPPA: So it’ll do away with Section 21, and it does away with fixed-term assured tenancies as well?
JENNY: It does. A strange by-product of getting rid of Section 21 is that everyone will be in a periodic arrangement known as a periodic rolling tenancy.
PHILIPPA: And what does that mean?
JENNY: So, now when you enter into a tenancy agreement - you have a fixed-term for normally a year, then when that year’s finished, your tenancy automatically turns into a periodic one, where you roll over month by month and you’re not tied in for another fixed-term. Some landlords will represent it as, ‘oh, your tenancy is coming to an end. You must re-sign for a new fixed-term’. That’s not what the law says. Some people like that added security, but it doesn’t suit everybody. It doesn’t suit someone who’s living in really dire conditions; with black mould on the wall and their kids are sick, and they want to get out. They can’t be trapped in a fixed-term. So a periodic arrangement gives them more freedom to move if they need to.
The other by-product of this is, during a fixed-term tenancy, you can’t put the rent up. In a periodic arrangement, you can put the rent up using a particular type of notice, a Section 13 notice. And that mechanism is limited to once a year. So, abolishing Section 21 means the end of fixed-terms, means the standardisation of periodic tenancies and it also means that rents can only go up once a year. So, it has a, kind of, knock on effect that we’re hoping might do some work in slowing down rent increases. And because a landlord won’t be able to evict a tenant just for refusing to pay a rent increase, then hopefully it has a slowing effect on how rapidly rents are rising.
PHILIPPA: It’s sounding like a step in the right direction when it finally comes into law. David, what about affordable housing? We hear a lot about that, don’t we? But there’s nowhere near enough affordable housing being built, is there?
DAVID: There isn’t, and actually I just wanted to add something. I think the one thing that we really lack is that there’s no competition for this appalling system at the moment, whereby landlords are responsible for the wellbeing and future of their tenants. And so what I’d like to see is a growing subsidy scheme for build-to-rent. These are basically institutional, purpose-built rental buildings without landlords. Builders like Uncle, Greystar and Quintain - which own the whole of the Wembley estate. The problem with these buildings is that, yes, they don’t have landlords, so there’s much greater security for the tenants, which is a good thing. So tenants will always be able to stay in their properties. But the problem is, because land is so expensive in cities, these institutional builders can only build if they build small properties and they charge high levels of rent.
So if there was a subsidy scheme, some sort of government scheme which subsidised and helped these institutional builders, encouraged them into the market, you get all of these purpose-built rental properties. They’d be able to charge reasonable rents and they’d be able to build properties suitable for families. Because at the moment, they’re suitable for young professionals and urban dwellers, not families. So I think competition is a good thing. If you’re a landlord, you want tenants in your property. And if the tenants are all going to that Quintain developer down the road, you’re gonna work harder, you’re gonna charge more reasonable rents, you’re gonna remove the mould from the wall. But, there’s no competition, so the sector is totally broken.
BECKY: Bringing it back to pensions just because everything can be brought back to pensions - the kind of institutions that David is mentioning, actually, can be pension fund managers. And in fact, Legal & General, which is a very big pension provider, does offer the kind of private rental accommodation that we’re talking about. But for all the reasons David said, it’s on a scale which is too small at the moment to change the culture around renting. But it can be a pension fund investment that then supports the retirement of people through the rental income that’s coming back into the fund and going back to the pension savers.
PHILIPPA: In the same way that they invest in commercial property?
BECKY: Exactly. So it can be a very beautiful circle, but it would require that subsidy to kick-start the market.
JENNY: For us at Shelter, social housing is the way forward. Talking about affordable rents is fine, but they can be up to 80% of market rent. They’re still not affordable for the people who need things to be affordable. Social housing, we believe, where there’s more support for people and more security - we think is more of a solution. Because for the end of the market that we support, home ownership is well beyond their reach and social housing would be the ideal solution to alleviate some of this pressure on the private rented sector.
PHILIPPA: OK. On that thought, I’m gonna wrap this up. And I’m sorry because I know there was so much more that we could talk about, but thank you very much everyone. All sorts of useful things to hear there. Thank you.
BECKY: Thank you.
JENNY: Thank you.
DAVID: Thanks.
PHILIPPA: Once more before we go. Please do remember that anything discussed on the podcast shouldn’t be regarded as financial advice or legal advice. And when investing your capital is at risk.
Next month, we’re going to be talking about financial mistakes and how to avoid them. Don’t miss it because our expert guests will be sharing their own financial blunders. Listen in for the lessons they learned and how they bounced back. In the meantime, you can check out our podcast feed right now for plenty of bonus content.
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