The race to rent is a fierce one. A shortage of supply coupled with high demand, as well as high interest rates and cost of living impacting the ability to buy, has led to more people than ever looking to rent. As a result, the listing time for rented properties is falling across the UK.

At the same time rent prices have risen by between 8 and 10% throughout England and Wales, with tenants having little choice but to pay. It’s led to accusations from some that landlords are profiteering from the situation. If you are a landlord having to justify increasing rents or a tenant wondering if landlords really are benefiting then it’s time to read on.

Cashing in?

Last November, a poll of more than 1,000 landlords commissioned by Shelter suggested that seven out of ten landlords who own their rental properties outright had increased rents on new or extended tenancies in the past 12 months.

This led to criticism that, without mortgage costs to pay, such landlords are simply taking benefit of the high demand for rental properties to cash in with higher prices, with Shelter accusing landlords of “cashing in on the housing emergency”.

However, the National Residential Landlords Association hit back with its own data, which it said showed that landlords without mortgages are half as likely to increase rents as those with them and are also more likely to keep them static. It said that data from Savills shows that profits for landlords, including those who are mortgage-free, were at their lowest level for 16 years.

The pain isn’t over yet, despite inflation now falling. According to the Resolution Foundation housing costs for private renters will rise to nearly 35% of their disposable income over the next year. That’s in contrast to only 15% for homeowners with a mortgage.  

For landlords who need rent to pay the mortgage costs on their rental property the need to raise prices is clear. They are likely to soon be facing, or already have faced, significant hikes in their mortgage costs as they’ve had to remortgage properties.

But even those who don’t have increased mortgage costs still have businesses to run and are impacted by rising costs and interest rates in other areas of their work, such as maintenance and repairs. Ensuring rents are in line with market conditions is necessary for success.

Or cashing out

Indeed, the rising costs faced by landlords have led to many cashing out of the market and if they can’t absorb their higher costs in higher rents then more will follow this path of selling up. This, in turn, further increases the restriction on supply and therefore the imbalance of demand.

Landlords are facing higher interest rates and costs, as well as a tougher tax regime with changes to how buy-to-let incomes are taxed. From 2028 landlords were also set to have to achieve an energy performance rating of C or better on their properties. This was scrapped by the government last September but prompted many landlords to sell up instead of facing expensive upgrades of their properties.

Landlords may be accused of winning the race to rent but the reality is that no-one is profiteering from the situation. Instead, for many landlords the rent rises are there to keep them in business and to ensure that the supply/demand imbalance isn’t impacted even further. And that is also good news for tenants.

At PH Estate Agents, we understand the significance of timing and market dynamics in the realm of property investment, particularly in regions like Cleveland and North Yorkshire. Rooted in traditional estate agency values of trust and unparalleled customer service, our dedicated team specialises in both residential and commercial properties. Whether you’re considering selling or letting, we offer comprehensive services tailored to meet your needs. From market valuations to full-service lettings management, our experienced team is here to provide expert guidance every step of the way. Reach out to us today to explore how we can assist you in navigating the property landscape with confidence