Derby Rents Smash Through the £850 Barrier - Are Landlords Profiteering?
As rents continue to rise, some would say that Derby landlords are profiteering. Yet, the truth is that the vast majority of local landlords aren't exploiting the situation. In fact, 64% are keeping rents steady or decreasing to protect their quality tenants! Discover the real facts and challenges they face in this in-depth article.
The private rented sector in Derby for both landlords and tenants is currently facing immense challenges, with a shortage of available homes for rent putting tenants under significant pressure.
It's not hard to see why when the average UK rent in 2021 was £1,381 and in 2023 it has been £1,706, an increase of 23.53%.
Looking closer to home in the Derby area, the average rent for homes coming on the market in the Derby area in 2021 was £738 per month, whilst in 2023, it has been £850 per month.
This has led to accusations of "widespread profiteering" by landlords, taking advantage of the current rental sector crisis. However, as always, the devil is in the detail.
The figures that are reported are based upon rents for new tenancies, not tenancy renewals or existing tenancies
A new tenancy is when a brand-new tenant moves into a home, whilst a renewal is when an existing tenant renews the lease with their existing landlord.
Government data shows that most landlords are not exploiting the mortgage crisis, with 64% of landlords maintaining and 4% decreasing rents to shield renters from the impact on renewal of their tenancy agreement, dispelling the notion that they are exploiting the situation.
Looking at the same Government data, of the landlords setting rents for new tenants, just under half of landlords (45%) stated they increased the rent compared to the previous tenancy with the old tenant, whereas a third (35%) kept the rent they charged at the same level, and surprisingly 1 in 12 (8%) decreased the rent.
Therefore, whilst the average percentage growth in Derby for new tenancies is 15.2%, the overall average for all tenancies is only 4.9% for Derby... and 4.9% is much lower than the rate of inflation.
Contrary to popular belief, landlords' profit margins have significantly dwindled in recent years. The profits for private landlords are at their lowest since the Credit Crunch due to rising mortgage rates and limited tax relief. This demonstrates that private landlords are not profiteering during the cost-of-living crisis.
Now some of you will say, Derby house prices have risen in that time. Yes, that is the case, yet not by the rate of inflation, so in fact in ‘real’ terms, their investments have gone down in value.
Landlords are often portrayed negatively in the media but the majority are, in fact, making considerable efforts to provide safe and secure housing for millions of tenants.
Landlords face growing costs, including increased mortgage payments and the negative impact of a tax system and Government policies that discourages investment in the rental market. These challenges are further exacerbated by ongoing uncertainty surrounding reforms to the law regarding landlords.
With limited options available, landlords must choose between leaving the private rented sector, increasing rents as a last resort, or absorbing mounting costs. However, the latter is nearly impossible for most individual landlords who lack deep pockets. To address these challenges, the Government must provide crucial support to the rental market.
I certainly believe that to alleviate the burden on renters, the Government should reconsider current taxes which are designed to discourage landlords from providing more rental homes.
The legislation in Section 24 of the Finance Act 2015 removes a landlord’s right to deduct the majority of their finance costs, including mortgage interest and arrangement fees, from their rental income before calculating their tax liability.
This means landlords have to pay tax on the gross income they earn from a rental property. This can often lead to landlords entering a higher tax bracket which can make or break a previously profitable rental portfolio.
As I have already said, this leaves many landlords with no option but to follow the market and increase rents in an attempt to offset the difference in tax paid. This is why that Section 24 is often referred to as the 'Tenant Tax'. Ultimately it is tenants that are now suffering with soaring rents.
It is vital to ensure that the supply of rental properties does not further diminish, as Derby tenants simply cannot bear the consequences of a dwindling market and it will lead to further housing hardship.
Without proper government support, both renters and landlords will continue to face challenges, caught between a rock and a hard place.
Housing is such an important sector in the UK and I would urge all parties to stop using the private rental sector as a political football and to move beyond rhetoric and take positive action to support the private rented sector.
I know many Derby landlords who are making sincere efforts to shield Derby renters from the mortgage crisis, and it is crucial their contributions are recognised.
By fostering an environment that encourages investment and providing support to renters, the Government can help alleviate the strain on both landlords and tenants and ensure a sustainable and fair rental market for all.
These are my thoughts, what are yours?