Monday, 22 July 2013

Why Do Rents Rise?

Short answer? Because letting agents profit from ramped up rents. If tenants refuse to pay and opt to move out, agents then charge for every part, every level, every transaction in the in the renter finding process, since they charge for references, holding fees, etc etc etc. Except in Scotland, where fees are banned.

So rents rise. They keep on rising. Or do they? I still think the problem is recording rents ‘asked for’ rather than rents achieved. Basically, some rentiers try it on, and letting agents are worse - they pull fantastical rents out of the ether. They make them up. These numbers then appear on internet sites, and become reported as the going rate.

Rents rise because rentiers still exercise their ‘right’ to rise rents whenever it suits them, and because nothing exists to rein in their excesses – no mechanism is available to control their greed. Where demand is high they charge what they wish. They see ludicrously inflated rents as beneficial to their eternal quest to be ‘debt free’ ‘mortgage free’ or simply rich Rich RICH and fervently believe this ambition is attainable. Tenants fall victim to this delusion, because they have their rents hiked to insure this. And if they can’t pay they’re described as losers.

Wise rentiers value longer tenancies and nurture relationships with their tenants because they realise that while letting agents insist rents should and must rise annually, owners lose more money with costly voids and under-occupation. Some agents even include automatic annual rises in rental agreements.

Rents rise because some people, especially small-scale buy-to-let rentiers, see rising rents as a good thing, much as they do house prices. They impose misery of rents rising every six months, as they can with impunity.

Now society is trapped in a groove, with property price rises viewed as good for the economy, despite evidence to the contrary. It’s odd, but even when people are saving hard to buy homes for their families and for their future, property rises are seen as universally an excellent thing. I now suspect that excessively elevated, ramped up rents are also seen cause for celebration.

Rents are not rising everywhere. They rise where supply is restricted, especially in London, and oddly Warwick. Where the world is sane, and housing is not inherently problematic, rents are not racing to the sky.

Rents are rising sixteen per cent per year. Social security does not reflect this – Local Housing Allowance rises at one per cent per year. So in places where homes are scarce, prices explode and benefits sink. Brilliant. This means that even rents in less desirable properties, euphemistically described as ‘affordable’ where people on no/low incomes rushed to live, become rare and prices rise.

Why do actual rents rise? That’s easy. Rents rise because they can. Because we let them. Because we are immune to the scandal. Because everybody, even the wonderful Shelter, oppose rent controls, although the notion is starting to gain popularity. The idea that people can just charge whatever they want for such an essential item is stupid, and damages us all.


RenterGirl said...

Friend just contacted to say she's moving out of her flat. Letting agents asking for 150 per month more. They won't get it, mind. Nice try...

Tesco Value Chef said...

It's completely bizarre. In every other business prices are set to cover running costs, a bit of investment back into the company, and an acceptable level of profit. Rents are set... on a whim.

In 2009 I was living alone in a studio and after my first year the landlord decided to put the rent up. I wrote a polite and well-reasoned email to the agent pointing out all the flaws in the flat, the fact that the economy was crashing and that housing was in fact stagnant, and that I was on a pay freeze along with most of the population.

I got a one-liner back saying that the landlord had considered my email but decided to go ahead with the raise anyway. I doubt they even forwarded it on to him.

I couldn't afford the raise and I was desperate not to move into a shared house (a room in a shared house is £600pcm round here anyway, so still expensive) and in the end my girlfriend - whom I'd known for a matter of months - and I moved into a little one-bed flat together.

It's worked out well and we're still together but I really resent the fact that I was pushed into such a potentially risky and life-changing position by a rich old man's greed.

Anonymous said...

Always, always, always – NEGOTIATE – heck if you get even £5 off eth rent that’s a fiver in your pocket – also it helps stem a further raise – once I put it to my landlord that I wanted a rent reduction (he nearly collapsed and said ‘well I was going to raise the rent but as you are such a good tenant I won’t on this occasion’ cheeky bustard) point is it shows you a savvy and not a walkover – simply say ‘I was looking for much nearer the £x mark’ and see at they say – always worth a try!

Anonymous said...

Oh – further to that if a letting agent tries to raise the rent – ask words to the effect of ‘is that landlord aware of this’ and/or contact the landlord direct and say you simply can’t justify spending nay more than your on rent – kinda like if they want an empty house they’ve got one if they raise the rent! Most landlords and indeed agents give it a lot of bras and front but in reality are shitting themselves because the market is very competitive and actually quiet fragile…desperate to avoid the voids…call their bluff will work 90% of the time…

Anonymous said...

poor grammar but you get my points!

Anonymous said...


There is a good reason for rents to rise - inflation.

A rise of around about inflation (typically 2% although more than that recently)per year is to be expected otherwise the actual value of the rent is decreasing.

That being said I think it's fair that, for long term tenants, the real terms rent should drift down a bit over time to allow for the fact that a long term tenant is "more valuable" than switching every year.

Increases of far above inflation are really taking the piss, and probably are agent/greed motivated.

Sadly the best medicine is probably to move (hugely inconvenient I know), or at least threaten to. Void periods really do hit LL's (esp buy-to-let ones) in the pocket.

Barney from Newington said...

Rents are not rising at 16% per year.

In the last year they rose at 1.3% which is well below inflation of 2.7%.

Below inflation rent rises have been the trend for the last ten years.

Anonymous said...

Tesco value chef
Successfull enterprises maximise profits .
Tesco a prime example .

RenterGirl said...

No Barney maybe on your planet, but where demand is extreme - rents rise by that much.

Not sure of the point re Tesco - this is not profits 'maximised' but profiteering.

Dave said...

Rents are not rising at anything like the rates you suggest. According to Homelet they have increase from £725 in June 2011 to £811 in June 2013. That is an increase of 12% over two years.

The reason why Tesco cannot increase their prices to make massive profits is because their is a Sainsburys down the road, an Asda on the corner and a Morrisons in the next town.

I am sure rents are increasing much faster in some places, but the message here would be the same as if Tesco doubled prices. Either push back against the increase or shop elsewhere.

Rents should probably increase in line with house prices. And house prices have generally increased a bit faster than inflation.

I think the real problem is not so much that rents are rising at a massive rent, but more that real incomes(adjusting for inflation) are stagnant or fallen since 2000.

space cadet said...

"Shop elsewhere". Love it. We're talking homes, not food.

Rents are rising, because of greed. Bankers and landlords have that in common.

MattW said...

I count myself lucky that since living here my rent has only gone up £10.00 a month, roughly the rate of inflation. I expect to get a notice fairly soon giving a month's notice to up it another £10.00 from September 1st...

Rentiers love to raise rents. Anything to stop those aspiring tenants to save up a deposit to buy a home of their own!

Dave said...

Rent prices are governed by exactly the same rules of supply and demand as food.

I don't believe that the people that run Tesco are any less greedy than those who run a letting agency. In fact the directors are employed by their shareholders to maximise shareholder returns(the future value of profits).

Landlords do not raise prices because they want to keep renters as a class down. They do it because there is not someone down the road letting out a similar place for £100 less.

RenterGirl said...

I think many bad rentiers see tenants as less than human, or as the scum who pay for their pension. Not as people. Some are excellent - mine is. But the free market is dead for property. It's been privatised. There is no competition.

space cadet said...

Agreed Gary. But when you say "I am sure rents are increasing much faster in some places, but the message here would be the same as if Tesco doubled prices. Either push back against the increase or shop elsewhere." you are forgetting that the very lack of supply vs demand means tenants are resigned to taking what they can get, and they can't shop elsewhere.

space cadet said...

Jeez, I meant Dave, not Gary!

Emma said...

In our last house, the landlady decided to ask for a rent increase of £50 per month, pushing the house way beyond what it was worth in the local market (and way, way beyond what it was worth in terms of the kind of service she provided). She wouldn't negotiate so we decided to cut our losses and move on. We moved out, and the house went up for rent at £150 per month more than what we were paying. And it stayed empty for well over six months.

Eventually, she got so desperate that she dropped the price to £200 less per month than we were paying. Those tenants wrecked the place, and moved on six months later, only for the property to stand empty again. It's just been rented out again, and if it went for the asking price then she's only now just getting the same as we were originally paying.

Adding it all up, her greed in trying to get another £600 per year out of us has probably ended up costing her well over £5k, when you add up the lost rent, agency costs, council tax, ongoing loss of rent and repairs. In fact, she lost more than the intended rise in the first month of the void. I'm not a spiteful person but I can't help but feel she was a bit of an idiot - no doubt she listened to some agency spiel about how 'tenants will pay anything' and 'don't worry if they go, there's loads of tenants out there', and found out too late that that's not always true.

Tesco Value Chef said...

I do regret my username, chosen after about half-a-second's thought from a nickname a friend used to use...

Anyway: Inflation doesn't happen for no reason. It doesn't happen in any other industry purely on a whim, it happens because costs have genuinely risen.

Supermarkets fight damn hard to keep their prices down and food prices have fallen in real terms over the last 50 years.

We're seeing the price of food rise now because of higher demand in China, environmental factors which have affected crops and numerous other reasons.

Rents rise because landlords want them to. That's it.