Private rental sector creates profit black spots

Confidence among landlords is rising, leading to speculation that rental demand in the private sector will continue to grow. Despite the government’s push to help more people get on the homeownership ladder and own their own home through the Help to Buy program, many are still unable to pay the deposit and are left with no choice but to rent.

Rising property prices and high rental yields have meant that buy-to-let property investment has once again become the choice and dream of many with almost a fifth of current homeowners planning to expand their property portfolio. properties and about 16% already bought another property last year. Many more people are hoping to buy in to enable the boom, as growing demand and good rental yields mean a good long-term investment.

But along with confidence in the buy-to-let market and rising monthly rents comes a dark side. With landlords able to charge more for their properties and an ever-increasing demand for houses, many tenants receiving welfare are facing eviction because they can’t pay their rent. A large landlord recently made the decision to stop accepting tenants with housing benefits and sent eviction notices to any tenant with benefits. And others are following his lead, like an agent in Kent with over 1,000 properties. This could create benefit black spots, where those with low incomes cannot rent in a city of their choice. The housing charity Shelter has said that if action is not taken, there could be whole areas of the UK that will not accept the housing benefit and applicants will be forced to live in less desirable locations and poor quality housing. This means there will be areas where, if you lose your job or get sick and rely on benefits, you’ll have to move out of town. There are currently around half a million people in the UK living in privately rented accommodation and are at risk of rising rents. Many are retired or have low-paying jobs. Any area with rising rents and rental demand is at risk.

An agency that has stopped accepting tenants with benefits has stated quite controversially that it prefers to rent to Eastern Europeans, as they are less likely to default on rent than single mothers with benefits.

Today, only one in five private landlords accepts applicants for benefits, less than half of what it was a year or two ago. And tenants in housing association accommodation and benefits are already affected by the so-called bedroom tax, where their benefits are reduced if they are deemed to have a spare bedroom.

And another scandal is brewing within the rental sector. There are now over four million people renting privately in the UK and a further million are expected to do the same in the next two years. Rents are constantly rising and landlords are getting very good returns and lots of profits, while tenants are struggling to make up the rent every month. Rents are now rising at nearly double the rate of inflation and wages, yet many landlords spend almost none of the money on the homes they rent. Tenants are threatened with eviction if they cannot pay their monthly rent or accept annual rent increases.

It used to be seen as a ‘London’ problem where renting a private sector luxury apartment was very expensive, but now rent is becoming the norm and in the last ten years there has been a 127% increase in number of families with children now rent long term. The fastest growing group of renters is 35-44 year olds, often with children.

Countries like Germany, where the majority of the population rents, have rent controls. It doesn’t look like a dirty word, but it’s perfectly acceptable. Similar proposals should be bought in the UK, as well as tougher penalties for dishonest owners.