Our Takeaways from Goodlord’s Industry Report

11th October 2024

1. Tenant Demand and Supply Issues:

– Tenant demand for rental properties remains high, with 62.3% of agents reporting an increase in tenant enquiries. However, supply continues to fall, with 58% of agents noting fewer available properties, with 37.4% stating a “significant” decrease.

– This supply shortage is intensified by high net migration, which has increased the number of people looking for homes, while new housing construction remains insufficient. With just over 232,000 new homes built in the last year, the imbalance has worsened.

2. Landlords Exiting the Market:

– Almost half of landlords (29.9%) have sold properties in the last year, with another 17.4% planning to downsize. Five primary reasons are driving landlords to exit:

     – Legislation: Especially concerns around Section 21 and the Renters’ Rights Bill.

     – Energy Efficiency: The cost of meeting new EPC standards is a major concern.

     – Economic Pressures: Rising interest rates and operating costs are squeezing profit margins.

– Over two-thirds (66.1%) of letting agents believe that Labour’s proposed Renters’ Rights Bill, which includes abolishing Section 21, will lead to fewer rental properties in the market, thus worsening the supply crisis.

3. Tenant Affordability and Rent Poverty:

– Many tenants (48%) spend more than 40% of their income on rent, putting them in “rent poverty.” The situation is worse for low-income renters, with 74% of tenants earning less than £20,000 facing rent poverty.

– Bidding wars are becoming common, with 1 in 8 tenants paying more rent than advertised. Furthermore, 33% of tenants said they would experience financial distress following a rent increase.

4. Sentiment and Morale:

– Letting agents and landlords are increasingly pessimistic about the future of the PRS. A significant portion of agents (53.8%) and 75% of landlords reported feeling pessimistic about the industry, with many fearing that ongoing reforms and economic pressures will push more landlords out of the sector.

– Agents are particularly concerned about legislative changes such as the abolition of fixed-term tenancies and energy efficiency upgrades, which may lead to additional financial strain.

5. Energy Efficiency Concerns:

– Labour’s plan to require all rental properties to meet a minimum EPC rating of Band C by 2030 is a significant issue for landlords. More than 60% of landlords report that at least one of their properties does not meet this standard. Compliance with the standard is expected to be costly, with landlords facing an average expense of £2,400 per property.

– While the government has promised grants and low-interest loans, over half of landlords indicated that these requirements could prompt them to leave the sector.

6. Reforms and Impact:

– Letting agents expect minimal fallout from the introduction of the Decent Homes Standard to the PRS, but they remain divided on reforms regarding pets and tenancy structures. Many agents fear that granting tenants the right to keep pets or mandating periodic tenancies could have negative consequences for the sector.

– Additionally, some agents are concerned about upcoming legislation requiring A-level-equivalent qualifications for letting agents, with 46.5% supporting the potential rise in professional standards, though 22.7% believe it could lead to job losses, particularly at smaller agencies.

7. Rising Rental Arrears:

– Rental arrears have increased across most UK regions, with London seeing the most significant rises. Letting agents report that 77.9% of their landlords now use rent protection insurance to safeguard against non-payment of rent.

This report paints a picture of a challenging future for the UK’s Private Rented Sector, driven by rising demand, regulatory pressures, and declining landlord confidence.