Renting a home: A guide for tenants and landlords
On a month-by-month basis in many regions of the country, it’s cheaper to buy a home than rent one. It’s time to find out why increasing numbers of us are becoming tenants rather than homeowners…
Owner-occupation is on the increase, and proving the UK has long been obsessed with property, its love affair seems to be continuing even during these tough times of economic doom and gloom.
It’s surprising then that the number of people renting a home has soared by 40% over the past five years.
Although some people choose to rent to be close to their place of work or to get their children into a good state school, for many, renting is now the only option. There are two main reasons why this is the case.
First, there is a definite shortage of homes in the UK due to the lack of new properties being built. Developers are being hampered by strict mortgage lending as well as the UK’s strongly regulated controls over greenfield development and building densities. Secondly, the lack of mortgage finance available to would-be buyers and the hefty deposits needed puts ownership out of reach for many.
In 1995, only 7% of residential properties in the UK were privately rented but by 2007, the figure had climbed to 14%. Today, more than 16% of total housing stock in the
UK is privately let to tenants.
Rental occupancy rates are being driven up by those people who would – during less financially testing times – be first-time buyers. While 402,800 people managed to buy their first home in 2006, just 196,700 got their foot on the property ladder in 2009.
On top of this, growing numbers of people who would qualify for social housing are being pushed into the private rental sector by an acute shortage of local authority and housing association property.
This strong demand for private rental property combined with a shortage of supply has, inevitably, pushed rents up to record levels. In greater London, the average monthly rent is £1,202 a month – this is an increase of 12.2% per cent compared to the same time last year.
Campbell Robb, chief executive of housing charity, Shelter (shelter.org.uk), says: ‘With a chronic shortage of social housing and millions priced out of the housing market, the reality is that renting is fast becoming the only option for more and more people.’
Shelter says that the problem with the imbalance between supply and demand is that private rents are now unaffordable in 55% of local authorities in England because they cost more than 35% of the median average local take-home pay, leaving people with very little left over to save at the end of each month.
The charity said 38% of families with children who rent privately have even had to cut back on buying food in order to help pay rent.
‘We have become depressingly familiar with first-time buyers being priced out of the housing market, but the impact of unaffordable rents is more dramatic,’ adds Campbell Robb.
Even though rental rates have already hit new highs, with so much growing competition among tenants, further price increases could be on the cards.The Association of Residential Letting Agents (ARLA), www.arla.co.uk, has warned that the private UK rental sector is nearing capacity – meaning that the sector is getting to the point where there are not enough properties to cater for those who need them, sparking a housing shortage.
ARLA has 6,000 members in the UK and 74% of them say that demand is outstripping supply as they have more tenants than properties to fill.
With mortgage interest rates at record lows, many people who are renting would be better off every month if they owned the home they live in. But they simply cannot raise the hefty deposit needed to be a homeowner, and now that rents are getting pushed even higher, it makes the likelihood of them saving that amount of money even more tricky.
Until the current mortgage lending criteria becomes a lot looser, it seems that those of you who dream of owning your own home will have to be content with renting for the time being. And with more and more buy-to-let investors now entering the market to take advantage of rising rental yields, we may soon change from a nation of proud homeowners to one of tenants.
‘I am stuck in the renting trap’
Holly Quayle, 26, has only lived in rental properties…
‘My parents don’t live in England so I don’t live at home, and I can’t afford to buy anything just yet, either. My only option is to rent.
‘I would prefer to buy my own place, rather then pay the mortgage on someone else’s like I am doing now, but getting together the deposit is very difficult, especially as my my current rent is high. I would have to stay indoors for the next four years and eat nothing but soup to get even close to having a deposit by the time I am 30, which is what I had planned to do.
‘If you want to live in a good area, the competition is so strong that people are paying over and above asking prices just to secure a semi-decent property. Cost and quality really don’t correlate!
‘And with rent prices going up each year, if you want to stay in the same place, you have to just cough up, as the landlord can easily fill your place.’
Five ways to be a good tenant
- Read your lease before you sign it. Understand what is allowed and what is not allowed. If the landlord doesn’t want animals, don’t sneak a dog or cat in…
- Consider your neighbours. The last thing you want is your landlord having to come over to answer to your neighbours about your incessant noise-making. If you like to play loud music, make sure you do it during reasonable hours.
- Keep the property clean. A well-kept property will keep your landlord happy and make him consider you as a responsible tenant. That way, if you need anything from your landlord, you are more likely to get it as he won’t want to lose you. Also, it will ensure that when you leave, you will get your security deposit back.
- Don’t be high maintenance.Okay, so your landlord is definitely responsible for most repairs, but he won’t want to rush over each time a screw comes loose or a lightbulb needs changing. If something can be done easily, and without you causing any damage, have a go.
- Pay rent on time. There is nothing landlords hate more than late-paying tenants. If you are going to be late for whatever reason, call and let him know. Don’t make him chase you for rent and don’t avoid his calls.
Five ways to be a good landlord
- Don’t ignore your tenant. If your tenant tries to contact you, respond as soon as you can. Okay, it may be hassle for you, but he/she needs to know that you care abouthis happiness and comfort.
- Maintain your property. Not only will your tenant hate you if you don’t get that boiler fixed or leaking tap repaired quickly, you may end up causing damage to your property if you don’t. If there is a problem that you feel is not your responsibility, explain to the tenant why.
- Give him space. Yes, it is your home but turning up unannounced is sure to annoy your tenant. He is paying you to stay in the house, so give him privacy and if you need to visit, by law you need to give him at least 24 hours notice. Keep visits to a minimum.
- Think before increasing the rent. If you have a great tenant, think twice about raising rental rates even if they are on the up. If the tenant doesn’t like it, he/she may leave and securing a new agreement with a tenant that you don’t know, will cost you both time and money.
- Be understanding. You don’t want to lose out financially during a tenancy but if there are things that get damaged unintentionally and your tenant is generally very good, don’t get angry – take it on the chin. It’s a business and there will be expenses.
Sarah says… ‘Right now, we are bouncing along the bottom of the market, and won’t see many further reductions in house prices. This is why renting is a good option at the moment.’