Spring Statement: A let-up for landlords but little assistance for the PRS

For the next five years, homeowners will pay zero per cent VAT on materials for improving the energy efficiency of their properties, down from five per cent VAT relief. The tax savings are estimated to be worth £1,000 up front and contribute to an annual energy bill saving of £300. This provides a timely boost for homeowners and landlords to help make more properties as energy efficient as possible. A move which will help landlords reduce outgoings during any rental voids and better support tenants when it comes to outgoings and affordability in the midst of rising rents across the UK.

Focusing on these points, rents paid by private tenants have risen at their largest annual rate for more than five years after spiking in the past 12 months. New data from the Office for National Statistics (ONS) showed that private rental prices in the UK increased by 2.3% in the year to February 2022, the largest annual growth rate since December 2016.

The area with the largest rental growth was the East Midlands, with prices rising 3.8% in the period, while London was the laggard with prices up just 0.2%. Excluding the capital, which the ONS said is witnessing a decrease in demand as the rise in remote working allows employees to live outside the city, rental prices in the UK rose by 3.2% in the 12-month period, compared to 3% for the year to January. Looking at each nation, private rental prices grew the most in Scotland (2.6%), followed by England (2.1%) and Wales (1.4%).

In terms of affordability, additional research from Rentd, outlined that average tenant earnings sit below the rental affordability threshold in five of the nation’s nine regions. The rental portal looked at the current average income of a tenant and how it compared to the average level of rental affordability based on the benchmark of two and half times the average rent. This resulted in a calculation that the average annual income for a rental tenant in England is currently £28,116, 12% below the wider average.

The average rent bill in England is now said to be £968 per month or £11,616 per year. This means a tenant needs to earn £29,041 per year for their home to be truly affordable. This is, however, £925 more than a tenant’s average annual income. In fact, as many as five regions are home to tenant earnings that come in some way below the rental affordability ratio of 2.5 times income.

This is a combination which is placing increased pressure on many tenants and with escalating living costs also potentially halting some homeownership dreams, the burdens being placed on the private rented sector will continue to grow. This means that the demand for good quality, rental properties will rise, at pace, with landlords – as well as tenants – needing all the support they can get to help navigate what will continue to be a challenging period for many.

The lending and intermediary markets are doing their bits but it would be great to also see the private rented sector getting some governmental breaks that it deserves. Although, I've almost given up holding my breath on that one.