Tenants Renewing on Existing Contracts hit with high rent rises - new data

Tenants renewing an existing contracts have been faced with high rent rises according to Hamptons lettings agency.

It says they rose 8.3% on average over the last year, exceeding rental growth on newly let property units - that’s now just 6.4%.

So far this year 61% of landlords who let their home to a new tenant have been able to secure a higher rent than they had been achieving. And 88% of landlords who renewed an existing contract increased their tenants’ rent so far this year.

However, Hamptons says these renewal increases are only just starting to close the gap with rents on the open market that have been rising significantly over the last 18 months. 

Six years ago - in April 2018 - the average tenant who moved into a new property paid just 1.1% (or £8pcm) more than a tenant renewing their contract. Since then, open market rents have risen 38%, whilst rents on existing tenancies have risen 21%.

The agency says landlords have generally increased rents by less than market rates over the last two years which means tenants have increasingly found themselves financially better off staying put rather than moving home. 

Hamptons analysis of the number of lets agreed more recently suggests that in 2023/24 the number of renters moving home will be around 17% below the pre-pandemic average, falling below one million moves.

Aneisha Beveridge, head of research at Hamptons, says: “Many tenants had enjoyed years of no or below-inflation rent increases, particularly when rents weren’t rising much on the open market and mortgage costs were falling.  

“Landlords were often content with a small gap between the market rate for their home and what their tenant was paying.  However, over the last two years, strong rental growth on the open market has meant that the gap between market rates and what some tenants were paying rose significantly.

“Tenants fortunate enough to be protected from higher rents by their landlord or longer contracts are increasingly seeing their rents rise.  These increases for renewing tenants tend to be lower and stretched over a longer period than for newly let homes, often meaning tenants still pay below market rate.  But even so, these hikes can still add up to hundreds of pounds a month.

“The large gap between market rates and what many tenants are paying is a big disincentive for them to move unless they have to.  Moving increasingly means getting less home for more money. 

“While time will eventually close the gap between what sitting and new tenants are paying, it may take longer if rental growth on the open market starts picking up again.”