Cost Of Rent Day launched by free-market think tank...

The right wing think tank the Adam Smith Institute has launched something called the Cost Of Rent Day.

The institute has calculated that private tenants are working 197 days of the year solely to pay their rent; this is calculated to be the day on which, on average, renters in England earn enough before tax to cover their annual rent bill.

This analysis of local areas shows Cost of Rent Day is even later in England’s major cities and the South East.

The average Cost of Rent day in London is July 16, more than two months later than the national average, which fell on May 5.

The institute says it has created this measure in order to translate the severity of the housing and rental crisis into simple terms that can be easily understood by all audiences. It claims it also provides a useful measure to hold politicians to account and track changes over time.

To calculate the Cost of Rent Day, annual rents were divided by gross annual pay, to understand what proportion of earnings are spent on rent.

The institute says the root problem is the lack of supply.

Since the 1970s, England’s construction of new homes has lagged behind population growth. In other words, new demand has outstripped supply. “Even if the government manages to deliver on the 1.5m new homes by the end of this Parliament, we will still be short of delivering the 4.3m backlog” claims the institute.

It warns against “punishing all landlords or introducing policies such as rent controls will only make the situation worse for renters. Instead, politicians must focus on creating the right incentives for developers and landlords, and on increasing supply.”

The ASI has previously called for beefed-up compulsory purchase powers to buy and develop what has now become known as ‘grey belt’ sites close to railway stations, for example.

A spokesperson says: “We all know that rental costs in England are just too high. But alarmingly, as our research shows, the rental crisis is even worse in our capital city where Cost of Rent Day falls over two months later than the national average.

“This means that higher salaries, which many professionals have historically moved to London for in the first place, do not compensate for the higher rent prices that they face.

“In the midst of a cost of living crisis and nearly two decades of stagnation, London’s ‘Cost of Rent Day’ is a damning indictment on the performance of our economy, and our failure to match the demand for homes with supply in the Capital.

“Concrete proposals to reform our sclerotic planning system and to deliver the homes we need must be an urgent priority for both the government and opposition parties.”

Zoe S
17 July 2024 10:54 AM

The lack of supply certainty has caused a hike in rents, but as you quite rightly stated that was massively due to the Conservative Goverment introducing:

1. Section 24 of the Finance Act 2015
2. Tenant Fees Act
3. SDLT Surcharge
4. MEES
5. Introduction of the Tenant Fees Ban
6. Right to Rent Checks
7. Eviction Reforms
8. Renters Reformed Bill (proposed)
9. Rent Controls (due to be proposed)
10. Landlords licences

The combined effect of higher taxes, increased compliance costs are no longer sustainable for the smaller landlords to make a reasonable profit to stay in business and so a lot of LL’s have chosen to sell their BTL properties due to all these financial and regulatory pressures, leading to a reduction in the supply of rental properties.

While these measures were aimed at addressing systemic issues in the housing market and protecting tenants, they have also led to consequences for both landlords and tenants, which in turn have affected the availability and affordability of the rental housing.

The Conservative Government have made a complete mess of it for landlords and tenants, but longterm with the new legislations the tenants will be better of as the system always favours them, its never balanced, so my predications are that the Labour Government will make the situation worse for landlords as they are intending on introducing further legislations to protect tenants, which will in turn cause more landlords to sell as it simply will not be viable to remain in the BTL market.

I question whether the Government is really that daft, do they really not know that they have caused a major shortage in the rental market - or was this intended to reduce the PRS market so only the large LL’s remain in business?

John McKay
17 July 2024 11:23 AM

Zoe, thank you for your response.
I compiled this list some years back. It probably needs updating and amending but nevertheless illustrates the bulk of the issues we've had to contend with over previous years...

1. S24 (disallowing of finance costs including mortgage interest)
2. Additional 3% SDLT on property purchase
3. Premium of 8% CGT when selling property
4. Banning of letting agent fees
5. Halving of lettings relief
6. Prospective banning of ‘No DSS’ wording in adverts
7. Promised banning of S21 notice to quit, which was originally introduced to increase the number of homes available to rent.
8. Growing trend of councils charging hefty licence fees per property
9. Changes to HMO regs including minimum room sizes
10. Right to rent checks (now shown to be discriminatory and there is no guidance on how to deal with EU immigrants)
11. Benefit tenants migrated to UC causing lengthy delays in rent payments and often substantial arrears
12. Unable to get housing benefit paid direct unless history of bad money management
13. Scrapping of Wear & Tear allowance
14. Introduction of EPC minimum requirements (even on HMOs) which can be difficult to meet with older properties
15. Unfit for human habitation legislation
16. CO detectors must be fitted
17. 100%+ council tax on properties being refurbished between tenancies. Not even the 25% single person discount
18. Substantial increases in court costs for use of S8, thus making S21 more popular
19. Membership of compulsory redress scheme for agents (and most likely for landlords soon)
20. Limit on amount of deposit we’re allowed to take
21. Rogue landlord database
22. Proposed 3 year minimum tenancies though not sure what the value of this would be with the abolition of S21 (which has promised to be abolished)
23. Some councils now charging council tax on HMO rooms
24. 6 month notice periods
25. Eviction moratorium, extended moratorium, Christmas moratorium
26. EICR legislation that only applies to the PRS, apparently social tenants don’t need to be safe. Upto £30k fine if checks not done.
27. Proposed EPC to be made C (up from E)
28. Proposed legislation to force landlords to accept pets (but cannot take extra deposit)
29. Having to consult with non-paying tenants in regard to giving them breathing space
30. Form N5B (S21) has gone from around 3 pages to nearly 30.
31. In Wales the minimum notice period is now 6 months and can only be served at the 6 month point of a tenancy, meaning a minimum 12 month tenancy unless contract is breached. The tenant only has to give 28 days notice.
32. Again in Wales, it is proposed that Council Tax is to be replaced with a land value tax payable by the property owner
33. Rent controls are being touted by the Mayor of London as a solution to the rises in rents caused by all the above.
34. In addition the Shadow Chancellor has promised further landlord taxation if Labour come to power.
35. Promise of open-ended tenancies under the Renter’s Reform Bill.