Real Estate

Cashing in? The mortgage-free landlords who are raising the rent anyway

More than two-thirds of mortgage-free landlords raised the cost of new rental agreements in the last year despite being unaffected by interest rate rises, according to research on alleged “cashing in”.

The practice has triggered windfalls for hundreds of thousands of investors at a time when tenants are paying more despite shrinking amounts of space in flats and houses.

According to a poll of more than 1,000 landlords commissioned by the housing charity Shelter and shared with the Guardian, seven out of 10 who own their rental properties outright increased rents on new or extended tenancies in the past 12 months as their average profits rose to more than £800 a month.

Meanwhile, private tenants have lost up to a quarter of their living space since the turn of the century as they are forced to “hutch up”, analysis of the government’s English Housing Survey by the Resolution Foundation shows.

Middle-aged people have been hit hardest by the squeeze on space, losing the equivalent of a master bedroom and a bathroom between 2000 and 2020 for a couple. It means homeowners now enjoy close to twice the amount of space per person that private renters do.

The double squeeze on private renters from rising rents and shrinking space comes as demand far outstrips supply. The Guardian has launched a series shining a light on the sector.

Polly Neate sitting at a conference table
Polly Neate of Shelter said owners and letting agents were ‘cashing in on the housing emergency’. Photograph: Richard Gardner/Rex Shutterstock

Ben Twomey, the chief executive of the campaign group Generation Rent, said debt-free landlords were “cashing in simply because they can”. He warned that without government intervention, “the cost of renting crisis will continue to uproot families and fuel homelessness”.

Landlords insisted they were not profiteering. Ben Beadle, the chief executive of the National Residential Landlords Association, said: “Our data shows landlords without mortgages are half as likely to increase rents as those with them and are much more likely to keep rents the same. Data from Savills shows investor profits, including those without a mortgage, at their lowest level for 16 years.”

The number of homes available to rent from each letting agent has almost halved since the start of the pandemic while inquiries for each home have trebled to about 30, according to data from Zoopla.

Housing costs for private renters are predicted to rise to nearly 35% of disposable income over the next year, compared with 15% for mortgage payers, according to the Resolution Foundation.

The chief executive of Shelter, Polly Neate, said rent increases by debt-free landlords showed they and letting agents were “cashing in on the housing emergency because they know people are in desperate situations”.

She said: “Every day we hear from private renters who are facing the very real possibility of losing the roof from over their heads after their landlord hiked their rent. Others are being pitted against each other and being forced to pay eye-watering sums to find a new home after being served an eviction notice.”

The space squeeze has triggered warnings from public health officials that it could speed up the spread of infections such as Covid. More than a third of all homes in England are owned outright and on average each person has 65 sq metres of space. But private renters aged 25 to 44 typically have to make do with less than half that amount, rising to 54 sq metres for renters over 65.

“Low-quality and overcrowded housing contributes to the spreading of infection, as we saw in the pandemic, respiratory issues from mould and damp [and] poor mental health,” said Matt Ashton, of the Association of Directors of Public Health. “Action and investment is needed across the UK to ensure safe, high-quality, affordable housing is a right, not a luxury.”

Across the UK, rental affordability is at its worst for a decade, outstripping earnings growth, data from the property website Zoopla shows. Over the past decade, it found the widest gaps between rises in rents and rises in salaries were in Edinburgh, where the cost of renting is now £7,000 a year higher, Glasgow (up £5,000) and Bristol (up £7,800).

When Shelter’s pollsters asked landlords why they were increasing rents despite not having increased mortgage costs, many said they had been advised to do so by letting agents and others who said “it’s the way the market is going”.

One of the largest lenders to landlords, Paragon Bank, told the Guardian: “Landlords are spoiled for choice for tenants, and that might not be good news for tenants.”

The bank’s managing director of mortgages, Richard Rowntree, said houses in multiple occupation, or HMOs, “are increasingly popular and are the only part of the market not reducing over the last 12 months”, as renters seek more affordable rents or more central locations.

He predicted increased demand for private rented homes in the short term as high interest rates make buying harder and plans to increase social housing remain no more than plans.


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