Crisis hits rental market

If you thought landlords were evil, think again...

New research from the Association of Residential Letting Agents suggests that the UK faces a severe rental property shortage – and, that things are getting worse.

Its research found that there is a significant shortfall in the amount of good quality rental property available to those who either can’t or don’t want to buy their own home. The study found that almost 60% of member agents had reported more tenants than available properties over the first quarter of 2010, a significant jump from the last quarter of 2009 where 41% reported such a disparity.

Back in the third quarter of 2009, the figure was just 24%!

So essentially, in six months, the number of agents unable to help prospective renters has more than doubled.

Here today, gone tomorrow

What is also noticeable is just how quickly those rental properties that are available are snapped up again. At this point last year, the association reports that properties would be vacant for an average of 4.2 weeks. It's now down to 3.6 weeks.

The research implies there is such a lack of decent properties available to renters that as soon as anything acceptable hits the market, just as quickly it has gone again.

But is this actually the case?

A local problem

Of course, the situation varies on a region-by-region basis.

In London, things seem to be particularly bad – one member agent described the rental market as nearing crisis point, with rental stock levels dropping by 60% in the space of a year. But not everywhere is this bad – two in 10 letting agents are actually reporting a surplus of properties compared to tenants.

However, the study does suggest that, on the whole, tenant demand in the UK is not being met with sufficient quality properties.

Is this ringing true with lovemoney.com landlords and renters? Please let us know and share your thoughts and experiences using the comments box below!

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It could get worse...

For me, a particularly concerning aspect of the study is that it suggests things may get even worse.

You'd think that such high levels of demand would actually spur more interest from landlords - that there is a ready made market, just waiting for some new properties to choose from.

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Become a buy-to-let landlord

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However, the report claims that an increasing number of landlords are considering leaving the buy-to-let market altogether. When asked if they plan to sell either part or all of their portfolio, there has been a small increase in the number saying yes, from 8.7% in September to 11.3% in March.

And there has also been a similarly small fall in the number of landlords stating they will look to expand their portfolios in the next year, down from 34% in September to 30% in March.

Tiny changes, but taken together they may suggest a trend. In other words, the report implies that not only are there currently insufficient levels of quality housing stock available to renters, but those landlords that do provide decent stock are either questioning their future, or at least unlikely to add to their portfolios.

Things are starting to look a bit desperate here...

• Adopt this goal: Become a buy-to-let landlord

It's not just ARLA

It's not just the Association of Residential letting Agents that is coming out with such data - the National Landlords Association has weighed in too.

In research published this week, it acknowledged that many of the 'accidental' landlords who shied away from selling their property over the past few years because they didn't want to get a raw deal are now in a position to sell up, further limiting tenant options.

However, somewhat surprisingly, this report does indicate a large number of landlords are still experiencing void periods.

According to the NLA, 52% of landlords reported experiencing void periods in the past 12 months. That seems awfully high, given the levels of increasing tenant demand. You'd think that hardly any landlords would be facing empty properties in these conditions.

And while the average time of the void has fallen, it's not been by much - from 19 days to 17.

The NLA has tried to explain this by dwelling on things like overpricing and poor marketing of the property. While overcharging your tenants won't help, I'm still a little surprised by the sheer number of landlords facing voids. It doesn't quite add up.... so perhaps things quite as bad as they seem, after all.

Do let us know what you think using the comments box below!

What needs to be done?

Personally, I am quite concerned by these reports. And unfortunately, I don't think we can rely on the State to step in to help renters. The money simply isn’t there in the public purse for a wholescale growth of the social rented sector.

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So what’s the answer? As far as I can see, there are two options. Either you make things easier for those people that would be renting to actually buy a home instead, or you do something – anything – to encourage the growth of the private rented sector.

Let’s take a look at the first option, helping people buy.

The Government has taken as big a step as it probably can by scrapping Stamp Duty for first-time buyers up to £250,000. It would be nice if the tax was scrapped for all buyers up to that point, or the definition of first-time buyer was perhaps not quite so restrictive, but the honest truth is there isn’t much more the Government could do financially.

• Read this blog: Property vs. Pensions

Encouraging landlords

That leaves the second option – encouraging the private rented sector to flourish.

A constant comment, whether from professional bodies like the National Landlords Association, or individual landlords commenting on lovemoney.com stories, surrounds the level of bureaucracy – the dreaded red-tape – that landlords have to deal with.

This is only likely to increase should the National Landlord Register go ahead, an idea that not only draws unfortunate comparisons with a certain other register, but is unlikely in my view to make much difference to the lot of the tenant.

Reducing some of the legislative burden on landlords would be a start in helping to attract them into the market, but that would only be the start, really.

Financing also needs to improve. As my colleague Christina Jordan highlighted in her piece Buy-to-let bounces back, lenders are slowly returning to buy-to-let mortgage lending, but it remains exceptionally tough to get sufficient funding for investment. According to Paragon Mortgages, a buy-to-let specialist, 82% of landlords said that securing financing had been tougher in the last quarter than the preceding three months.

The banks are supposedly under obligation to increase their lending to small businesses, to help the economic recovery. It would be helpful if some of that funding found its way to landlords, as better funding would at least give them a fighting chance of meeting this tenant demand.

Whether we like buy-to-let landlords or not – and in my view they have been viewed as the pantomime villain of the housing market for far too long – we need someone to provide good standard rental property. And as it won’t be the State, it’s in our own interest to help those individuals who are willing to step in.

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