The gap between the cost of buying and renting a home has hit a nine-year low, according to research by Halifax.
The mortgage lender calculated the monthly costs of a three-bedroom property either to buy or rent. It found that buyers were saving an average of £900 per year compared to tenants in 2017, but this saving was down to £366 in 2018 – a 59% decline.
This is the smallest savings gap for nine years.
The research compares the typical costs for a first time buyer, such as average mortgage payments, income lost by funding a deposit, rather than saving, spending on household maintenance and repairs, and insurance costs, with rental data from BM Solutions.
There are some limits to the figures, as they don’t include upfront costs, such as Stamp Duty, valuations and legal fees, or anything that a tenant may pay, such as a deposit or tenant fees.
Homeowners are still better off by buying their own properties than renting across the UK.
In December 2018, housing costs, including a mortgage on a three-bedroom home in the UK, averaged £729 a month, compared to the typical rent of £759 for the same property type.
The greatest saving is in London, where homeowners are spending £4,475 less than tenants over a year, followed by Scotland, at £1,574.
In contrast, the cost of buying a property in Yorkshire is just 5% lower than renting, saving £361.
Russell Galley, the Managing Director at Halifax, says: “The gap between buying and renting is narrowing, primarily driven by reduced first time buyer prices, deposits in some regions and continuing house price growth, meaning buyers are paying more on their mortgages.
“With more products available for borrowers, these factors combined have pushed up the price of buying quicker than the price of renting. Meanwhile, the cost of rent, household maintenance and average deposits have remained broadly flat.”
Estate agent haart is urging the Chancellor, Philip Hammond, to relax the Government’s buy-to-let tax crackdown after it found that the number of landlords looking to invest in rental property dropped by more than a third in the year to January.
haart’s data shows that, although the amount of landlords registering to buy rental property increased by 2% between December and January, it has plummeted by 37.4% on an annual basis.
In London, the number of landlords looking to invest fell by 41.3% over the year to January.
The estate agent’s branches did, however, report that the amount of sales to national landlords increased by 13.9% in the 12 months to January.
In the general sales market, haart saw a 15.2% annual boost in new property listings, a 2.6% rise in buyer registrations and a 5.5% increase in exchanges year-on-year.
Paul Smith, the Chief Executive of haart, observes: “There is a clear appetite to move amongst buyers and sellers. Just one month from Brexit, buyers are continuing to act in ignorant bliss, ignoring formidable predictions that are still dominating headlines. With increased confidence in activity, we can expect price rises over the coming months.
“But January was very much a tale of two halves. The London market did not pick up in the same way that the rest of the UK did, and the number of new instructions for sale in the capital dropped by 2.6%. The lack of new homes to buy has, in turn, pushed up rental prices by 6% on the year, to a record £1,924, as Londoners scramble for rental accommodation as an alternative to buying a home.”
He believes: “This is a not a fault of Brexit, but rather a consequence of the Government’s misguided efforts to reform the property market with taxation on buy-to-let landlords.
“Until buy-to-let taxation is relaxed, we can expect rents to rise throughout 2019, and tenants will increasingly be faced with difficulty when finding a new home in the capital.”
The Government must end the controversial Right to Rent scheme, after the High Court ruled it in breach of human rights laws on Friday (1st March 2019), insists homelessness charity Crisis.
The current Right to Rent scheme requires landlords to check that all prospective adult tenants have the right to rent property in the UK, by checking their official documentation, such as a passport or visa.
If landlords fail to complete these checks or let to someone who does not have the right to rent in the UK, they could face criminal charges.
Jon Sparkes, the Chief Executive of Crisis, is pleased with the ruling: “It is fantastic news that the High Court has ruled that this discriminatory policy be reviewed, taking the vital first step needed to scrap it altogether.
“Every day, our frontline staff hear of the overwhelming difficulties faced by homeless people trying to find a tenancy in the already saturated rental market. This is made even harder if someone has to prove their immigration status, especially as official documents like passports can often be lost sleeping rough, moving from hostel to hostel, or fleeing domestic abuse – and replacements can be prohibitively expensive. And, as a result of this policy, many landlords are avoiding renting to anyone they don’t believe to be British, to avoid the threat of prosecution if they accidentally rent to the wrong person.”
He insists: “This can’t carry on. No one deserves to face the devastation of homelessness – especially at a time when the crisis is worsening. The Government must act now to end this policy and ensure that those in the most vulnerable circumstances are supported, rather than pushed further to the fringes.”
The Housing Minister has called for an end to housing adverts that potentially discriminate against potential tenants in receipt of housing benefit.
The Minister for Housing and Homelessness, Heather Wheeler MP, said that she would be meeting with industry representatives as part of her approach to ending no DSS adverts.
Along with other Government ministers, Wheeler will be meeting with landlord associations, tenant groups, mortgage providers and property websites to clamp down on blanket exclusions in housing adverts, with a view to stopping them altogether.
However, recent figures show that around half of landlords would not be willing to let to tenants on housing benefit, which rules out thousands of vulnerable people and families.
The announcement came on the same day that NatWest confirmed that it was removing all restrictions on landlords letting to tenants who are in receipt of housing benefit.
John Stewart, the Policy Manager for the Residential Landlords Association (RLA), responds to the news: “Landlords should not refuse someone solely because they are on benefits, and should consider prospective tenants on a case-by-case basis. But, with growing numbers of benefit claimants now reliant on the private rented sector, we need to do more to give tenants and landlords greater confidence in the benefits system.
“This means giving all tenants the right to choose if they want to have the housing element of Universal Credit paid directly to their landlord, working with bank lenders to remove mortgage terms that prevent landlords renting to benefit claimants and ending the Local Housing Allowance freeze, which has meant benefits bear little resemblance to rents.”
RLA research has found that the average amount owed by Universal Credit tenants in rent arrears has increased by half, from just over £1,600 in 2017 to almost £2,400 in 2018.
Government Calls for an End to No DSS Housing Adverts
Around two thirds of the largest buy-to-let mortgage lenders do not permit landlords to let property to tenants in receipt of housing benefit.
A study by Manchester Metropolitan University, for the RLA, has found that 53% of landlords reported that the gap between Local Housing Allowance and local market rents was more than £50 per month. Almost 25% said that the gap was over £100 a month.
Support for homelessness
Wheeler also confirmed that more than £19.5m will be shared among 54 projects in England to help thousands of people who are homeless or at risk of becoming homeless to secure their own homes.
Councils will use the funding boost to help vulnerable people secure their own tenancy through support, such as paying deposits or putting down the first month’s rent.
The Ministry for Housing, Communities and Local Government (MHCLG) believes that this will give them an opportunity to make a home in a property that they may otherwise not have been able to access. The funding forms part of the £100m Rough Sleeping Strategy.
Working with landlords
Wheeler said: “This funding will make a huge difference in opening up the private rented sector to people who need it and give them the chance to rebuild their lives.
“I will also be meeting key stakeholders to tackle the practice of no DSS, to underline the need for immediate change.”
Justin Tomlinson MP, the Minister for Family Support, Housing and Child Maintenance, added: “Everyone should have the same opportunity when looking for a home, regardless of whether they are in receipt of benefits.
“With Universal Credit, payments can be paid directly to the landlord, and we continue to listen to feedback and work with landlords to improve the system.”
He continued: “Landlords can already receive rent from tenants on housing benefit and Universal Credit – meaning payments can be paid directly into their accounts.
“This helps strengthen the choices and opportunities available for those on benefits to secure the homes they and their families need.”
A growing number of young professionals and students are choosing to house share, which is driving up the average cost of renting a room in London, according to new research by Ideal Flatmate.
Data from the room share platform shows that the cost of renting a single room in the capital has already increased by an average of 2% in 2019 so far, having jumped by 13% between 2017-18.
In 2017, the average price of a room listed to rent on Ideal Flatmate was £781 per month. This rose by 13% to £855 in 2018. With a continued lack of suitable stock and a decline in buy-to-let investors, this figure has already climbed to £902 a month in 2019.
Westminster is currently the most expensive borough to rent a room, at an average of £1,045 per month, followed by Camden, at £999.
Looking on a more granular level, Nine Elms tops the table, with an average monthly rent of £2,123 a month.
Other areas to see some of the highest rents for a single room are: Covent Garden, Upper Clapton, South Kensington, Knightsbridge, Church End, Bayswater, St James’s, North Finchley and Millbank, all at £1,200 per month or above.
North Woolwich was identified as the cheapest area to rent a room, at just £350 a month, with Abbey Wood, Manor Park, Hither Green and West Norwood also some of the lowest.
Tom Gatzen, the Co-Founder of Ideal Flatmate, comments: “Despite room sharing remaining the most affordable way of finding a place to live in London, it, too, is seeing prices increase, as the capital’s rental market continues to strain under the pressure of a supply and demand imbalance.
“We’re currently seeing the price of room rentals in London increase at a rate of at least 1% a month on average, which is pretty significant for those already struggling to afford the overall cost of living in the capital.”
He believes: “This cost increase has largely been driven by a reduction in the number of landlords and letting agents with rooms to rent, as a result of the Stamp Duty shake-up, changes to tax thresholdsand the impending ban on letting fees. Unless more is done to address this, we will continue to see the cost of renting lift across the board, with the capital’s tenants ultimately the ones paying the price.”
Despite the cost of renting a room rising across the capital, living in a house share could help tenants get onto the property ladder sooner, compared to renting a one-bedroom apartment.
The High Court has ruled today that the Government’s Right to Rent scheme breaches human rights.
Under Right to Rent, landlords are responsible for checking the immigration status of all prospective tenants, with the risk of prosecution if they know or have reasonable cause to believe that someone who does not have the right to rent in the UK occupies the property that they’re letting. Theresa May, as Home Secretary, introduced the scheme as a key part of the Government’s hostile environment for illegal immigrants.
The Residential Landlords Association (RLA) joined with human rights group Liberty to intervene in a case brought by the Joint Council for the Welfare of Immigrants (JCWI), to have the policy declared incompatible with human rights, on the grounds that it is leading to discrimination against non-UK nationals who might be in the country legitimately, along with British ethnic minorities.
Recent research by the RLA found that the fear of getting things wrong led to 44% of private landlords being less likely to let to those without a British passport. It also revealed that 53% of landlords were less likely to let to those with limited time to remain in the UK, while 20% were less likely to consider letting to EU or EEA nationals.
Similar findings were uncovered by the JCWI. Significantly, during the course of the case, Government research recently emerged that confirmed that a significant proportion of landlords were unwilling to let to people without British passports.
Delivering his verdict in the High Court today, Mr. Justice Martin Spencer ruled that the scheme breaches the European Convention on Human Rights, on the basis that it led to discrimination against non-UK nationals with the right to rent property and British ethnic minorities.
In a damning ruling, Mr. Justice Spencer, referring extensively to arguments and evidence provided by the RLA, concluded that discrimination by landlords was taking place “because of the scheme”.
He went on: “The Government’s own evaluation failed to consider discrimination on grounds of nationality at all, only on grounds of ethnicity.”
The judge continued, finding that Right to Rent “does not merely provide the occasion or opportunity for private landlords to discriminate, but causes them to do so where otherwise they would not”, describing such discrimination as being “logical and wholly predictable” when faced with potential sanctions and penalties for getting things wrong.
High Court Rules Right to Rent a Breach of Human Rights
He added: “The safeguards used by the Government to avoid discrimination, namely online guidance, telephone advice, and codes of conduct and practice, have proved ineffective. In my judgment, in those circumstances, the Government cannot wash its hands of responsibility for the discrimination which is taking place, by asserting that such discrimination is carried out by landlords acting contrary to the intention of the scheme.”
The ruling comes following a report published last year by David Bolt, the Independent Chief Inspector of Borders and Immigration, which found that Right to Rent has “yet to demonstrate its worth as a tool to encourage immigration compliance” and that the Home Office was “failing to coordinate, maximise or even measure effectively its use, while, at the same time, doing little to address the concerns of stakeholders”.
Academics at the University of Oxford suggest that the foreign-born population is almost three times as likely to live in the private rental sector than those born in the UK.
The RLA and JCWI have written to the Home Secretary, seeking an urgent meeting.
John Stewart, the Policy Manager at the RLA, says: “Today’s ruling is a damning critique of a flagship Government policy. We have warned all along that turning landlords into untrained and unwilling border police would lead to the exact form of discrimination the court has found.
“We call on the Government to accept the decision, scrap the Right to Rent, and consider what else can be done to sensibly manage migration, without having to rely on untrained landlords to do the job of the Home Office.”
Chai Patel, the Legal Policy Director for the JCWI, adds: “There is no place for racism in the UK housing market. Now that the High Court has confirmed that Theresa May’s policy actively causes discrimination, Parliament must act immediately to scrap it. But we all know that this sort of discrimination, caused by making private individuals into border guards, affects almost every aspect of public life – it has crept into our banks, hospitals and schools. Today’s judgment only reveals the tip of the iceberg and demonstrates why the hostile environment must be dismantled.”
