DPS report record rent increases

I'm not sure that anybody should be surprised by this; if the Bank of England puts interest rates up that has a disproportionate effect on landlords because unlike other businesses they can no longer offset all their finance costs against their income. Raising interest rates will inevitably raise rents.

I think the other factor that's missing here is that during lockdown the government told tenants that they didn't have to pay their rent and gave landlords no compensation for the loss of business: So landlords are going to be recovering those rent arrears now.

Reply to the comment left by Beaver at 28/07/2022 - 11:30
PS: That doesn't just affect tenants. According to this site:

https://www.propertyreporter.co.uk/finance/ortgage-costs-now-account-for-28-of-disposable-income.html

Mortgage costs now account for 28% of disposable income. This site:

https://www.statista.com/statistics/379934/household-expenditure-categories-uk-by-decile/

Has a slightly different figure but still thinks that housing costs are 22% of disposable income, ahead of food costs.

If the Bank of England continues to raise interest rates that will fuel both rises in housing costs and demands for increased wages. It will increase inflation.

As a landlord you cannot offset your finance costs against your revenues any more. Your only remedies faced with rising costs and increased risks of providing residential accommodation are:

(1) Raise Rents.
(2) Evict.
(3) Sell. But you aren't going to be selling to a tenant who cannot afford a mortgage.

Could this have something to do with economic reality?
Not a total fan of either would-be PM but Mr Sunak seems to be the grown-up in the room. Ms Truss flaky about her background (Dad a Professor, she's not from The Struggling Classes) and school (Tim Kirkhope her then MP whom I've known 60 yrs said very good) and light on economic reality (can she count - what is between debit and credit to balance?)? Her success will doom the Conservatives to defeat next time round.
Then watch the damage!

The DPS has contributed to the rise. Their unreasonable biased decisions in favour of tenants has forced landlords to increase rent. Irrefutable evidence being ignored and nonsensical decision making has rendered deposit protection useless. The result?…..even the good tenants are penalised by higher rent setting to compensate for the incompetent DPS who refuse to compensate landlords for the bad ones.

Reply to the comment left by Trisha at 28/07/2022 - 13:50Hi Trisha
I don't think the way DPS deals with claims has a significant effect on rents. The problem for landlords is they don't present their cases properly. They don't get a second bite of the cherry. If information is missing or something is unclear the DPS do not ask the landlord to provide the missing information or to clarify. We have had to make a few claims and never had a problem.

The real causes of the recent rent increase IMHO are a number of landlords withdrawing their rental properties and leaving them empty or selling them. When there is already a shortage of housing, a further small decrease in the supply of an essential good (with no substitute) will result in the price rising. (I am sure any economists out there could explain this better than I can.)

In the case of HMOs, rising utility costs borne by the landlord are also contributing.

Reply to the comment left by Ian Narbeth at 29/07/2022 - 11:21
I agree with all the other factors you point out, stamp duty, loss of wear /tear allowance, no application fees, section 24 etc have all contributed. But we dealt with the DPS and provided irrefutable evidence which they ignored with no redress. I’ve spoken to many others who experienced the same. So we raised the low rent to compensate the loss and to hedge against it happening again. Other landlords have done the same.

Reply to the comment left by Trisha at 29/07/2022 - 15:26
It's certainly true that the last time I tried to withhold the deposit I wasn't allowed to keep all of it so I didn't manage to recover all of the costs of the damage done by the tenant. "The deposit" ("My deposit"?, "The TenantsDeposit?") was only available to cover part of my costs. It was just cheaper to accept part payment than follow due process and recover all of the costs.

I have just asked my agent to raise the rent: I've increased the rent because interest rates are going up, the EICR changes increased my costs and pretty much everything else out there at present increases my risk. That does include the fact that I am now only allowed to hold 5 weeks rent, not 6; I may not get all of it back; and some of the recent proposed changes under discussion talked of tenants having portable or lifetime deposits; I think the idea was that you release the deposit before the tenancy ends (so in effect you would have no deposit).

As a landlord there is nothing out there that reduces my risk and nothing out there that reduces my costs. The only option you have is to raise rents. So nobody should be surprised that they are going up.

Reply to the comment left by Trisha at 28/07/2022 - 13:50
Absolutely Trisha. The govt, govt instigated bodies and the press hate landlords. But see a recent Telegraph article that supports us.......(https://www.telegraph.co.uk/property/buy-to-let/next-prime-minister-needs-undo-damage-unleashed-landlords/)

another 'no sh*£ Sherlock' headline.

The unintended consequences of what's being gone on recently are likely to cause a lot of collateral damage. The Bank of England raising interest rates is a blunt instrument.

During the Covid period the government shut down much of the private sector told them they weren't "key workers" and stopped them trading. A lot of small businesses (like ours) weren't eligible for compensation. We survived but many didn't. Those that did survive did so by taking on unprecedented levels of debt.

https://www.fsb.org.uk/resources-page/small-firms-call-for-help-with-unmanageable-debt-burden-as-lending-tops-100bn.html

The government also of course didn't compensate landlords for lost income and told tenants they didn't have to pay. In the aftermath of the last recession it was small businesses that generated most of the new jobs. Small businesses also employ the most people. At the moment the Bank of England is raising interest rates and the group in society that they are going to hurt by doing so are the group that generate the jobs.

Raising interest rates will also raise rents.